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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A

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 §240.14a-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)(1) 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:
 


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KEMET Corporation
KEMET Tower
One East Broward Boulevard
Fort Lauderdale, Florida 33301

 

January 14, 2020

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders (the “Special Meeting”) of KEMET Corporation (“KEMET” or the “Company”) to be held on Thursday, February 20, 2020, at KEMET Corporation, KEMET Tower, One East Broward Boulevard, First Floor, Fort Lauderdale, Florida 33301, at 9:00 a.m., Eastern Time.

At the Special Meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 11, 2019, by and among KEMET, Yageo Corporation (“Yageo”) and Sky Merger Sub Inc. (“Acquisition Sub”), a wholly owned subsidiary of Yageo (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, Acquisition Sub will merge with and into KEMET (the “Merger”), with KEMET surviving the Merger, and KEMET will become a wholly owned subsidiary of Yageo. You will also be asked to consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger.

If the Merger contemplated by the Merger Agreement is completed, you will be entitled to receive $27.20 in cash, without interest, for each share of KEMET’s common stock, par value $0.01 per share (“KEMET common stock”) (unless you have properly exercised your appraisal rights with respect to such shares).

The Board, after considering factors more fully described in the enclosed proxy statement (the “Proxy Statement”), approved the adoption of the Merger Agreement, and resolved that the Merger Agreement and the transactions contemplated thereby, including the consummation of the Merger, in accordance with the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware, are advisable to, fair to and in the best interests of KEMET and its stockholders.

After careful consideration, the Board unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement.

The enclosed Proxy Statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the Proxy Statement. The Proxy Statement also describes the actions and determinations of our Board in connection with its evaluation of the Merger Agreement and the Merger. You are encouraged to read the Proxy Statement and its annexes, including the Merger Agreement, carefully and in their entirety. You may also obtain more information about KEMET from documents we file with the U.S. Securities and Exchange Commission (the “SEC”) from time to time.

We appreciate you taking the time to vote promptly. After reading the Proxy Statement, please vote, at your earliest convenience. Your shares cannot be voted unless you (i) vote by Internet, (ii) vote by phone, (iii) sign, date and return the enclosed proxy card by mail or (iv) attend the Special Meeting and vote in person. In addition, your proxy is revocable at any time before it is voted by written notice to the Secretary of KEMET or by delivery of a later-dated proxy. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your broker how to vote in accordance with the voting instruction card you will receive from your broker, bank or other nominee.


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Your vote is very important, regardless of the number of shares that you own. We cannot consummate the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of a majority of the shares of KEMET common stock outstanding and entitled to vote thereon, provided a quorum is present. In addition, the Merger Agreement makes the approval by the stockholders of KEMET (“KEMET stockholders”) of the proposal to adopt the Merger Agreement a condition to the parties’ obligations to consummate the Merger. The failure of any stockholder to vote in person by ballot at the Special Meeting, to submit a signed proxy card or to grant a proxy electronically over the Internet or by telephone will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting. Broker non-votes, if any, will have the effect of a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.

If you have any questions about the accompanying Proxy Statement, the Special Meeting, the Merger Agreement or the Merger or need assistance with voting procedures, please contact Innisfree M&A Incorporated, our proxy solicitor, by calling toll-free (888) 750-5834.

On behalf of our Board, I thank you for your support and appreciate your consideration of this matter.

Sincerely,

Frank G. Brandenberg
Chairman of the Board

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the Merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying Proxy Statement is dated January 14, 2020 and, together with the enclosed form of proxy card, is first being mailed to KEMET stockholders on or about January 14, 2020.

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KEMET Corporation
KEMET Tower
One East Broward Boulevard
Fort Lauderdale, Florida 33301

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

YOUR VOTE IS VERY IMPORTANT.

PLEASE VOTE YOUR SHARES PROMPTLY.

A special meeting of stockholders (the “Special Meeting”) of KEMET Corporation, a Delaware corporation (“KEMET” or the “Company”), will be held on Thursday, February 20, 2020, at KEMET Corporation, KEMET Tower, One East Broward Boulevard, First Floor, Fort Lauderdale, Florida 33301, at 9:00 a.m., Eastern Time, with respect to the following matters:

1. to consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of November 11, 2019, by and among the Company, Yageo Corporation (“Yageo”) and Sky Merger Sub Inc., a wholly owned subsidiary of Yageo (as may be amended from time to time, the “Merger Agreement”), a copy of which is attached as Annex A to the proxy statement (the “Proxy Statement”) accompanying this notice;
 
2. to consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger;
 
3. to consider and vote on any proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and
 
4. to transact any other business that may properly come before the Special Meeting or any adjournment or postponement of the Special Meeting.

The affirmative vote of the majority of the shares of KEMET common stock outstanding and entitled to vote thereon is required to adopt the Merger Agreement. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, whether or not a quorum is present, is required to approve the proposal to adjourn the Special Meeting. The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting. Abstentions will be counted as votes “AGAINST” the proposal to adopt the Merger Agreement, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and the proposal to adjourn the Special Meeting, since abstentions represent shares entitled to vote and thus are included in the denominator in determining the approval percentage. A broker, bank or other nominee holding shares in “street name” for a beneficial owner has discretion (but is not required) to vote the client’s shares with respect to “routine” matters if the client does not provide voting instructions. All of the proposals in the Proxy Statement are non-routine matters. When a matter is not routine and the brokerage firm has not received voting instructions from the stockholder, the brokerage firm cannot vote the shares on that matter. This is called a broker “non-vote.” Broker non-votes, if any, will have the effect of a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.

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Only KEMET stockholders of record as of the close of business on January 9, 2020 are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the Special Meeting will be available in our principal executive offices located at KEMET Tower, One East Broward Boulevard, 2nd Floor, Fort Lauderdale, Florida 33301, during regular business hours for a period of no less than ten (10) days before the Special Meeting and at the place of the Special Meeting during such meeting.

KEMET stockholders who do not vote in favor of the proposal to adopt the Merger Agreement will have the right to seek appraisal of the fair value of their shares of KEMET common stock if they deliver a demand for appraisal before the vote is taken on the Merger Agreement and comply with all the requirements of Delaware law, which are summarized in the Proxy Statement accompanying this notice and reproduced in their entirety in Annex C to the accompanying Proxy Statement.

KEMET’s board of directors (the “Board”) unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you vote “FOR” the adoption of the Merger Agreement, “FOR” the non-binding, advisory proposal regarding compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting (if necessary or appropriate). In considering the recommendation of the Board, KEMET stockholders should be aware that its executive officers and members of the Board may have agreements and arrangements in place that provide them with interests in the Merger that may be different from, or in addition to, those of KEMET. See the section entitled “The Merger—Interests of the Directors and Executive Officers of KEMET in the Merger” beginning on page 59 of this Proxy Statement.

Our Notice of Special Meeting and Proxy Statement are available at http://www.kemet.com/proxymaterials.

By order of the Board of Directors,

R. James Assaf
Secretary

January 14, 2020

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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, KEMET ENCOURAGES YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) THROUGH THE INTERNET, (2) BY TELEPHONE OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before your proxy is exercised at the Special Meeting. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished to you by such broker, bank or other nominee, which is considered the stockholder of record, in order to vote. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the shares in your account. Your broker, bank or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you fail to either (i) return your proxy card, (ii) grant your proxy electronically over the Internet or by telephone, or (iii) vote by ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a broker, bank or other nominee, you must obtain from the record holder a valid “legal” proxy issued in your name in order to vote in person at the Special Meeting.

KEMET encourages you to read the accompanying Proxy Statement, including all documents incorporated by reference into the accompanying Proxy Statement, and its annexes carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the accompanying Proxy Statement, would like additional copies of the accompanying Proxy Statement or need help voting your shares of common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders Call: (888) 750-5834
Banks and Brokers Call: (212) 750-5833

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TABLE OF CONTENTS

SUMMARY       1
The Special Meeting 1
Parties Involved in the Merger 2
Effect of the Merger 3
Effect on KEMET if the Merger is Not Consummated 3
Merger Consideration 3
Recommendation of the Board and Reasons for the Merger 3
Opinion of KEMET’s Financial Advisor 4
Interests of the Directors and Executive Officers of KEMET in the Merger 4
Treatment of Equity-Based Awards 5
Financing of the Merger 5
U.S. Federal Income Tax Consequences of the Merger 6
Regulatory Approvals 6
Legal Proceedings Regarding the Merger 6
Restrictions on Solicitations of Other Offers 6
Adverse Recommendation Changes 7
Employee Benefits 7
Conditions to the Closing of the Merger 7
Termination of the Merger Agreement 9
Termination Fees 11
Expense Reimbursement 11
Specific Performance 11
Market Prices and Dividend Data 12
Appraisal Rights 12
     
QUESTIONS AND ANSWERS 13
     
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 21
     
THE SPECIAL MEETING 22
Date, Time and Place 22
Purpose of the Special Meeting 22
Record Date; Shares Entitled to Vote; Quorum 22
Vote Required; Abstentions and Broker Non-Votes 22
Shares Held by KEMET’s Directors and Executive Officers 23
Voting of Proxies 23
Revocability of Proxies 23
Board Recommendation 24
Tabulation of Votes 24
Solicitation of Proxies 24
Anticipated Date of Consummation of the Merger 24
Attending the Special Meeting 24
Assistance 25
Rights of Stockholders Who Seek Appraisal 25
Other Matters 25
     
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT 26
     
THE MERGER 26
Parties Involved in the Merger 26
Effect of the Merger 27
Effect on KEMET if the Merger is Not Consummated 27
Merger Consideration 27

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Background of the Merger       28
Recommendation of the Board and Reasons for the Merger 42
Opinion of KEMET’s Financial Advisor 48
Projections Prepared by KEMET’s Management 53
Interests of the Directors and Executive Officers of KEMET in the Merger 59
Financing of the Merger 64
Closing and Effective Time 66
Accounting Treatment 66
U.S. Federal Income Tax Consequences of the Merger 66
Regulatory Approvals 68
Legal Proceedings Regarding the Merger 68
     
TERMS OF THE MERGER AGREEMENT 69
Explanatory Note Regarding the Merger Agreement 69
Effects of the Merger 69
Closing and Effective Time 69
Directors and Officers; Certificate of Incorporation; By-laws 69
Merger Consideration 70
Exchange and Payment Procedures 71
Representations and Warranties 71
Conduct of Business Pending the Merger 74
Restrictions on Solicitations of Other Offers 75
Adverse Recommendation Changes 77
Financing Efforts 78
Employee Benefits 80
Regulatory Approvals 81
Efforts to Close the Merger 83
Access to Information 84
Indemnification and Insurance 85
Other Covenants 85
Conditions to the Closing of the Merger 86
Termination of the Merger Agreement 87
Termination Fees 89
Expense Reimbursement 89
Specific Performance 90
Fees and Expenses 90
Amendment; Extension and Waiver 90
     
PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED EXECUTIVE
COMPENSATION ARRANGEMENTS
91
The Non-Binding Advisory Proposal 91
Vote Required and Board Recommendation 91
     
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING 92
The Adjournment Proposal 92
Vote Required and Board Recommendation 92
     
MARKET PRICES AND DIVIDEND DATA 93
     
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 94

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APPRAISAL RIGHTS       96
Filing Written Demand 97
Notice by the Surviving Corporation 98
Filing a Petition for Appraisal 98
Determination of Fair Value 99
     
FUTURE STOCKHOLDER PROPOSALS 101
     
HOUSEHOLDING INFORMATION 102
     
WHERE YOU CAN FIND MORE INFORMATION 103
     
MISCELLANEOUS 104
     
Annexes
Annex A - Agreement and Plan of Merger A-1
Annex B - Opinion of Goldman Sachs & Co. LLC B-1
Annex C - Section 262 of the General Corporation Law of the State of Delaware C-1

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SUMMARY

This summary highlights selected information from this proxy statement (this “Proxy Statement”) related to the merger of Sky Merger Sub Inc. (“Acquisition Sub”) with and into KEMET Corporation (the “Merger”) and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should read carefully this entire Proxy Statement, the annexes to this Proxy Statement and the documents we refer to in this Proxy Statement. You may obtain the information incorporated by reference in this Proxy Statement without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 103 of this Proxy Statement. The Merger Agreement (as defined below) is attached as Annex A to this Proxy Statement. You are encouraged to read the Merger Agreement, which is the legal document that governs the Merger.

Except as otherwise specifically noted in this Proxy Statement, “KEMET,” the “Company,” “we,” “our,” “us” and similar words in this Proxy Statement refer to KEMET Corporation, including, in certain cases, our subsidiaries. Throughout this Proxy Statement we refer to Yageo Corporation as “Yageo” and Sky Merger Sub Inc. as “Acquisition Sub.” In addition, throughout this Proxy Statement we refer to the Agreement and Plan of Merger, dated as of November 11, 2019, as it may be amended from time to time, by and among KEMET, Yageo and Acquisition Sub as the “Merger Agreement.”

The Special Meeting (page 22)

Date, Time and Place

The Special Meeting will be held on Thursday, February 20, 2020, at KEMET Corporation, KEMET Tower, One East Broward Boulevard, First Floor, Fort Lauderdale, Florida 33301, at 9:00 a.m., Eastern Time.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting of KEMET stockholders (the “Special Meeting”) if you owned shares of our common stock at the close of business on January 9, 2020, the record date for the Special Meeting (the “record date”). You will have one vote at the Special Meeting for each share of KEMET common stock you owned at the close of business on the record date.

Purpose

At the Special Meeting, we will ask KEMET stockholders of record as of the record date to vote on proposals to adopt the Merger Agreement, to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Quorum

As of the record date, there were approximately 58,267,253 shares of our common stock outstanding and entitled to be voted at the Special Meeting. The holders of a majority in voting power of the outstanding shares of KEMET common stock, present either in person or represented by proxy, will constitute a quorum at the Special Meeting. As a result, 29,133,627 shares must be represented by proxy or by stockholders present and entitled to vote at the Special Meeting to have a quorum.

Required Vote

The affirmative vote of the majority of the shares of common stock of KEMET, par value $0.01 per share (“KEMET common stock”), outstanding and entitled to vote thereon is required to adopt the Merger Agreement. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, whether

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or not a quorum is present, is required to approve the proposal to adjourn the Special Meeting. This means that the proposal to adopt the Merger Agreement will be approved if the number of shares voted “FOR” such proposal is greater than fifty percent (50%) of the total number of shares of KEMET common stock entitled to vote at the Special Meeting. Abstentions will have the same effect as votes “AGAINST” the proposal to adopt the Merger Agreement, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and the proposal to adjourn the Special Meeting, since abstentions represent shares entitled to vote and thus are included in the denominator in determining the approval percentage. Broker non-votes, if any, will have the effect of a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.

Share Ownership of KEMET’s Directors and Executive Officers

As of January 9, 2020, the record date, KEMET’s directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 1,105,320 shares of KEMET common stock, representing approximately 1.90% of the outstanding shares of KEMET common stock. KEMET’s directors and executive officers have informed KEMET that they currently intend to vote all of their shares of KEMET common stock “FOR” the adoption of the Merger Agreement, “FOR” the non-binding, advisory proposal regarding compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting (if necessary or appropriate).

Voting and Proxies

Any KEMET stockholder of record entitled to vote may submit a proxy by returning a signed proxy card by mail in the postage-paid envelope provided or voting electronically over the Internet or by telephone, or may vote in person by appearing at the Special Meeting. If you are a beneficial owner and hold your shares of KEMET common stock in “street name” through a broker, bank or other nominee, you should instruct your broker, bank or other nominee on how you wish to vote your shares of KEMET common stock using the instructions provided by your broker, bank or other nominee. Under applicable rules, brokers, banks or other nominees have the discretion to vote on routine matters. All of the proposals in this Proxy Statement are non-routine matters, and brokers, banks and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your broker, bank or nominee on how you wish to vote your shares.

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy, signing another proxy card with a later date and returning it to us prior to the exercise of your proxy at the Special Meeting or attending the Special Meeting and voting in person.

If you hold your shares of common stock in “street name,” you should contact your broker, bank or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a valid “legal” proxy from your broker, bank or other nominee.

Parties Involved in the Merger (page 26)

KEMET Corporation

KEMET is a leading global manufacturer of a wide variety of capacitors, and electro-magnetic compatible devices, sensors and actuators. With respect to capacitors, KEMET competes in the passive electronic component industry, specifically multilayer ceramic, tantalum, film and aluminum (solid & electrolytic) capacitors. While KEMET competes in the passive electronic component industry, its strategic focus is on growth markets, specialty products requiring high reliability, and within its Ceramic product line, larger case size capacitors.

KEMET common stock is currently listed on the New York Stock Exchange (the “NYSE”) under the symbol “KEM.”

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Yageo Corporation

Yageo is a corporation organized under the laws of the Republic of China and a leading global electronic component company with capabilities on a global scale, including production and sales facilities in Asia, Europe and the Americas. Yageo provides one-stop-shopping, offering its complete product portfolio of resistors, capacitors, inductors, wireless and circuit protection components to meet the diverse requirements of customers. Upon the consummation of the Merger, KEMET will be a wholly owned subsidiary of Yageo.

Yageo’s common stock is listed on the Taiwan Stock Exchange under the ticker symbol “2327” (TAIEX: 2327 TW).

Sky Merger Sub Inc.

Acquisition Sub is a Delaware corporation and a wholly owned subsidiary of Yageo, formed solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated by the Merger Agreement, including the Merger, and the related financing transactions. Acquisition Sub has not conducted any business operations except in furtherance of this purpose and activities incident to its formation. Upon the consummation of the Merger, Acquisition Sub will cease to exist.

Effect of the Merger (page 27)

If the Merger Agreement is adopted by KEMET stockholders and certain other conditions to the consummation of the Merger are either satisfied or waived, Acquisition Sub will merge with and into KEMET, with KEMET surviving and continuing under the name “KEMET Corporation” (the “Surviving Corporation”). As a result of the Merger, the Surviving Corporation will become a wholly owned subsidiary of Yageo, and KEMET common stock will no longer be publicly traded. In addition, KEMET common stock will be delisted from the NYSE and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in each case, in accordance with applicable law, rules and regulations, and KEMET will no longer file periodic reports with the SEC on account of KEMET common stock. If the Merger is consummated, you will not own any shares of capital stock of the Surviving Corporation.

The time at which the Merger will become effective (the “Effective Time”) will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as KEMET and Yageo may agree and specify in the certificate of merger).

Effect on KEMET if the Merger is Not Consummated (page 27)

If the Merger Agreement is not adopted by KEMET stockholders or if the Merger is not consummated for any other reason, KEMET stockholders will not receive any payment for their shares of KEMET common stock. Instead, KEMET will remain an independent public company, the KEMET common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and we will continue to file periodic reports with the U.S. Securities and Exchange Commission (the “SEC”) on account of KEMET common stock. Under certain specified circumstances, KEMET may be required to reimburse Yageo’s expenses or pay Yageo a termination fee, or under certain other specified circumstances, KEMET may be entitled to receive a reimbursement of KEMET’s expenses or a reverse termination fee from Yageo, upon the termination of the Merger Agreement, as described in the sections entitled “Terms of the Merger Agreement—Termination Fees” and “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement.

Merger Consideration (page 27)

Upon the consummation of the Merger, each share of KEMET common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares held by KEMET or held, directly or indirectly, by Yageo or Acquisition Sub, which will be canceled for no consideration, and (ii) any shares owned by stockholders who are entitled to and who properly exercise appraisal rights under Delaware law (“Dissenting Shares”)) will be converted into the right to receive $27.20 in cash, without interest and less any applicable withholding taxes (the “Merger Consideration”).

Recommendation of the Board and Reasons for the Merger (page 42)

The Board—after considering various factors described in the section entitled “The Merger—Recommendation of the Board and Reasons for the Merger,” beginning on page 42 of this Proxy Statement, and after consultation with KEMET’s legal and financial advisors—has determined that the Merger Agreement and the transactions contemplated

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by the Merger Agreement, including the Merger, are advisable to, fair to and in the best interests of KEMET and its stockholders, and has approved the adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.

The Board unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you (i) vote “FOR” the proposal to adopt the Merger Agreement, (ii) “FOR” the non-binding, advisory proposal regarding compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and contemplated by the Merger Agreement and (iii) “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Opinion of KEMET’s Financial Advisor (page 48)

Goldman Sachs & Co. LLC (“Goldman Sachs”) delivered its opinion to the Board that, as of November 11, 2019, and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Yageo and its affiliates) of KEMET common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 11, 2019, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion and which you should read carefully and in its entirety, is attached as Annex B to this Proxy Statement. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of KEMET common stock should vote with respect to the Merger or any other matter. Pursuant to an engagement letter between KEMET and Goldman Sachs, KEMET has agreed to pay Goldman Sachs a transaction fee that is estimated, based on the information available as of the date of announcement of the Merger, at approximately $22 million, all of which is contingent upon consummation of the Merger.

Interests of the Directors and Executive Officers of KEMET in the Merger (page 59)

When considering the recommendation of the Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that KEMET’s directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. The Board was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement, in approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by KEMET stockholders. These interests include the following:

cancellation and conversion of restricted stock units, other than the time- or performance-based portion of a long-term incentive plan award into the right to receive the Merger Consideration (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) as of the Effective Time;
 
cancellation and conversion of long-term incentive plan awards into the right to receive the Merger Consideration (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld), calculated, with respect to performance-based awards, assuming maximum performance with respect to certain awards and the greater of target and actual performance with respect to other awards;
 
the entitlement of each executive officer to receive enhanced severance payments and benefits under his or her change in control severance agreement in connection with a qualifying termination of employment during the two (2) year period following the consummation of the Merger;
   
the possibility of KEMET’s executive officers entering into arrangements with Yageo prior to or following the closing of the Merger; and
 
continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation.

If the proposal to adopt the Merger Agreement is approved by KEMET stockholders, the shares of KEMET common stock held by KEMET’s directors and executive officers will be treated in the same manner as outstanding shares of KEMET common stock held by all other KEMET stockholders entitled to receive the Merger Consideration.

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Treatment of Equity-Based Awards (page 59)

The Merger Agreement provides that KEMET’s equity awards and long-term incentive plan awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment as of the Effective Time:

Options

Each then-outstanding option to purchase shares of KEMET common stock (a “KEMET Option”), whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such KEMET Option and (ii) the amount, if any, by which the Merger Consideration exceeds the exercise price per share of KEMET common stock underlying the KEMET Option. If the exercise price per share of KEMET common stock underlying a KEMET Option is equal to or greater than the Merger Consideration, then the KEMET Option will be canceled without any cash payment or other consideration being made in respect thereof.

Restricted Stock Units

Each then-outstanding restricted stock unit, other than the time- or performance-based portion of a long-term incentive plan award (an “RSU”), whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such RSU and (ii) the Merger Consideration.

Long-Term Incentive Plan Awards

Each then-outstanding long-term incentive plan (“LTIP”) award, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to: (i) with respect to the time-based vesting portion of such LTIP award, the product of (x) the total number of shares of KEMET common stock subject thereto and (y) the Merger Consideration and (ii) with respect to the performance-based vesting portion of such LTIP award, the total value of the payout (whether in the form of shares of KEMET common stock or cash) that would have been earned assuming (x) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (y) the greater of target and actual level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021.

Financing of the Merger (page 64)

The total amount of funds necessary to consummate the Merger and related transactions, including payment of related fees and expenses, is anticipated to be approximately $1,800 million, which will be funded with the combined net proceeds of debt financing and cash on hand of Yageo and its subsidiaries. Yageo has obtained debt financing on the terms and conditions set forth in (i) the commitment letter, dated as of November 11, 2019 (the “Commitment Letter”), from Citigroup Global Markets Asia Limited, Citibank Taiwan Limited and Citibank, N.A., Taipei Branch (collectively, “Citi”), pursuant to which Citi has provided commitments in respect of a senior secured bridge loan facility in an aggregate principal amount of $1,100 million, (ii) the shareholder loan agreement, dated as of November 11, 2019 (the “Shareholder Loan Agreement”), with Chen Tie-Min (also known as “Pierre Chen”), pursuant to which Pierre Chen has provided commitments in respect of a subordinated, unsecured term loan facility in an aggregate principal amount of $195 million (the “Shareholder Loan”) and (iii) the standby letter of credit (the “Standby Letter of Credit”) issued by Citibank, N.A., Hong Kong Branch, pursuant to which, in the event that Pierre Chen does not advance the Shareholder Loan to Yageo, Yageo will draw an aggregate amount of $195 million under the Standby Letter of Credit. Funding of the debt financing is subject to the satisfaction of the respective conditions set forth in the Commitment Letter, Shareholder Loan Agreement and Standby Letter of Credit, as applicable, under which such debt financing will be provided. See the section entitled “The Merger—Financing of the Merger” beginning on page 64 of this Proxy Statement.

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U.S. Federal Income Tax Consequences of the Merger (page 66)

For U.S. federal income tax purposes, the receipt of cash by a U.S. Holder (as defined in the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement) in exchange for such U.S. Holder’s shares of KEMET common stock pursuant to the Merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the cash such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of KEMET common stock surrendered in the Merger.

If you are a Non-U.S. Holder (as defined in the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement), the Merger generally will not result in U.S. federal income tax to you unless you have certain connections with the United States.

For a more complete description of the U.S. federal income tax consequences of the Merger, see the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement.

KEMET stockholders should consult their tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Regulatory Approvals (page 68)

Under the Merger Agreement, the Merger cannot be consummated until, among other things, the approval required from the Committee on Foreign Investment in the United States (“CFIUS”) has been obtained, the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), have expired or been terminated, the clearances or approvals under applicable antitrust laws have been obtained in Austria, China, Germany, Mexico and Taiwan, and approval has been obtained from the Investment Commission, Ministry of Economic Affairs, Taiwan (the “Taiwan Investment Commission”). KEMET and Yageo have agreed to use their reasonable best efforts to comply with all regulatory notification requirements and obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement.

Legal Proceedings Regarding the Merger (page 68)

Following the filing of the preliminary proxy statement issued in connection with the proposed merger between KEMET and Yageo, between December 27, 2019 and January 10, 2020, six (6) lawsuits were filed against KEMET and the members of the Board in the United States District Court for the District of Delaware and the United States District Court for the Southern District of New York under the following captions: Stein v. KEMET Corp., et al., Case No. 1:19-cv-02361 (D. Del.); Braunstein v. KEMET Corp., et al., Case No. 1:20-cv-00035 (S.D.N.Y.); Rosenblatt v. KEMET Corp., et al., Case No. 1:20-cv-00023 (D. Del.); Conrad v. KEMET Corp., et al., Case No. 1:20-cv-00139 (S.D.N.Y.); Landau v. KEMET Corp., et al., Case No. 1:20-cv-00219 (S.D.N.Y.); and Silverberg v. KEMET Corp., et al., Case No. 1:20-cv-00036 (D. Del.) (collectively, the “Actions”).

Restrictions on Solicitations of Other Offers (page 75)

For purposes of this Proxy Statement, each of “Competing Proposal,” “Intervening Event,” and “Superior Proposal” is defined in the section entitled “Terms of the Merger Agreement—Restrictions on Solicitations of Other Offers” beginning on page 75 of this Proxy Statement.

In the Merger Agreement, KEMET agreed that, subject to certain exceptions, KEMET will not, and will cause its directors, officers and subsidiaries not to, and will instruct and use its reasonable best efforts to cause its and its subsidiaries’ other representatives not to, directly or indirectly (i) solicit, initiate, knowingly encourage or knowingly facilitate, whether publicly or otherwise, any inquiry, discussion, offer or request that constitutes, or would reasonably be expected to lead to, a Competing Proposal; (ii) engage, continue or otherwise participate in negotiations or discussions with or furnish or provide access to any of KEMET’s or its subsidiaries books and records, properties or non-public information or data to, any person relating to a Competing Proposal or any inquiry or proposal that would reasonably be expected to lead to a Competing Proposal; (iii) approve or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or similar agreement providing for or relating to a Competing Proposal or require KEMET to abandon consummating the Merger (an “Alternative Acquisition Agreement”); (iv) approve, endorse, recommend, or publicly propose to approve, endorse or recommend, any Competing Proposal;

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(v) take any action to make any provision of any “fair price,” “moratorium,” “control share acquisition” or other form of antitakeover statute, regulation or provision of KEMET’s organizational documents inapplicable to a transaction contemplated by a Competing Proposal; or (vi) terminate, amend, modify or waive any provision of any confidentiality, standstill or similar agreement to which KEMET or any of its subsidiaries is a party. However, KEMET may grant a waiver of any standstill or similar obligation of any person with respect to KEMET or any of its subsidiaries solely to the extent to allow such person to submit a confidential Competing Proposal to the Board if the Board determines in good faith, after consultation with outside legal counsel, that the failure to do so would be reasonably expected to be inconsistent with its fiduciary duties.

Adverse Recommendation Changes (page 77)

Except as described in the following paragraph, under the terms of the Merger Agreement, neither the Board nor any committee thereof may (i) make an “Adverse Recommendation Change” (as defined in the section entitled “Terms of the Merger Agreement—Adverse Recommendation Changes” beginning on page 77 of this Proxy Statement) or (ii) approve or recommend, or allow KEMET or any of its subsidiaries to enter into, any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or similar agreement with respect to any Competing Proposal (other than a confidentiality agreement) or require KEMET to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement.

Under the Merger Agreement, under certain circumstances and subject to certain requirements described in the section entitled “Terms of the Merger Agreement—Adverse Recommendation Changes” beginning on page 77 of this Proxy Statement, the Board is entitled to make an Adverse Recommendation Change or enter into an agreement with respect to such Competing Proposal (concurrently with the termination of the Merger Agreement and subject to the payment of a termination fee by KEMET) prior to obtaining approval of the Merger Agreement by a majority of the outstanding shares of KEMET common stock entitled to vote thereon (the “KEMET Stockholder Approval”), if the Board determines in good faith (after consultation with outside legal counsel and financial advisors) that such Competing Proposal constitutes a Superior Proposal and (after consultation with outside legal counsel) the failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties. In addition, at any time prior to obtaining KEMET Stockholder Approval, in response to an Intervening Event, the Board may make an Adverse Recommendation Change if the Board determines in good faith (after consultation with outside legal counsel and financial advisors) that failure to take such action would be reasonably expected to be inconsistent with its fiduciary duties, subject to certain requirements described in the section entitled “Terms of the Merger Agreement—Adverse Recommendation Changes” beginning on page 77 of this Proxy Statement.

Employee Benefits (page 80)

Yageo has agreed to honor, as of the Effective Time, the terms of KEMET’s benefit plans in effect as of the date of the Merger Agreement. For the period commencing at the Effective Time and ending on the first (1st) anniversary of the date on which such Effective Time occurs, Yageo will, or will cause the Surviving Corporation or an affiliate thereof to, provide to each continuing employee (as defined in the section entitled “Terms of the Merger Agreement—Employee Benefits” beginning on page 80 of this Proxy Statement), compensation and employee benefits that are, in the aggregate, substantially comparable to the compensation and benefits, in the aggregate, being provided as of the date of the Merger Agreement under KEMET’s benefit plans (including any equity-based compensation, but excluding retention arrangements or any other compensation or benefits payable in connection with, or as a result of, the Merger and any employee benefits that are frozen, discontinued, or, as of the Effective Time, being frozen or discontinued). However, Yageo is not required to provide such compensation and benefits in the form of equity or equity-based awards or defined benefit pension plans.

Conditions to the Closing of the Merger (page 86)

The respective obligations of each party to consummate the Merger are subject to the satisfaction or (to the extent permitted by applicable law) waiver by KEMET and Yageo, by the Effective Time, of the following conditions:

the KEMET Stockholder Approval having been obtained;
 
the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority;

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(i) the expiration or early termination of any waiting periods (or any extensions thereof) applicable to the consummation of the Merger under the HSR Act and (ii) the termination or expiration of all waiting periods (and any extensions thereof), and all related approvals or clearances of the Merger by the relevant antitrust authorities, pursuant to any antitrust laws in Austria, China, Germany, Mexico and Taiwan that are required to be terminated or expired prior to the consummation of the Merger;
 
the CFIUS approval (as defined in the section entitled “The MergerRegulatory Approvals” beginning on page 81 of this Proxy Statement) having been obtained;
 
approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission having been obtained; and
 
if required by applicable law, the Yageo Stockholder Approval (as defined in the section entitled “Terms of the Merger Agreement—Other Covenants” beginning on page 85 of this Proxy Statement) having been obtained.

The obligations of Yageo and Acquisition Sub to consummate the Merger are also subject to the satisfaction or (to the extent permitted by applicable law) waiver by Yageo of the following conditions:

the representations and warranties of KEMET:
 
regarding KEMET’s organization and qualification, subsidiaries, certain aspects of capitalization, corporate authority and resolutions, the absence of non-ordinary course conduct since April 1, 2019, vote required by KEMET stockholders in connection with the Merger Agreement and the absence of any undisclosed brokers fees being true and correct in all material respects as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date (except to the extent expressly made as of a specific earlier date, in which case such representations and warranties will be true and correct as of such specific date);
 
regarding KEMET’s capital structure being true and correct in all respects as of the closing date of the Merger, as if made on and as of the closing date (except for any inaccuracies that are de minimis in the aggregate);
 
regarding the absence of Material Adverse Effect (as defined in the section entitled “Terms of the Merger Agreement—Representations and Warranties” beginning on page 71 of this Proxy Statement), with respect to KEMET, from April 1, 2019 to the date of the Merger Agreement, being true and correct in all respects as of the closing date of the Merger, as if made on and as of the closing date (giving effect to the reference to Material Adverse Effect in such representation); and
 
other than the representations and warranties described in the three (3) clauses above, being true and correct (without giving effect to any materiality or Material Adverse Effect qualifications set forth therein) as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date, except for such failures to be so true and correct as would not have a Material Adverse Effect (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be so true and correct as of such specific date only);
 
KEMET having complied, in all material respects, with all covenants required by it in the Merger Agreement on or prior to the closing date of the Merger;
 
Yageo’s receipt of a certificate of KEMET signed by an officer confirming the satisfaction of the foregoing conditions; and
 
since the date of the Merger Agreement, no change, event, occurrence, state of facts, condition, development or circumstances has had, individually or in the aggregate, with respect to KEMET, a Material Adverse Effect (as defined in the section entitled “Terms of the Merger Agreement—Representations and Warranties” beginning on page 71 of this Proxy Statement).

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The obligations of KEMET to effect the Merger are also subject to the satisfaction or waiver by KEMET of the following conditions:

the representations and warranties of Yageo and Acquisition Sub:
 
regarding Yageo’s organization and qualification, corporate authority and resolutions and Yageo stockholder vote required (if applicable) being true and correct in all material respects as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date); and
 
other than the representations and warranties described in the clause above, being true and correct (without giving effect to any materiality or Material Adverse Effect qualifications set forth therein) as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date, except where the failure of such representations and warranties to be so true and correct would not have, with respect to Yageo or Acquisition Sub, a Material Adverse Effect (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date);
 
Yageo and Acquisition Sub each having complied, in all material respects, with all covenants required by it in the Merger Agreement on or prior to the closing date; and
 
KEMET’s receipt of a certificate of Yageo signed by an officer of Yageo confirming the satisfaction of the foregoing conditions.

Termination of the Merger Agreement (page 87)

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the KEMET Stockholder Approval:

by mutual written consent of Yageo and KEMET;
 
by either Yageo or KEMET if:
 
the Merger has not been consummated by 5:00 p.m., New York City time, on November 11, 2020 (the “Termination Date”). However, if the condition relating to antitrust approvals has not been satisfied or waived but all other conditions to the Merger have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the Merger) as of November 11, 2020, the Termination Date will be automatically extended for ninety (90) days, in which case the Termination Date will be deemed, for all purposes, to be February 9, 2021. Additionally, the right to terminate the Merger Agreement as a result of the occurrence of the Termination Date will not be available to any party if the failure of such party (and, in the case of Yageo, the failure of Acquisition Sub) to materially perform any of its obligations under the Merger Agreement results in the failure of the Merger to be consummated by the Termination Date;
 
the Legal Restraints Condition has not been met prior to the Effective Time; provided that the party seeking to terminate the Merger Agreement pursuant to this clause has used its reasonable best efforts to remove the law, order or action in question. However, the right to terminate the Merger Agreement pursuant to the previous sentence will not be available to a party if (i) the issuance of such law or order was primarily due to the failure of such party (including in the case of Yageo, the failure of Acquisition Sub) to perform any of its obligations under the Merger Agreement and (ii) exercised in connection with CFIUS approval, CFIUS turndown or the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission;
 
KEMET has failed to obtain the KEMET Stockholder Approval at the Special Meeting, or any adjournment or postponement thereof, at which a vote of the Merger was taken;

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Yageo has failed to obtain the Yageo Stockholder Approval at the Yageo Stockholders’ Meeting (as defined in the section entitled “Terms of the Merger Agreement—Other Covenants” beginning on page 85 of this Proxy Statement), or any adjournment or postponement thereof, if such approval is required by applicable law;
 
a CFIUS turndown has occurred at any time or the parties have failed to obtain CFIUS approval before the Termination Date; or
 
the parties have failed to obtain the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission before the Termination Date;
 
by KEMET:
 
if Yageo or Acquisition Sub has breached any of their respective representations, warranties, covenants or agreements set forth in the Merger Agreement, which (i) would give rise to the failure of a related closing condition and (ii) is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is thirty (30) calendar days following KEMET’s delivery of written notice of such breach. However, KEMET will not have the right to terminate the Merger Agreement pursuant to this provision if KEMET is then in material breach of any of its representations, warranties, covenants or agreements under the Merger Agreement;
 
prior to the date of the Special Meeting (and only if KEMET is not in breach of its non-solicitation obligations under the Merger Agreement pursuant to this provision, other than non-consequential, immaterial breaches), to enter into a definitive agreement with respect to a Superior Proposal, subject to the terms of KEMET’s non-solicitation obligations, and provided that KEMET pays the related termination fee of $63.75 million to Yageo (see the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement); or
 
if (i) all of the conditions to Yageo’s and Acquisition Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger; provided that such actions would then be capable of being satisfied), (ii) Yageo has failed to consummate the Merger by the time the closing should have occurred as a result of the failure of the debt financing to be funded, (iii) KEMET has notified Yageo in writing that the conditions to the Merger have been satisfied or, with respect to KEMET’s conditions, waived (to the extent such waiver is permitted under applicable law) and that it is prepared to consummate the Merger and (iv) Yageo has failed to consummate the Merger within five (5) business days of the later of the date on which closing was required to occur or the delivery of KEMET’s notice of termination; or
 
by Yageo if:
 
KEMET has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that specified conditions set forth in the Merger Agreement are not satisfied and such breach is not capable of being cured, or is not cured, prior to the earlier of the Termination Date or the date that is thirty (30) calendar days following Yageo’s delivery of written notice of such breach. However, Yageo will not have the right to terminate the Merger Agreement pursuant to this provision if Yageo or Acquisition Sub is then in material breach of any of its representations, warranties, covenants or agreements under the Merger Agreement; or
 
prior to the adoption of the Merger Agreement by KEMET stockholders, the Board (or any committee of the Board), (i) makes an Adverse Recommendation Change or (ii) approves or recommends, or allows KEMET or any of its subsidiaries to enter into, an Alternative Acquisition Agreement.

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Termination Fees (page 89)

If the Merger Agreement is terminated in specified circumstances, the terminating party may be required to pay a termination fee.

Yageo would be entitled to receive a termination fee of $63.75 million from KEMET if the Merger Agreement is terminated:

(i) (a) either by KEMET or Yageo because (x) the Merger has not been consummated by the Termination Date or (y) KEMET stockholders have failed to adopt the Merger Agreement or (b) by Yageo because KEMET has breached its representations, warranties, covenants or agreements in the Merger Agreement that would cause conditions to the Merger to not be satisfied, (ii) a Competing Proposal has been publicly announced, publicly disclosed or otherwise has become known to KEMET, the Board or KEMET stockholders prior to such termination and (iii) KEMET enters into an agreement relating to, or consummates, a transaction involving such Competing Proposal within twelve (12) months of such termination;
 
by KEMET, to enter into a definitive agreement with respect to a Superior Proposal; or
 
by Yageo, because KEMET:
 
has made an Adverse Recommendation Change; or
 
approved or recommended, or allowed KEMET or any of its subsidiaries to enter into, an Alternative Acquisition Agreement.

KEMET would be entitled to receive a reverse termination fee of $49.05 million from Yageo if the Merger Agreement is terminated by KEMET or Yageo because Yageo has failed to obtain the Yageo Stockholder Approval (if required by applicable law).

KEMET would be entitled to receive a reverse termination fee of $63.75 million from Yageo if the Merger Agreement is terminated by KEMET because Yageo has failed to consummate the Merger by the time the closing should have occurred as a result of the failure of the debt financing to be funded. KEMET must irrevocably elect in writing whether to accept such termination fee or maintain its right to seek monetary damages within thirty (30) days of the time of termination.

KEMET would be entitled to receive a reverse termination fee of $65.40 million from Yageo if the Merger Agreement is terminated by KEMET or Yageo because Yageo fails to obtain CFIUS approval or a CFIUS turndown occurs, or if all conditions have been met by the Termination Date, except with respect to CFIUS approval.

Expense Reimbursement (page 89)

If either party terminates the Merger Agreement because KEMET fails to obtain the KEMET Stockholder Approval, KEMET would be required to reimburse up to $18 million of reasonable out-of-pocket expenses of Yageo, Acquisition Sub or their affiliates in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement. If either party terminates the Merger Agreement because Yageo fails to obtain the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission, Yageo is required to reimburse up to $18 million of reasonable out-of-pocket expenses of KEMET and its affiliates in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement.

Specific Performance (page 90)

Yageo, Acquisition Sub and KEMET are entitled to seek specific performance to prevent breaches of the Merger Agreement and to enforce the terms of the Merger Agreement in addition to any other remedy to which they are entitled at law or in equity. KEMET is entitled to seek specific performance or other equitable relief to cause Yageo to effect the closing of the Merger if and only if (i) all conditions to the parties’ obligation to consummate the Merger (other than conditions to be satisfied at the closing of the Merger, each of which is capable of being satisfied at that time) have been satisfied at the time when the closing of the Merger would have occurred, (ii) the debt financing has been funded or will be funded at the closing of the Merger and (iii) KEMET has irrevocably confirmed that (x) all of the conditions to consummating the Merger have been and continue to be satisfied (other than those conditions that by their nature are

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to be satisfied at the closing, each of which shall then and continues to be capable of being satisfied as of the closing) or waived (to the extent such waiver is permitted under applicable law) and (y) KEMET is prepared to consummate the Merger.

Market Prices and Dividend Data (page 93)

KEMET common stock is listed on the NYSE under the symbol “KEM.” The closing price of KEMET common stock on November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement, was $23.51. On January 13, 2020, the latest practicable trading day before the date of this Proxy Statement, the closing price of KEMET common stock was $26.60 per share.

Under the terms of the Merger Agreement, between the date of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger, neither KEMET nor any of its subsidiaries may authorize, declare, pay or make any dividends or other distributions without the prior written consent of Yageo.

Appraisal Rights (page 96)

If the Merger is adopted by KEMET stockholders, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”). This means that KEMET stockholders will be entitled to have their shares of KEMET common stock appraised by the Court of Chancery of the State of Delaware (the “Court of Chancery”) and to receive payment in cash of the “fair value” of the shares of KEMET common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest based to be paid upon the amount determined to be fair value, if any, as determined by the Court of Chancery. KEMET stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares.

To exercise your appraisal rights, you must, among other things, submit a written demand for appraisal to KEMET before the vote is taken on the adoption of the Merger Agreement, you must not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement and you must continue to hold the shares of KEMET common stock of record through the Effective Time. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this Proxy Statement in the section entitled “Appraisal Rights” beginning on page 96 of this Proxy Statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this Proxy Statement. If you hold your shares of KEMET common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such broker, bank or other nominee.

Neither the SEC Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the Merger, or determined if the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

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QUESTIONS AND ANSWERS

The following questions and answers are intended to address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that may be important to you as a KEMET stockholder. You are encouraged to read carefully the more detailed information contained elsewhere in this Proxy Statement, the annexes to this Proxy Statement and the documents we refer to in this Proxy Statement. You may obtain the information incorporated by reference in this Proxy Statement without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 103 of this Proxy Statement.

Q: Why am I receiving these materials?
     
A: On November 11, 2019, KEMET entered into the Merger Agreement providing for the Merger of Acquisition Sub with and into KEMET, with KEMET surviving the Merger as a wholly owned subsidiary of Yageo. The Board is furnishing this Proxy Statement and form of proxy card to the holders of KEMET common stock in connection with the solicitation of proxies in favor of the proposal to adopt the Merger Agreement and to approve the other proposals to be voted on at the Special Meeting or any adjournment or postponement thereof. This Proxy Statement includes information that we are required to provide to you under the rules of the SEC and is designed to assist you in voting on the matters presented at the Special Meeting. KEMET stockholders of record as of the close of business on January 9, 2020 may attend the Special Meeting and are entitled and requested to vote on the proposals described in this Proxy Statement.
 
Q: What is included in the proxy materials?
 
A: The proxy materials include this Proxy Statement, the annexes to this Proxy Statement, including the Merger Agreement, and a proxy card.
 
Q: When and where is the Special Meeting?
 
A: The Special Meeting will take place on Thursday, February 20, 2020, at KEMET Corporation, KEMET Tower, One East Broward Boulevard, First Floor, Fort Lauderdale, Florida 33301, at 9:00 a.m., Eastern Time.
 
Q: What is the proposed Merger and what effects will it have on KEMET?
 
A: The proposed Merger is the acquisition of KEMET by Yageo through the Merger of Acquisition Sub with and into KEMET pursuant to the Merger Agreement. If the proposal to adopt the Merger Agreement is approved by the requisite number of shares of KEMET common stock, and the other closing conditions under the Merger Agreement have been satisfied or waived, Acquisition Sub will merge with and into KEMET, with KEMET continuing as the Surviving Corporation. As a result of the Merger, KEMET will become a wholly owned subsidiary of Yageo and you will no longer own shares of KEMET common stock. KEMET expects to delist its common stock from the NYSE as promptly as practicable after the Effective Time and de-register its common stock under the Exchange Act as promptly as practicable after such delisting. Thereafter, KEMET would no longer be a publicly traded company, and KEMET will no longer file periodic reports with the SEC on account of KEMET common stock.
 
Q: What will I receive if the Merger is consummated?
 
A: Upon the consummation of the Merger, you will be entitled to receive the Merger Consideration of $27.20 in cash, without interest and less applicable tax withholdings, for each share of KEMET common stock that you own, unless you have properly exercised and perfected and not withdrawn your demand for appraisal rights under the DGCL with respect to such shares. For example, if you own one hundred (100) shares of KEMET common stock, you will receive $2,720.00 in cash, without interest and less any applicable withholding taxes, in exchange for your one hundred (100) shares of KEMET common stock. In either case, your shares will be canceled and you will not own shares in the Surviving Corporation.

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Q: Who is entitled to vote at the Special Meeting?
     
A: Only stockholders of record as of the close of business on January 9, 2020 are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournment or postponement thereof. If you hold shares of KEMET common stock indirectly through a broker, bank or similar institution, you are not a stockholder of record, but instead hold your shares in “street name” and the record owner of your shares is your broker, bank or similar institution. Instructions on how to vote shares held in “street name” are described under the question “How may I vote?” below.
 
Q: How may I vote?
 
A: For KEMET stockholders of record: If you are eligible to vote at the Special Meeting and are a stockholder of record, you may submit your proxy or cast your vote in any of four (4) ways:

(i) by Internet — If you have Internet access, you may submit your proxy by following the instructions provided with your proxy materials and on your proxy card. Proxies submitted via Internet must be received by 11:59 p.m., Eastern Time, on February 19, 2020;
 
(ii) by telephone — You can also submit your proxy by telephone by following the instructions provided with your proxy materials and on your proxy card. Proxies submitted via telephone must be received by 11:59 p.m., Eastern Time, on February 19, 2020;
 
(iii) by mail — You may submit your proxy by completing the proxy card enclosed with those materials, signing and dating it and returning it in the postage-paid envelope KEMET has provided; or
 
(iv) in person at the Special Meeting — You can vote in person at the Special Meeting. In order to gain admittance, you must present valid government-issued photo identification, such as a driver’s license or passport.

For holders in “street name”: If you hold your shares in “street name” and, therefore, are not a stockholder of record, you will need to follow the specific voting instruction card provided to you by your broker, bank or other similar institution. If you wish to vote your shares in person at the Special Meeting, you must obtain a valid “legal” proxy from your broker, bank or similar institution, granting you authorization to vote your shares. In order to attend and vote your shares held in “street name” at the Special Meeting, you will need to present valid government-issued photo identification, such as a driver’s license or passport, and hand in the valid “legal” proxy from your broker, bank or similar institution, along with a signed ballot that you can request at the Special Meeting. You will not be able to attend and vote your shares held in “street name” at the Special Meeting without valid government-issued photo identification such as a driver’s license or passport, a valid “legal” proxy from your broker, bank or similar institution and a signed ballot.

If you submit your proxy by Internet, telephone or mail, and you do not subsequently revoke your proxy, your shares of KEMET common stock will be voted in accordance with your instructions.

Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of KEMET common stock by proxy. If you are a stockholder of record or if you obtain a valid “legal” proxy to vote shares which you beneficially own and wish to change your vote, you may still vote your shares of KEMET common stock in person at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person, your previous vote by proxy will not be counted.

     
Q: How many votes do I have?
 
A: Each holder of KEMET common stock is entitled to cast one vote on each matter properly brought before the Special Meeting for each share of KEMET common stock that such holder owned as of the record date.
 
Q: May I attend the Special Meeting and vote in person?
 
A: Yes. All KEMET stockholders as of the record date may attend the Special Meeting and vote in person. KEMET stockholders will need to present a form of personal identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices (including mobile phones and tablets), large bags, briefcases or packages will be permitted in the Special Meeting, without the express written permission of KEMET. Even if you plan to attend the Special Meeting in person, you are encouraged to complete, sign, date and return the enclosed

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proxy or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the Special Meeting. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you hold your shares in “street name,” because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain, and bring to the Special Meeting, a valid “legal” proxy from your bank, broker or other nominee.
     
Q: What am I being asked to vote on at the Special Meeting?
 
A: You are being asked to consider and vote on the following proposals:

to adopt the Merger Agreement, pursuant to which Acquisition Sub will merge with and into KEMET, and KEMET will become a wholly owned subsidiary of Yageo;
   
to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger; and
   
to approve the adjournment of the Special Meeting to a later date if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Q: How does the Merger Consideration compare to the market price of KEMET common stock prior to the announcement of the Merger?
     
A: The Merger Consideration represents a premium of approximately sixteen percent (16%) over the closing price of KEMET common stock on November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement. The Merger Consideration also represents approximately a twenty-seven percent (27%) premium over the 30-day volume weighted average price of KEMET common stock, a thirty-eight percent (38%) premium over the 90-day volume weighted average price of KEMET common stock, and a forty-five percent (45%) premium over the 180-day volume weighted average price of KEMET common stock, in each case, for the period through November 8, 2019.
 
Q: Will KEMET pay a quarterly dividend before the closing of the Merger?
 
A: Under the terms of the Merger Agreement, from November 11, 2019 until the consummation of the Merger, KEMET may not authorize, declare, pay or make any dividend or other distribution in respect of any of its capital stock or other equity interests, as further described in the section entitled “Terms of the Merger Agreement—Conduct of Business Pending the Merger” beginning on page 74 of this Proxy Statement.
 
Q: Does Yageo have the financial resources to consummate the Merger?
 
A: Yageo has secured committed Debt Financing (as defined in the section entitled “Terms of the Merger Agreement—Financing Effortsbeginning on page 78 of this Proxy Statement) from financing sources providing Yageo with sufficient funds, together with cash on hand and other sources of funds available to Yageo at the Effective Time, to consummate the Merger and pay all associated fees, costs and expenses with respect to the Merger. In connection with entering into the Merger Agreement, Yageo executed the Commitment Letter and the Shareholder Loan Agreement, and received a Standby Letter of Credit to backstop the Shareholder Loan. Consummation of the Merger is not conditioned on Yageo or Acquisition Sub obtaining financing. For a more complete description of sources of funding for the Merger and related costs, see the section entitled “The Merger—Financing of the Merger” beginning on page 64 of this Proxy Statement.
 
Q: What do I need to do now?
 
A: You are encouraged to read this Proxy Statement, the annexes to this Proxy Statement (including the Merger Agreement) and the documents we refer to in this Proxy Statement carefully and consider how the Merger affects you. Then complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone, so that your shares can be voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction card provided by your broker, bank or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.

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Q: Should I send in my stock certificates now?
     
A: No. If you are a recordholder, after the Merger is consummated, under the terms of the Merger Agreement, you will receive a letter of transmittal instructing you to send your stock certificates to the paying agent in order to receive the cash payment of the Merger Consideration for each share of KEMET common stock represented by such stock certificates. You should use the letter of transmittal to exchange your stock certificates for the Merger Consideration to which you are entitled upon the consummation of the Merger. Please do not send in your stock certificates now.
 
Q: If I do not know where my stock certificates are, how will I get the Merger Consideration for my shares of KEMET common stock?
 
A: If the Merger is consummated, the transmittal materials you will receive after the closing of the Merger will include the procedures that you must follow if you cannot locate your stock certificates. This will include an affidavit that you will need to sign attesting to the loss of your stock certificates. You may also be required to post a bond as indemnity against any potential loss.
 
Q: How does the Board recommend that I vote?
 
A:

The Board—after considering the various factors as set forth in the section entitled “The Merger—Recommendation of the Board and Reasons for the Merger,” beginning on page 42 of this Proxy Statement, the comprehensive sale process conducted by the Board and the alternatives to the Merger (including remaining as a standalone company)—has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable to, fair to and in the best interests of KEMET and its stockholders, and has approved the adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.

The Board unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you vote “FOR” the adoption of the Merger Agreement, by means of a non-binding, advisory vote, “FOR” the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 
Q: What happens if the Merger is not consummated?
 
A:

If the Merger Agreement is not adopted by KEMET stockholders or if the Merger is not consummated for any other reason, KEMET stockholders will not receive any payment for their shares of KEMET common stock. Instead, KEMET will remain an independent public company, KEMET common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and we will continue to file periodic reports with the SEC on account of KEMET common stock.

Under certain specified circumstances, KEMET may be required to reimburse Yageo’s expenses or pay Yageo a termination fee, or under certain other specified circumstances, KEMET may be entitled to receive a reimbursement of KEMET’s expenses or a reverse termination fee from Yageo, upon the termination of the Merger Agreement, as described in the sections entitled “Terms of the Merger Agreement—Termination Fees” and “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement.

 
Q: Do any of KEMET’s directors or officers have interests in the Merger that may differ from those of KEMET stockholders generally?
 
A: Yes. In considering the recommendation of the Board with respect to the proposal to adopt the Merger Agreement, you should be aware that KEMET’s directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of KEMET stockholders generally. The Board was aware of and considered these interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, in approving the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by KEMET stockholders. For a description of the interests of KEMET’s directors and executive officers in the Merger, see the section entitled “The Merger—Interests of the Directors and Executive Officers of KEMET in the Merger” beginning on page 59 of this Proxy Statement.

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Q: What vote is required to approve the proposals submitted to a vote at the Special Meeting?
     
A: The affirmative vote of the majority of the shares of KEMET common stock outstanding and entitled to vote thereon is required to adopt the Merger Agreement. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, whether or not a quorum is present, is required to approve the proposal to adjourn the Special Meeting. This means that the proposal to adopt the Merger Agreement will be approved if the number of shares voted “FOR” such proposal is greater than fifty (50%) of the total number of shares of KEMET common stock entitled to vote at the Special Meeting. Abstentions will be counted as votes “AGAINST” the proposal to adopt the Merger Agreement, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and the proposal to adjourn the Special Meeting, since abstentions represent shares entitled to vote and thus are included in the denominator in determining the approval percentage. Broker non-votes, if any, will have the effect of a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.
   
  As of January 9, 2020, the record date for determining who is entitled to vote at the Special Meeting, there were approximately 58,267,253 shares of KEMET common stock issued and outstanding. Each holder of KEMET common stock is entitled to one vote per share of stock owned by such holder as of the record date.
   
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
   
A: If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this Proxy Statement and your proxy card have been sent directly to you by KEMET.
   
  If your shares are held through a broker, bank or other nominee, you are considered the “beneficial owner” of the shares of KEMET common stock held in “street name.” In that case, this Proxy Statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid “legal” proxy from your broker, bank or other nominee.
   
Q: What is a proxy?
   
  A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of KEMET common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of KEMET common stock is called a “proxy card.” The Board has designated William M. Lowe, Jr. and R. James Assaf, and each of them, with full power of substitution, as proxies for the Special Meeting.
   
Q: Can I change or revoke my proxy?
   
A: For KEMET stockholders of record: Yes. A proxy may be changed or revoked at any time prior to the vote at the Special Meeting by submitting a later-dated proxy (including a proxy submitted via the Internet or by telephone) or by giving written notice to KEMET’s Secretary. You may not change your vote over the Internet or by telephone after 11:59 p.m., Eastern Time, on February 19, 2020. You may also attend the Special Meeting and vote your shares in person.
   
  For holders in “street name”: Yes. You must follow the specific voting instruction card provided to you by your broker, bank or other similar institution to change or revoke any instructions you have already provided to them.

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Q: If a KEMET stockholder gives a proxy, how will the shares be voted?
     
A: Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.
   
  If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the adoption of the Merger Agreement, “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.
   
Q: I understand that a quorum is required in order to conduct business at the Special Meeting. What constitutes a quorum?
   
A: A majority in voting power of KEMET common stock issued and outstanding and entitled to vote at the Special Meeting, which are present in person or represented by proxy, constitutes a quorum at the Special Meeting. As of the close of business on the record date, there were 58,267,253 shares of KEMET common stock issued and outstanding and entitled to vote. If you submit a properly executed proxy by Internet, telephone or mail, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. As a result, 29,133,627 shares must be present in person or represented by proxy to have a quorum. If a quorum is not present, the Special Meeting will be adjourned until a quorum is obtained, subject to the terms of the Merger Agreement. The affirmative vote of a majority of the voting power of the shares of KEMET common stock, present, in person or represented by proxy, and entitled to vote at the Special Meeting, or the chairman of the Special Meeting, may adjourn the Special Meeting.
   
Q: How can I obtain a proxy card?
   
A: If you lose, misplace or otherwise need to obtain a proxy card, please follow the applicable procedure below.
   
  For KEMET stockholders of record: Please contact Innisfree M&A Incorporated by mail at 501 Madison Avenue, 20th Floor, New York, New York 10022 or by telephone. Stockholders may call toll-free at +1 (888) 750-5834.
   
  For holders in “street name”: Please contact your account representative at your broker, bank or other similar institution.
   
Q: What happens if I sell or otherwise transfer my shares of KEMET common stock after the close of business on the record date but before the Special Meeting?
   
A: The record date is earlier than both the date of the Special Meeting and the date the Merger is expected to be consummated. If you sell or transfer your shares of KEMET common stock after the close of business on the record date but before the Special Meeting, unless special arrangements (such as the provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies KEMET in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is consummated, to the person to whom you sell or transfer your shares of KEMET common stock, but you will retain your right to vote these shares at the Special Meeting. Even if you sell or otherwise transfer your shares of KEMET common stock after the close of business on the record date, you are encouraged to complete, date, sign and return the enclosed proxy card or vote via the Internet or telephone.
   
Q: What should I do if I receive more than one set of voting materials?
   
A: You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxy cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, date, sign and return (or vote via the Internet or telephone with respect to) each proxy card and voting instruction card that you receive.

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Q: Who will count the votes?
     
A: The votes will be counted by Computershare, the independent inspector of election appointed by the Board for the Special Meeting.
   
Q: Who pays for the expenses of this proxy solicitation?
   
A: KEMET will bear the entire cost of this proxy solicitation, including the preparation, printing, mailing and distribution of these proxy materials. KEMET has retained Innisfree M&A Incorporated (“Innisfree”), a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $15,000 plus expenses. KEMET has also agreed to reimburse Innisfree, for reasonable out-of-pocket expenses incurred in connection with the proxy solicitation and indemnify Innisfree against losses arising out of its provision of such services on KEMET’s behalf. KEMET may also reimburse brokerage firms and other persons representing stockholders who hold their shares in “street name” for reasonable expenses incurred by them in forwarding proxy materials to such stockholders. In addition, certain directors, officers and other employees, without additional remuneration, may solicit proxies in person, or by telephone, facsimile, email and other methods of electronic communication.
   
Q: Where can I find the voting results of Special Meeting?
   
A: KEMET intends to announce preliminary voting results at the Special Meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC within four (4) business days after the Special Meeting.
   
Q: Will I be subject to U.S. federal income tax upon the exchange of KEMET common stock for cash pursuant to the Merger?
   
A: The exchange of KEMET common stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement) who exchanges shares of KEMET common stock for cash in the Merger generally will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. Holder’s adjusted tax basis in such shares. If you are a Non-U.S. Holder (as defined in the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement), the Merger generally will not result in U.S. federal income tax to you unless you have certain connections with the United States.
   
  For a more complete description of the U.S. federal income tax consequences of the Merger, see the section entitled “The Merger—U.S. Federal Income Tax Consequences of the Merger” beginning on page 66 of this Proxy Statement.
   
Q: What will the holders of outstanding KEMET equity awards receive in the Merger?
   
A: For information regarding the treatment of KEMET’s outstanding equity awards, see the section entitled “Terms of the Merger Agreement—Merger Consideration—Outstanding Equity Awards and Long-Term Incentive Plan Awards” beginning on page 70 of this Proxy Statement.
   
Q: When do you expect the Merger to be consummated?
   
A: We are working toward consummating the Merger as quickly as possible and currently expect to consummate the Merger in the second half of calendar year 2020. However, the exact timing of consummation of the Merger cannot be predicted because the Merger is subject to specified conditions, including, among other things, the KEMET Stockholder Approval, the Yageo Stockholder Approval (if required by applicable law) and the receipt of certain regulatory approvals.
   
Q: Are there any other risks to me from the Merger that I should consider?
   
A: Yes. There are risks associated with all business combinations, including the Merger. See the section entitled “Cautionary Statement On Forward-Looking Statements” beginning on page 21 of this Proxy Statement.

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Q: Am I entitled to appraisal rights under the DGCL?
     
A: If the Merger is adopted by KEMET stockholders, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that KEMET stockholders common stock are entitled to have their shares appraised by the Court of Chancery and to receive payment in cash of the “fair value” of the shares of KEMET common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest based to be paid upon the amount determined to be fair value, if any, as determined by the Court of Chancery. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in the section entitled “Appraisal Rights” beginning on page 96 of this Proxy Statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this Proxy Statement.
   
Q: How can I obtain more information about KEMET?
   
A: You can find more information about KEMET from various sources described in the section entitled “Where You Can Additional Information” beginning on page 103 of this Proxy Statement.
   
Q: Who can help answer my questions?
   
A: If you have any questions concerning the Merger, the Special Meeting or this Proxy Statement, would like additional copies of this Proxy Statement or need help voting your shares of common stock, please contact KEMET’s proxy solicitor:

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders Call: (888) 750-5834
Banks and Brokers Call: (212) 750-5833

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement, and the documents to which KEMET refers you in this Proxy Statement, as well as information included in oral statements or other written statements made or to be made by KEMET or on KEMET’s behalf, contain “forward-looking statements” within the meaning of federal securities laws about KEMET’s financial condition and results of operations that are based on management’s current expectations, estimates and projections about the markets in which KEMET operates, as well as management’s beliefs and assumptions. Words such as “expects,” “anticipates,” “believes,” “estimates” or other similar expressions and future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements.

This Proxy Statement includes forward-looking statements relating to the proposed Merger between KEMET and Yageo, including financial estimates and statements as to the expected timing, completion and effects of the proposed Merger. These estimates and statements are subject to risks and uncertainties, and actual results might differ materially. Such estimates and statements include, but are not limited to, statements about the benefits of the proposed Merger, including future financial and operating results, the combined company’s plans, expectations and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of KEMET’s management and are subject to significant risks and uncertainties outside of KEMET’s control. Actual results could differ materially based on factors including, but not limited to: (i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (ii) the risk that KEMET stockholders may not approve the proposed Merger; (iii) the risk that Yageo stockholders may not approve the proposed Merger (if approval by Yageo’s stockholders is required by applicable law); (iv) the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated; (v) inability to complete the proposed Merger because, among other reasons, conditions to the closing of the proposed Merger may not be satisfied or waived; (vi) uncertainty as to the timing of completion of the proposed Merger; (vii) potential adverse effects or changes to relationships with customers, employees, suppliers or other parties resulting from the announcement or completion of the proposed Merger; (viii) potential litigation relating to the proposed Merger that could be instituted against KEMET or its directors and officers, including the effects of any outcomes related thereto; or (ix) possible disruptions from the proposed Merger that could harm KEMET’s business, including current plans and operations.

All of the forward-looking statements KEMET makes in this Proxy Statement are qualified by the information contained or incorporated by reference herein, including, but not limited to, (i) the information contained under this heading and (ii) the information in KEMET’s consolidated financial statements and notes thereto included in our most recent filing on Form 10-K for the fiscal year ended March 31, 2019 and subsequent periodic and interim report filings (see the section entitled “Where You Can Find More Information” beginning on page 103 of this Proxy Statement).

Discussions of additional risks and uncertainties are contained in KEMET’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect KEMET’s judgment only as of the date hereof. KEMET undertakes no obligation to update publicly any of these forward-looking statements to reflect new information, future events or otherwise.

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board for use at the Special Meeting or at any adjournment or postponement thereof.

Date, Time and Place

We will hold the Special Meeting on Thursday, February 20, 2020, at KEMET Corporation, KEMET Tower, One East Broward Boulevard, First Floor, Fort Lauderdale, Florida 33301, at 9:00 a.m., Eastern Time.

Purpose of the Special Meeting

At the Special Meeting, KEMET stockholders will be asked to vote on proposals to adopt the Merger Agreement, to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Record Date; Shares Entitled to Vote; Quorum

Only KEMET stockholders of record as of the close of business on January 9, 2020 are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournment or postponement thereof. A list of stockholders entitled to vote at the Special Meeting will be available for inspection in KEMET’s headquarters located at KEMET Tower, One East Broward Boulevard, 2nd Floor, Fort Lauderdale, Florida, during regular business hours for a period of at least ten (10) days before the Special Meeting and at the location of the Special Meeting during the Special Meeting.

A majority in voting power of KEMET common stock issued and outstanding and entitled to vote at the Special Meeting, which are present in person or represented by proxy, constitutes a quorum at the Special Meeting. As of the close of business on the record date for the Special Meeting, there were 58,267,253 shares of KEMET common stock issued and outstanding and entitled to vote. If you submit a properly executed proxy by Internet, telephone or mail, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum. As a result, 29,133,627 shares must be present in person or represented by proxy to have a quorum. If a quorum is not present, the Special Meeting will be adjourned until a quorum is obtained, subject to the terms of the Merger Agreement. The affirmative vote of a majority of the voting power of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, or the chairman of the Special Meeting, may adjourn the Special Meeting.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the majority of the shares of KEMET common stock outstanding and entitled to vote thereon is required to adopt the Merger Agreement. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, provided a quorum is present, is required to approve, by means of a non-binding, advisory vote, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger. The affirmative vote of a majority of the shares of KEMET common stock entitled to vote which are present, in person or represented by proxy, at the Special Meeting, whether or not a quorum is present, is required to approve the proposal to adjourn the Special Meeting. This means that the proposal to adopt the Merger Agreement will be approved if the number of shares voted “FOR” such proposal is greater than fifty percent (50%) of the total number of shares of KEMET common stock entitled to vote at the Special Meeting. Abstentions will have the same effect as votes “AGAINST” the proposal to adopt the Merger Agreement, the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and the proposal to adjourn the Special Meeting, since abstentions represent shares entitled to vote and thus are included in the denominator in determining the approval percentage. Broker non-votes, if any, will have the effect of a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.

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Shares Held by KEMET’s Directors and Executive Officers

At the close of business on January 9, 2020, KEMET’s directors and executive officers beneficially owned 1,105,320 shares of KEMET common stock, which represented approximately 1.90% of the shares of KEMET’s outstanding common stock on that date. The directors and executive officers have informed KEMET that they currently intend to vote all of their shares of KEMET common stock “FOR” the adoption of the Merger Agreement, “FOR” the non-binding, advisory proposal regarding compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting (if necessary or appropriate).

Voting of Proxies

If your shares are registered in your name with KEMET’s transfer agent, Computershare, you may cause your shares to be voted by returning a signed proxy card, or you may vote in person at the Special Meeting. Additionally, you may submit electronically over the Internet or by phone a proxy authorizing the voting of your shares by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you attend the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

Voting instructions are included on your enclosed proxy card. All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholders. Properly executed proxies that do not contain voting instructions will be voted “FOR” adoption of the Merger Agreement, “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. No proxy that is specifically marked against adoption of the Merger Agreement will be voted in favor of the proposed compensation arrangements for KEMET’s named executive officers in connection with the Merger, unless it is specifically marked “FOR” the approval of such proposal.

If your shares are held in “street name” through a broker, bank or other nominee, you may vote through your broker, bank or other nominee by completing and returning the voting instruction form provided by your broker, bank or other nominee, or by the Internet or telephone through your broker, bank or other nominee if such a service is provided. To vote via the Internet or telephone through your broker, bank or other nominee, you should follow the instructions on the voting instruction card provided by your broker, bank or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting instruction form, do not vote via the Internet or telephone through your broker, bank or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal” proxy from your broker, bank or other nominee, it will be counted as a vote “AGAINST” the proposal to adopt the Merger Agreement and will not have any effect on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger or the proposal to adjourn the Special Meeting.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;
  
delivering a written notice of revocation to KEMET’s Secretary;
  
completing and properly executing another proxy card with a later date and returning it in the postage paid envelope provided; or
  
attending the Special Meeting and voting in person.

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Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by KEMET’s Secretary prior to the Special Meeting and, in the case of Internet or telephonic voting instructions, must be received before 11:59 p.m. Eastern Time on February 19, 2020. If you have submitted a proxy, your appearance at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

If you hold your shares of common stock in “street name,” you should contact your broker, bank or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting if you obtain a valid “legal” proxy from your broker, bank or other nominee. Any adjournment, recess or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow KEMET stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting which was adjourned, recessed or postponed.

Board Recommendation

The Board—after considering various factors described in the section entitled “The Merger—Recommendation of the Board of Directors and Reasons for the Merger” beginning on page 42 of this Proxy Statement, and after consultation with legal and financial advisors—has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable to, fair to and in the best interests of KEMET and its stockholders, and has adopted and approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger. The Board unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you vote “FOR” the proposal to adopt the Merger Agreement, “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Tabulation of Votes

All votes will be tabulated by a representative of Computershare, who will act as the inspector of election appointed for the Special Meeting, and will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

Solicitation of Proxies

This Proxy Statement is sent on behalf of, and the proxies are being solicited by, the Board. The expense of soliciting proxies in the enclosed form will be borne by KEMET. KEMET has retained Innisfree, a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $15,000 plus expenses. KEMET has also agreed to reimburse Innisfree, for reasonable out-of-pocket expenses incurred in connection with the proxy solicitation and indemnify Innisfree against losses arising out of its provision of such services on KEMET’s behalf. In addition, KEMET may reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by some of KEMET’s directors, officers and employees, in person, or by telephone, facsimile, email and other methods of electronic communication. No additional compensation will be paid for such services.

Anticipated Date of Consummation of the Merger

Assuming timely satisfaction of necessary closing conditions, including, among other things, the KEMET Stockholder Approval and receipt of required regulatory approvals, we currently anticipate that the Merger will be consummated in the second half of calendar year 2020.

Attending the Special Meeting

KEMET stockholders as of the close of business on the record date may attend the Special Meeting in person. All KEMET stockholders should bring valid government-issued photo identification, such as a driver’s license or passport.

If you hold your shares in “street name” and wish to vote your shares in person at the Special Meeting, you must obtain a valid “legal” proxy from your broker, bank or similar institution granting you authorization to vote your shares. In order to attend and vote your shares held in “street name” at the Special Meeting, you will need to present valid government-issued photo identification, such as a driver’s license or passport, and hand in the valid “legal” proxy from

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your broker, bank or similar institution, along with a signed ballot that you can request at the Special Meeting. You will not be able to attend and vote your shares held in “street name” at the Special Meeting without valid government-issued photo identification, such as a driver’s license or passport, a valid “legal” proxy from your broker, bank or similar institution and a signed ballot.

No cameras, recording equipment, electronic devices (including mobile phones and tablets), large bags, briefcases or packages will be permitted in the Special Meeting, without the express written permission of KEMET.

Even if you plan to attend the Special Meeting in person, you are encouraged to complete, sign, date and return the enclosed proxy card or vote electronically over the Internet or via telephone to ensure that your shares will be represented at the Special Meeting. If you attend the Special Meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you hold your shares in “street name,” because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you follow the procedures set forth above.

Assistance

If you need assistance in completing your proxy card or have questions regarding the Special Meeting, please contact Innisfree, our proxy solicitor, toll-free at (888) 750-5834. Brokers, banks and other nominees may call collect at (212) 750-5833.

Rights of Stockholders Who Seek Appraisal

If the proposal to adopt the Merger Agreement is approved by KEMET stockholders, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the Merger Agreement and who properly exercise and perfect their demand for appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of KEMET common stock are entitled to have their shares appraised by the Court of Chancery and to receive payment in cash of the “fair value” of the shares of KEMET common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the $27.20 per share Merger Consideration payable pursuant to the Merger Agreement if they did not seek appraisal of their shares.

To exercise your appraisal rights, you must, among other things, submit a written demand for appraisal to KEMET before the vote is taken on the proposal to adopt the Merger Agreement, you must not submit a blank proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement, and you must continue to hold the shares of KEMET common stock of record through the Effective Time. Your failure to follow the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this Proxy Statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this Proxy Statement. If you hold your shares of KEMET common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such broker, bank or other nominee. Stockholders should refer to the discussion in the section entitled “Appraisal Rights” beginning on page 96 of this Proxy Statement and the DGCL requirements for exercising appraisal rights reproduced and attached as Annex C to this Proxy Statement.

Other Matters

At this time, we know of no other matters to be submitted at the Special Meeting.

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

THE MERGER

The discussion of the Merger in this section and elsewhere in this Proxy Statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this Proxy Statement and is incorporated into this Proxy Statement by reference. This summary does not purport to be complete and may not contain all of the information about the Merger that is important to you. You are encouraged to read the entire Merger Agreement carefully and in its entirety as it is the legal document that governs the Merger.

Additional information about the Company may be found elsewhere in this Proxy Statement and in the Company’s other public filings. See the section entitled “Where You Can Find Additional Information” beginning on page 103 of this Proxy Statement.

Parties Involved in the Merger

KEMET Corporation

KEMET Tower
One East Broward Boulevard, 2nd Floor
Fort Lauderdale, Florida 33301

KEMET is a leading global manufacturer of a wide variety of capacitors, and electro-magnetic compatible devices, sensors and actuators. With respect to capacitors, KEMET competes in the passive electronic component industry, specifically multilayer ceramic, tantalum, film and aluminum (solid & electrolytic) capacitors. While KEMET competes in the passive electronic component industry, its strategic focus is on growth markets, specialty products requiring high reliability, and within its ceramic product line, larger case size capacitors.

KEMET is organized into three (3) reportable segments: Solid Capacitors, Film and Electrolytic, and Electro-magnetic, Sensors & Actuators (“MSA”). Each segment is responsible for the operations of certain manufacturing sites as well as all related research and development efforts. For the year ended March 31, 2019, approximately 67.7% of KEMET’s net sales were derived from sales of Solid Capacitors, approximately 14.9% of KEMET’s net sales were derived from sales of Film and Electrolytic products and approximately 17.4% of KEMET’s net sales were derived from sales of MSA products. KEMET operates twenty-two (22) production facilities in Europe, North America, and Asia, and employs approximately 13,400 employees worldwide. KEMET serves the needs of its global customer base through four geographic regions: North America and South America (the “Americas”), Europe, the Middle East and Africa (“EMEA”), Asia and the Pacific Rim (“APAC”) and Japan and Korea (“JPKO”). For the year ended March 31, 2019, approximately 38.6% of KEMET’s net sales were derived from sales in APAC, approximately 22.8% of KEMET’s net sales were derived from sales in EMEA, approximately 24.4% of KEMET’s net sales were derived from sales in the Americas and approximately 14.2% of KEMET’s net sales were derived from sales in JPKO.

KEMET common stock is currently listed on the NYSE under the symbol “KEM.”

Yageo Corporation

3F, 233-1, Baoqio Road
Xindian District, New Taipei City
23145, Taiwan

Yageo is a corporation organized under the laws of the Republic of China and a leading global electronic component company with capabilities on a global scale, including production and sales facilities in Asia, Europe and the Americas. Yageo provides one-stop-shopping, offering its complete product portfolio of resistors, capacitors, inductors, wireless and circuit protection components to meet the diverse requirements of customers. Upon the consummation of the Merger, KEMET will be a wholly owned subsidiary of Yageo.

Yageo’s common stock is listed on the Taiwan Stock Exchange under the ticker symbol “2327” (TAIEX: 2327 TW).

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Sky Merger Sub Inc.

The Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801

Acquisition Sub is a Delaware corporation and a wholly owned subsidiary of Yageo, formed solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated by the Merger Agreement, including the Merger, and the related financing transactions. Acquisition Sub has not conducted any business operations except in furtherance of this purpose and activities incident to its formation. Upon the consummation of the Merger, Acquisition Sub will cease to exist.

Effect of the Merger

If the Merger Agreement is adopted by KEMET stockholders and certain other conditions to the consummation of the Merger are either satisfied or waived, Acquisition Sub will merge with and into KEMET, with KEMET surviving and continuing under the name “KEMET Corporation” as the Surviving Corporation. As a result of the Merger, KEMET Corporation will become a wholly owned subsidiary of Yageo, and KEMET common stock will no longer be publicly traded. In addition, KEMET common stock will be delisted from the NYSE and deregistered under the Exchange Act, in each case, in accordance with applicable law, rules and regulations, and KEMET will no longer file periodic reports with the SEC on account of KEMET common stock. If the Merger is consummated, you will not own any shares of capital stock of the Surviving Corporation.

The Effective Time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as KEMET and Yageo may agree and specify in the certificate of merger).

Effect on KEMET if the Merger is Not Consummated

If the Merger Agreement is not adopted by KEMET stockholders or if the Merger is not consummated for any other reason, KEMET stockholders will not receive any payment for their shares of KEMET common stock. Instead, KEMET will remain an independent public company, KEMET common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and KEMET will continue to file periodic reports with the SEC on account of KEMET common stock. In addition, if the Merger is not consummated, KEMET expects that KEMET’s management will operate the business in a manner similar to that in which it is being operated today.

Furthermore, if the Merger is not consummated, and depending on the circumstances that would have caused the Merger not to be consummated, it is likely that the price of KEMET common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of KEMET common stock would return to the price at which it trades as of the date of this Proxy Statement.

Accordingly, if the Merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of KEMET common stock. If the Merger is not consummated, the Board will continue to evaluate and review KEMET’s business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the Merger Agreement is not adopted by KEMET stockholders or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to KEMET will be offered or that KEMET’s business, prospects or results of operation will not be adversely impacted.

In addition, under specified circumstances, KEMET may be required to reimburse Yageo’s expenses or pay Yageo a termination fee, or may be entitled to Yageo reimbursing KEMET’s expenses or to receive a reverse termination fee from Yageo, upon the termination of the Merger Agreement, as described in the sections entitled “Terms of the Merger Agreement—Termination Fees” and “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement.

Merger Consideration

Upon the consummation of the Merger, each share of KEMET common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares held by KEMET or held, directly or indirectly, by Yageo or Acquisition Sub, which will be canceled for no consideration, and (ii) Dissenting Shares) will be canceled and automatically converted into the right to receive the Merger Consideration.

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Background of the Merger

As part of its ongoing evaluation of KEMET’s business, the Board, together with senior management, regularly reviews and assesses opportunities to increase stockholder value. As part of this review, the Board has periodically considered whether the continued execution of KEMET’s business strategy as a standalone company or through a business combination with a third party would provide the best avenue to enhance stockholder value. Since the beginning of fiscal year 2019, KEMET has focused on increasing stockholder value by leveraging KEMET’s manufacturing expertise, strengthening its “Go-to-Market” leadership position, consistently attracting and retaining exceptional talent, and continuing the execution and communication to investors of its structural transformation relating to: ceramics market segmentation, polymer / tantalum vertical integration of production and sourcing, and product and geographic diversification arising from the acquisition of TOKIN Corporation, all resulting in an accelerated growth profile and sustainable higher gross margin levels. As part of their regular assessment of opportunities to increase stockholder value, the Board and KEMET’s management have considered and evaluated various potential strategic alternatives, including acquisitions, dispositions and internal integration and restructuring.

On December 3, 2018, KEMET announced that William M. Lowe, Jr., Executive Vice President and Chief Financial Officer of KEMET, would retire from KEMET on May 31, 2019, and that Gregory C. Thompson, then-Executive Vice President – Finance, would assume the role of Executive Vice President and Chief Financial Officer in May 2019.

On December 20, 2018, KEMET announced that Mr. Lowe would be appointed as Chief Executive Officer of KEMET and a member of its Board, effective immediately, succeeding Per-Olof Loof, who KEMET announced would resign as Chief Executive Officer and a member of the Board, effective immediately. Mr. Loof’s departure followed an investigation overseen by certain independent members of the Board, with assistance from an external law firm, of facts and circumstances surrounding a consensual personal relationship between Mr. Loof and an employee of KEMET and related actions which were inconsistent with KEMET’s policies. KEMET also announced that Mr. Thompson would succeed Mr. Lowe as Executive Vice President and Chief Financial Officer, effective immediately.

On January 24, 2019, Frank G. Brandenberg, Chairman and independent director of the Board, had a meeting with Mr. Loof, during which Mr. Loof indicated that Yageo, a potential strategic buyer, might be interested in a potential acquisition of KEMET. This conversation came after Mr. Loof’s telephonic conversation with Chen Tie-Min (also known as Pierre Chen), Chairman of Yageo, following Mr. Loof’s departure from KEMET, during which Mr. Chen requested that Mr. Loof convey to the Board Yageo’s interest in a potential acquisition of KEMET.

On January 29, 2019, Mr. Brandenberg reported his conversation with Mr. Loof to the Board with respect to Yageo’s potential interest in an acquisition of KEMET.

On January 30, 2019, Mr. Chen of Yageo communicated to Mr. Brandenberg via email his interest in having a discussion regarding a potential acquisition of KEMET by Yageo.

On February 5, 2019, in response to Mr. Chen’s January 30, 2019 email, Mr. Chen of Yageo held a telephonic conversation with Messrs. Brandenberg and Lowe and Gurminder S. Bedi, an independent director of the Board, during which Mr. Chen reiterated that Yageo was interested in acquiring KEMET. During this conversation, representatives of KEMET sought additional information regarding Yageo’s interest, emphasizing that such interest was unsolicited and required sufficient time to be assessed; however, specific prices or price ranges were not addressed. In addition, Messrs. Brandenberg, Lowe and Bedi emphasized to Mr. Chen that KEMET had confidence in its standalone plan and was not, at that time, anticipating pursuing a sale of KEMET.

On March 6, 2019, the Board received an unsolicited, non-binding proposal letter from Yageo, offering to acquire all of the outstanding shares of KEMET’s common stock at a price of $24.00 per share in cash, representing an approximate 28.3% premium to the closing price of KEMET’s common stock on March 5, 2019 (the “Initial Yageo Proposal”). The Initial Yageo Proposal highlighted Yageo’s ability to provide certainty to KEMET’s stockholders. The Initial Yageo Proposal also noted that Yageo had the necessary internal approvals to make the Initial Yageo Proposal and that a definitive merger agreement in connection with a potential transaction between the parties would not be subject to any financing contingency.

On March 7, 2019, Mr. Brandenberg provided an email update to the full Board, providing a copy of the Initial Yageo Proposal.

Following receipt of the Initial Yageo Proposal, Messrs. Brandenberg and Bedi had several calls with Mr. Chen regarding Yageo’s interest in acquiring KEMET. Mr. Brandenberg periodically updated the Board on such conversations.

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In early March 2019, KEMET engaged Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) to assist with the response to the Initial Yageo Proposal and the evaluation of potential strategic alternatives. Such engagement followed an engagement of Skadden by the independent directors of KEMET in late November 2018 to assist the independent directors with their review of Mr. Loof’s actions and ultimate termination of employment.

On March 10, 2019, Mr. Brandenberg acknowledged receipt of the Initial Yageo Proposal to Yageo, stating that the Board, together with KEMET’s advisors, would carefully review the Initial Yageo Proposal.

On March 13, 2019, with members of KEMET’s management and representatives of Skadden participating, the Board met telephonically to discuss the Initial Yageo Proposal. During the Board meeting, Mr. Brandenberg reviewed the Initial Yageo Proposal with the Board. In light of the Initial Yageo Proposal and the possibility of interest in KEMET from other potential strategic buyers, the Board agreed to search for, interview and engage an independent financial advisor. In addition, the Board determined that Messrs. Brandenberg and Bedi should schedule an in-person meeting with Mr. Chen of Yageo to discuss the Initial Yageo Proposal.

On March 19 and March 20, 2019, with members of KEMET’s management and a representative of Skadden participating, the Board met in person in Fort Lauderdale, Florida with, and received presentations from, two potential independent financial advisors. During such presentations, the two potential independent financial advisors—neither of whom had been informed of the Initial Yageo Proposal—each separately reviewed and discussed with the Board its preliminary financial analysis of KEMET (based upon publicly available information at the time) and its preliminary analysis of potential alternatives available to KEMET. After the potential financial advisors left the meeting, management provided the Board with a three (3) year plan, including financial projections prepared by management, assuming a base plan with KEMET continuing to operate as a standalone company (the “base plan”) as well as a recession case (the “recession plan”). On March 20, 2019, in connection with the Initial Yageo Proposal and potential strategic alternatives, representatives of Skadden reviewed certain legal matters with the Board, including directors’ fiduciary duties.

On April 3, 2019, with members of KEMET’s management and representatives of Skadden participating, the Board met, during which meeting representatives of Goldman Sachs —who had not been informed of the Initial Yageo Proposal—reviewed and discussed with the Board its preliminary financial analysis of KEMET (based upon publicly available information at the time) and its preliminary analysis of certain potential strategic alternatives available to KEMET.

From April 8 to April 9, 2019, at the direction of the Board, Messrs. Brandenberg and Bedi met with Mr. Chen of Yageo in Taipei, Taiwan. Mr. Chen discussed certain aspects of a potential transaction, including, among others, Yageo’s access to financing (in a combination of cash on hand and borrowing), Yageo’s desire to conduct a process on a more accelerated basis due to stock volatility and the substantial synergies of a potential transaction between Yageo and KEMET. Although specific prices or price ranges of a potential transaction were not discussed, Messrs. Brandenberg and Bedi emphasized that KEMET was undervalued relative to its then current trading price based on metrics employed by certain financial advisors.

On April 11, 2019, with members of KEMET’s management and representatives of Skadden participating, the Board met telephonically to discuss updates from the April 8 and April 9, 2019 meetings with Mr. Chen of Yageo. Following discussion of the three (3) financial advisor candidates, the Board decided to engage Goldman Sachs in light of, among other factors, Goldman Sachs’ industry expertise and experience in mergers and acquisitions. The Board concluded that Goldman Sachs could assist KEMET’s management and the Board in its evaluation and negotiation of the Initial Yageo Proposal, the assessment of the availability of financing sources to Yageo and its review of other potential strategic alternatives that may be available to KEMET. The Board discussed the scope of engagement of Goldman Sachs, which would include an assessment of KEMET’s valuation with internal data, assistance in responding to the Initial Yageo Proposal and analysis of potential strategic alternatives available to KEMET. Subsequently, the Board directed management to negotiate an engagement letter with Goldman Sachs pursuant to which Goldman Sachs would provide customary advisory and investment banking services to KEMET in connection with the possible sale of KEMET.

On April 15, 2019, Mr. Brandenberg received a call from Mr. Chen of Yageo, during which Mr. Brandenberg informed Mr. Chen that the Board met, that the advice of KEMET’s financial advisor would be forthcoming over the next few weeks and that no decision regarding a potential transaction would be made until the Board reviewed and considered the financial analysis of KEMET’s financial advisor.

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On April 23, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss KEMET’s five (5) year business plan, which was previously sent to the Board on April 18, 2019, including the implications of such plan on KEMET’s potential strategic alternatives. Such five (5) year business plan also included financial projections prepared by KEMET’s management contemplating two (2) additional scenarios: (i) if KEMET were to remain a standalone company but assuming additional potential for increased revenues (the “organic growth plan”); and (ii) if KEMET were to execute a buy-side acquisition plan and execute three (3) acquisitions (the “acquisition plan”). The five (5) year business plan expanded upon the three (3) year business plan presented to the Board at the March 19 and 20, 2019 Board meeting both in terms of fiscal years covered and scenarios contemplated. Following such discussion, the Board authorized Goldman Sachs to use the growth plan, the acquisition plan and the recession plan, which had been provided to Goldman Sachs in advance of the April 23, 2019 Board meeting, in its preliminary financial analysis of KEMET. For additional information regarding the financial projections, see the section entitled “The Merger—Projections Prepared by KEMET’s Management” beginning on page 53 of this Proxy Statement.

On May 6, 2019, following negotiations, KEMET executed an engagement letter with Goldman Sachs.

On May 9, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to continue discussions with respect to the Initial Yageo Proposal. At such meeting, representatives of Goldman Sachs discussed with the Board its preliminary financial analysis, based upon management’s financial projections, which were approved by the Board at the April 23, 2019 Board meeting, including the organic growth plan, the acquisition plan and the recession plan. The Board, after consultation with Goldman Sachs, determined that the Initial Yageo Proposal did not adequately reflect KEMET’s value, business and prospects and decided it was in the best interests of KEMET and its stockholders to continue dialogue with Yageo and directed representatives of Goldman Sachs to contact Yageo’s financial advisor, Citigroup Global Markets Taiwan Securities Co. Limited (together with certain of its affiliates, “Citi”). Representatives of Goldman Sachs outlined various strategic alternatives to the Board—including considering any potential acquisitions—in addition to continuing engagement with Yageo, including through outreach to other potential buyers. At such meeting, representatives of Goldman Sachs additionally discussed with the Board Goldman Sachs’ perspectives on potentially interested buyers that had been identified. The Board did not yet authorize representatives of Goldman Sachs to begin outreach to potentially interested buyers, as the Board was still in the beginning stages of considering the exploration of strategic alternatives.

Also on May 9, 2019, at the direction of the Board, Mr. Brandenberg sent a response letter to Mr. Chen of Yageo stating that the Initial Yageo Proposal did not adequately reflect KEMET’s value, business and prospects. The response letter indicated that the Board would be open to further discussions about a transaction adequately reflecting KEMET’s intrinsic value and prospects, as well as the potential benefits of combining the two companies, including preliminary perspectives on potential synergies.

On May 16, 2019, at the direction of the Board, representatives of Goldman Sachs communicated telephonically to representatives of Citi, Yageo’s financial advisor, that, without a higher proposal, KEMET likely would not be willing to pursue a potential sale transaction and share non-public information about KEMET with Yageo. Representatives of Citi indicated they would report back to representatives of Goldman Sachs after discussing with Mr. Chen of Yageo and reviewing KEMET’s earnings results and related research notes.

On June 2, 2019, Mr. Brandenberg and Mr. Chen had a telephonic conversation regarding Yageo’s continued interest in KEMET. During this conversation, Mr. Chen stated that Yageo’s non-binding proposal remained at $24.00 per share.

On June 11, 2019, Yageo sent a letter to the Board reaffirming the Initial Yageo Proposal with the same proposal of $24.00 per share (the “June Yageo Proposal”). Yageo suggested that it would consider increasing the June Yageo Proposal if KEMET were to provide non-public information for Yageo to complete its due diligence, subject to KEMET and Yageo executing a customary confidentiality and standstill agreement (the “Yageo NDA”). The June Yageo Proposal also noted that Yageo was prepared to move forward expeditiously with a potential sale transaction.

On June 12, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending telephonically, the Board met in person in New York to discuss the June Yageo Proposal. In connection with the June Yageo Proposal, the Board discussed next steps, and, after consultation with representatives of Goldman Sachs and Skadden, determined to proceed with a process to explore potential strategic alternatives in light of Yageo’s continued unsolicited interest in a possible transaction and the possibility that a potential transaction resulting from

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such exploration could result in an attractive alternative for KEMET’s stockholders. The Board directed representatives of Goldman Sachs to reach out to representatives of Citi to indicate KEMET’s willingness to give a management presentation to Yageo so that Yageo might consider increasing the June Yageo Proposal. In addition, in order to explore whether there might be sufficient credible interest in a transaction with KEMET, the Board directed representatives of Goldman Sachs to contact ten (10) potentially interested strategic parties (other than Yageo) that the Board and KEMET’s management had identified, with assistance from representatives of Goldman Sachs, to gauge their interest in a potential transaction. At such Board meeting, representatives of Goldman Sachs indicated that strategic bidders would likely be able to offer higher valuations than financial bidders. The Board discussed with representatives of Goldman Sachs the identities of potential likely buyers and other process matters, including confidentiality agreements, management presentations with potentially interested parties and the timing of reaching out to potential buyers. The Board also requested that Mr. Brandenberg send an email response to the June Yageo Proposal to Mr. Chen of Yageo.

Throughout the course of the strategic review process, Mr. Brandenberg periodically updated the Board on the status of such process and negotiations with certain potential strategic buyers.

On June 14, 2019, certain members of KEMET’s management and certain members of the Board had a telephonic discussion with representatives of Goldman Sachs and Skadden, and discussed an appropriate response to the June Yageo Proposal, and further discussed the financial projections and growth plans to present to Yageo and any other potentially interested parties, the expected timeline for negotiating a potential transaction and the identities of potential likely buyers.

Later that day, at the direction of the Board, Mr. Brandenberg sent an email response to the June Yageo Proposal to Mr. Chen of Yageo, informing Mr. Chen that KEMET would give a management presentation so that Yageo could increase the per share proposal reflected in the June Yageo Proposal, subject to KEMET and Yageo executing the Yageo NDA. Mr. Chen agreed to Mr. Brandenberg’s proposal.

On June 19, 2019, at the direction of the Board, representatives of Goldman Sachs began outreach efforts to the ten (10) selected potential strategic buyers (other than Yageo), including Party A, Party B and Party C, to ascertain their interest in pursuing a transaction with KEMET.

On June 26, 2019, KEMET’s management provided Goldman Sachs with revised base plan financial projections, which differed from the base plan financial projections provided to the Board on March 19, 2019 in terms of fiscal years covered, and certain interest and tax expenses contemplated.

On June 28, 2019, KEMET’s management provided the Board with the revised base plan financial projections, which were intended to be provided to potential buyers subject to entry into customary confidentiality and standstill agreements.

On July 1, 2019, KEMET, with assistance from representatives of Goldman Sachs and Skadden, completed negotiations of, and entered into, the Yageo NDA, which contained customary “standstill” provisions.

On July 3, 2019, KEMET, with assistance from representatives of Goldman Sachs and Skadden, completed negotiations of, and entered into, a confidentiality and standstill agreement with another strategic bidder, hereinafter referred to as Party A (the “Party A NDA”). The Party A NDA contained customary “standstill” provisions, which would terminate upon, among other things, KEMET’s entry into a definitive written agreement providing for a merger (and which, in fact, did terminate upon entry into the Merger Agreement with Yageo).

On July 8, 2019, with representatives of Goldman Sachs, Skadden and Mr. Brandenberg attending, certain members of KEMET’s management conducted a management presentation for representatives of Yageo, including Mr. Chen and Yageo’s financial advisors. During the management presentation, Yageo received confidential, non-public information, including certain preliminary financial projections by KEMET’s management, and was provided with the opportunity to discuss such projections with members of KEMET’s management. Representatives of Yageo, including Mr. Chen, then had dinner with Mr. Brandenberg and Jacob T. Kotzubei, an independent member of the Board. Mr. Chen indicated to Mr. Brandenberg that, based upon the information learned during the management presentation, Yageo would consider raising its per share proposal from the price proposed in the June Yageo Proposal.

On July 9, 2019, with Goldman Sachs in attendance, certain members of KEMET’s management conducted a management presentation for Party A’s management, including Party A’s Chief Executive Officer (“Party A CEO”). During the management presentation, Party A received confidential, non-public information, including certain preliminary financial projections by KEMET’s management, and was provided with the opportunity to discuss such projections with members of KEMET’s management.

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Also on July 9, 2019, in response to Goldman Sachs’ initial outreach, another potential strategic buyer, hereinafter referred to as Party B, expressed interest in a potential transaction.

On July 12, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss the status of the strategic review process, including KEMET’s interactions with Yageo, Party A and Party B. At this Board meeting, Mr. Brandenberg indicated that Yageo had reaffirmed its apparent interest in a potential transaction. The Board also discussed engaging with a fourth potential strategic bidder, hereinafter referred to as Party C, who had expressed interest regarding a potential transaction. The remaining potential buyers other than Parties A, B and C determined not to participate in the process for various reasons.

On July 18, 2019, Party C advised Goldman Sachs that it was not interested in acquiring KEMET’s business at that time and that it had determined not to proceed with a potential acquisition of KEMET.

On July 19, 2019, KEMET, with assistance from representatives of Goldman Sachs and Skadden, completed negotiations of, and entered into, a customary nondisclosure and standstill agreement with Party B (the “Party B NDA”). The Party B NDA contained customary “standstill” provisions, which would terminate upon, among other things, KEMET’s entry into a definitive written agreement providing for a merger (and which, in fact, did terminate upon entry into the Merger Agreement with Yageo).

Following the management presentation given to Party A, KEMET responded to Yageo’s and Party A’s requests for additional diligence information.

On July 22, 2019, with representatives of Goldman Sachs and Skadden attending, certain members of KEMET’s management conducted a management presentation for representatives of Party B via video conference. During the management presentation, Party B received confidential, non-public information, including certain preliminary financial projections by KEMET’s management, and was provided with the opportunity to discuss such projections with members of KEMET’s management.

On July 24 and 25, 2019, at the direction of the Board, representatives of Goldman Sachs contacted Yageo, Party A and Party B, each of whom had expressed potential interest in pursuing an acquisition of KEMET and informed them that they were invited to proceed with their evaluation of a potential transaction. Representatives of Goldman Sachs sent to each of Yageo, Party A and Party B a bid process letter, outlining the procedures in connection with KEMET’s exploratory process (the “Initial Bid Letters”). The Initial Bid Letters stated that indications of interest would be due by August 7, 2019.

On August 1, 2019, Party B informed representatives of Goldman Sachs that Party B had determined not to proceed with a potential acquisition of KEMET, without citing its reasoning.

On August 7, 2019, KEMET received indications of interest from each of Yageo and Party A. The indication of interest from Yageo (the “Yageo Indication of Interest”) reaffirmed the terms of the Initial Yageo Proposal and the June Yageo Proposal to acquire all of the outstanding shares of KEMET’s common stock in cash at a price of $24.00 per share. The indication of interest from Party A (the “Party A Indication of Interest”) included a proposal to acquire all of the outstanding shares of KEMET’s common stock at a price of $26.75 per share, with 75% of the consideration to consist of cash and 25% of the consideration to consist of publicly traded common stock of Party A. Both the Yageo Indication of Interest and the Party A Indication of Interest confirmed that a potential transaction would not be subject to a potential financing contingency. In addition, the Party A Indication of Interest offered assurances to KEMET that both the management and the board of directors of Party A had approved the Party A Indication of Interest, and that no approval by the stockholders of Party A would be required to complete a potential transaction with KEMET.

On August 8, 2019, certain members of KEMET’s management and certain members of the Board held a call with representatives of Goldman Sachs and Skadden to discuss each of the Yageo Indication of Interest and the Party A Indication of Interest. During the call, representatives of Goldman Sachs discussed certain financial considerations related to the Yageo Indication of Interest and the Party A Indication of Interest. With respect to the Yageo Indication of Interest, KEMET continued to believe the Yageo Indication of Interest represented a price which undervalued KEMET, which would not be in the best interests of KEMET and its stockholders, as had already been communicated to Mr. Chen of Yageo. Representatives of the Board determined, following consultation with representatives of Goldman Sachs and Skadden, that the best course of action would be to permit Yageo to continue its exploration of a potential acquisition of KEMET and conduct additional diligence in order to formulate a higher proposal, and to further analyze the Party A Indication of Interest.

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On August 9, 2019, Mr. Brandenberg emailed Mr. Chen of Yageo expressing disappointment in the Yageo Indication of Interest and that Yageo would need to increase its proposal if a transaction were to be feasible. Later that day, in response, Mr. Chen telephonically communicated to Mr. Brandenberg and verbally increased Yageo’s proposal for all outstanding shares of KEMET to $26.00 per share and requested that KEMET negotiate exclusively with Yageo (the “Revised Yageo Indication of Interest”). Mr. Brandenberg conveyed that this proposal still undervalued KEMET, but that he would convey the terms of the Revised Yageo Indication of Interest to the Board.

On August 14, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss the Yageo Indication of Interest, the Revised Yageo Indication of Interest and the Party A Indication of Interest, to update the Board on the ongoing sale process, to update the Board on the interactions between KEMET and each of Yageo and Party A, and to discuss KEMET’s potential next steps. Management updated the Board on the equity component of the Party A Indication of Interest, including the need to conduct reverse due diligence on Party A to evaluate such equity component and that Party A’s existing covenants in its credit facilities may limit its ability to offer additional cash as additional consideration beyond what had already been proposed. Representatives of Goldman Sachs reviewed the financial terms of the Revised Yageo Indication of Interest and the Party A Indication of Interest. Representatives of Goldman Sachs discussed with the Board an updated valuation analysis, as well as a detailed analysis of the equity component of the Party A Indication of Interest. Such analysis included discussion of potential risk mitigation measures in light of the equity component of Party A’s proposed merger consideration, such as a potential equity collar. Representatives of Skadden provided an overview of other key legal terms of the Revised Yageo Indication of Interest and the Party A Indication of Interest and reviewed certain legal considerations for the Board. After discussion with representatives of Goldman Sachs and Skadden and careful consideration, the Board determined to continue to explore whether a potential sale or merger of KEMET was available on terms that would be in the best interest of KEMET’s stockholders, and to provide additional due diligence information to Yageo and Party A that the Board believed, after discussions with management and its advisors, might elicit improved proposals. The Board directed representatives of Goldman Sachs to communicate to Yageo and Party A that they may continue with their due diligence and consideration of a potential acquisition of KEMET, and to solicit final proposals from each of Yageo and Party A.

On August 19, 2019, KEMET, with assistance from representatives of Goldman Sachs and Skadden, entered into a separate, customary nondisclosure and standstill agreement with Party A, in order to permit KEMET to conduct reverse due diligence on Party A. Such agreement was entered into after Party A’s financial advisor (“Party A Financial Advisor”) communicated Party A’s limited flexibility to increase the cash component of its offer versus the stock component as consideration and suggested a reverse diligence process, including through an in-person meeting with Messrs. Brandenberg and Bedi and the management of Party A, in order to better understand the value of the equity component of the Party A Indication of Interest.

Also on August 19, 2019, KEMET opened a virtual data room to Yageo and Party A to continue their due diligence on KEMET.

From mid-August to mid-September, KEMET, with assistance from representatives of Goldman Sachs, conducted due diligence meetings and site visits with each of Yageo and Party A, and responded to questions and information requests to facilitate Yageo’s and Party A’s due diligence investigation of KEMET. Also during this time, at the direction of the Board, representatives of Skadden began preparing a draft of a merger agreement to be provided to Yageo and Party A. Over this same period, KEMET, with assistance from representatives of Goldman Sachs and Skadden, engaged in preliminary reverse due diligence of Party A.

On August 30, 2019, at the direction of the Board, representatives of Goldman Sachs contacted Yageo and Party A, informing them that they were invited to proceed with their evaluation of a potential transaction, and requested revised proposals from each of Yageo and Party A by September 30, 2019.

On September 5, 2019, Party A CEO gave an in-person management presentation to KEMET’s management and certain Board members outlining Party A’s corporate strategy and value, and some preliminary perspectives on the potential synergies that may arise out of a business combination of Party A and KEMET. Representatives of Goldman Sachs were present in person, and representatives of Skadden, as well as Party A’s legal advisor and Party A Financial Advisor, were present telephonically.

In early September 2019, KEMET’s management continued to conduct face-to-face diligence meetings with representatives of Party A’s management, and continued to further discuss the potential transaction.

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On September 6, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss, among other things, the status of the ongoing due diligence process with Yageo and Party A, including the due diligence conducted to date on Party A’s business and operations by KEMET. In addition, representatives of Skadden reviewed certain legal matters and gave a summary presentation of the auction drafts of the merger agreements for each of Yageo and Party A, reviewing the terms of such auction drafts and highlighting differences between the drafts that KEMET would be sending to Yageo and Party A, which differences resulted primarily from the distinction between Yageo’s all-cash proposal and Party A’s mixed cash-stock proposal. At the direction of the Board, representatives of Skadden thereafter posted to the virtual data room proposed auction drafts of the merger agreement to each of Yageo and Party A. At such Board meeting, the Board also discussed certain recent developments in In re: Capacitors Antitrust Litigation, No. 3:14-cv-03264-JD, filed on December 4, 2014, with the United States District Court, Northern District of California (the “In re Capacitors litigation”) (for additional information, please refer to Item 3 of KEMET’s Form 10-K, filed with the SEC on May 30, 2019, which is incorporated by reference herein), which had been brought to the potential buyers’ attention during the due diligence process.

Through mid-September, KEMET continued to provide diligence information to each of Yageo and Party A, with several telephonic meetings between KEMET’s management and each of Yageo and Party A to discuss certain developments concerning the In re Capacitors litigation in light of the potential transaction and, in particular, the potential settlement negotiations with the plaintiffs’ counsel. During such conversations, Party A indicated that it would continue to explore the opportunity to acquire KEMET, but stated that either a price accommodation for the unknown settlement amount would need to be reflected in a draft merger agreement or Party A would need to wait for resolution of the settlement negotiations (following completion of its due diligence process) before submitting a final proposal.

On September 11, 2019, KEMET conducted a diligence session and plant tour in Monterrey, Mexico with representatives of Party A, including Party A CEO.

On September 12, 2019, Messrs. Brandenberg and Bedi met with Mr. Chen of Yageo in Japan to discuss the outstanding issues with respect to the terms of the Revised Yageo Indication of Interest. At such meeting, Mr. Chen confirmed that he was notified of the development concerning the In re Capacitors litigation with respect to the potential settlement negotiations with plaintiffs’ counsel, discussed that the resolution of such settlement may impact Yageo’s proposal, and reiterated his eagerness to continue pursuing a potential transaction with KEMET.

On September 16, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to consider the next steps in the strategic review process, particularly in light of the potential settlement of the In re Capacitors litigation. Members of KEMET’s management and the Board discussed the recent meetings with Mr. Chen of Yageo. Mr. Brandenberg reported Mr. Chen’s eagerness to pursue a potential sale transaction. Mr. Brandenberg additionally reported that he and Mr. Chen had discussed the potential regulatory filings and approvals necessary to complete the potential transaction. In addition, Mr. Brandenberg updated the Board that Mr. Chen had reaffirmed Yageo’s intent to make an all-cash proposal, and had discussed and reaffirmed Yageo’s awareness of the potential mediation and settlement of the In re Capacitors litigation. Mr. Brandenberg also confirmed that both Yageo and Party A were apprised of timing and developments in connection with the potential settlement negotiations, and that each of Mr. Chen and Party A CEO nonetheless expressed a willingness to continue with the strategic process.

Later that day, Mr. Lowe also discussed with Mr. Chen of Yageo and Party A CEO the potential settlement negotiations with the plaintiffs’ counsel in the In re Capacitors litigation. Mr. Lowe informed Mr. Chen and Party A CEO that KEMET intended to fully ascertain the settlement liability before announcing any transaction with either Yageo or Party A.

On September 17, 2019, Mr. Lowe received a call from Party A CEO, who expressed concern about the In re Capacitors litigation and the related potential settlement negotiations. Mr. Lowe advised Party A CEO that the preferred course of action would be for Party A to continue its due diligence efforts and continue to pursue a potential acquisition transaction, and to reassess any impact on any terms of a potential transaction once the full settlement liability was determined. Party A CEO agreed with such approach, and advised Mr. Lowe that Party A CEO would update the board of directors of Party A with the developments in the In re Capacitors litigation, including the potential settlement negotiations.

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On September 23, 2019, Mr. Chen of Yageo along with other representatives of Yageo management and its financial and other advisors had an in-person diligence session with KEMET’s management in Fort Lauderdale, Florida. Following such session, Mr. Chen of Yageo met separately with certain members of KEMET’s management, including Mr. Lowe, to discuss remaining outstanding diligence items.

Also on September 23, 2019, at the direction of the Board, representatives of Goldman Sachs discussed the Party A Indication of Interest telephonically with Party A Financial Advisor, who agreed it would convene with Party A to discuss the merits of submitting a revised proposal on schedule. Later that day, Party A informed KEMET that it had determined not to proceed with the potential acquisition of KEMET, noting its potential amenability to submit a revised proposal once any liabilities related to the In re Capacitors litigation were determined. After making such a determination, Party A did not submit a mark-up of the draft merger agreement. Party A, however, requested to complete its diligence on KEMET, which KEMET agreed to in order to enable Party A to be in a position to submit a revised proposal, if it determined to do so, once any liabilities in connection with the In re Capacitors litigation were determined.

Later that day, representatives of KEMET and Yageo, discussed telephonically the potential transaction and the fact that submission of Yageo’s proposal and revised draft merger agreement would be delayed, due, in part, to recent updates with respect to the In re Capacitors litigation.

From mid- to late September 2019, KEMET, and representatives of Goldman Sachs and Skadden continued to provide clarity to Yageo and Party A and their respective financial advisors as to the strategic process in light of the In re Capacitors litigation, including considerations related to the In re Capacitors litigation and how such matters might affect the timing and valuation of a potential proposal, noting that any proposal could be adjusted at a later date to account for the settlement of such litigation.

On September 24, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss updates in the strategic review process. At such Board meeting, Mr. Lowe updated the Board on the strategic review process, including Party A’s determination not to pursue a potential acquisition of KEMET or submit a revised proposal or draft merger agreement until the In re Capacitors litigation was resolved or a settlement was publicly announced. Mr. Lowe also updated the Board on certain developments related to the In re Capacitors litigation, including that KEMET’s counsel had contacted the plaintiffs’ counsel to schedule non-binding mediation in October 2019. The Board determined that, once and if a settlement amount was ascertained, KEMET would seek to re-engage Party A to resume the strategic process. Then, for the convenience of overseeing the settlement discussions, the Board designated an ad-hoc committee of the Board, consisting of E. Erwin Maddrey, II, an independent director of the Board, and Messrs. Brandenberg and Bedi (the “Settlement Committee”), who would be available during the mediation process to advise KEMET’s management and recommend a settlement amount if determined by the committee to be favorable; provided that approval of a final settlement agreement would require full Board approval.

Also on September 24, 2019, representatives of Goldman Sachs delivered to the Board a customary relationships disclosure letter confirming that Goldman Sachs had no relationships with Yageo or Party A that would limit Goldman Sachs’ ability to fulfill its responsibilities as financial advisor to the Board in connection with the transaction.

Later that day, representatives of Party A management visited KEMET’s Evora, Portugal facility. Following that visit, Mr. Lowe spoke with Party A CEO telephonically and discussed Party A’s determination not to proceed with a potential acquisition of KEMET at that time. During such discussion, Party A CEO reiterated that Party A would not consider submitting a revised proposal until the In re Capacitors litigation was resolved or a settlement was publicly announced.

Subsequently, representatives of Citi telephonically reaffirmed to representatives of Goldman Sachs Yageo’s interest and communicated that committed financing papers were in the process of being prepared, and requested an extension to the revised proposal deadline to permit Yageo to complete final regulatory diligence. KEMET’s management, following consultation with representatives of the Board, Goldman Sachs and Skadden, agreed to allow Yageo to submit a proposal the week of October 7, 2019.

On September 25, 2019, at the direction of the Board, representatives of Goldman Sachs communicated to representatives of Citi that Yageo would be allowed to submit a proposal the week of October 7, 2019.

On September 27, 2019, the mediation for the In re Capacitors litigation was scheduled for October 7, 2019.

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On September 29, 2019, Mr. Chen of Yageo communicated to Mr. Brandenberg telephonically that Yageo did not wish to submit a revised proposal in light of the potential contingent liability related to the In re Capacitors litigation. Mr. Brandenberg notified Mr. Chen that the mediation date with plaintiffs’ counsel was scheduled for October 7, 2019, and that Yageo would be allowed to submit a revised proposal following the conclusion of the mediation; provided that KEMET would expect a proposal from Yageo within a week of being notified of such conclusion. Mr. Chen requested a response within two weeks of submitting a proposal to KEMET. In turn, Mr. Bedi requested that Mr. Chen submit a revised draft of the merger agreement that was sent to Yageo on September 6, 2019, in order for the strategic process to proceed efficiently so that KEMET could have a full view of the terms of Yageo’s revised proposal.

On October 1, 2019, at the direction of the Board, representatives of Goldman Sachs notified representatives of Citi and Party A Financial Advisor of the mediation scheduled for the In re Capacitors litigation on October 7, 2019, and the new proposal deadlines set in accordance with the timing of mediation, in an effort to solicit Party A’s re-engagement in pursuing a potential acquisition of KEMET. Party A Financial Advisor agreed to communicate this update to Party A, and requested to continue conducting final diligence on certain tax items related to KEMET. Representatives of Goldman Sachs communicated to Party A Financial Advisor that Party A would be allowed to finalize its tax diligence to enable Party A to be in a position to submit a revised proposal following the conclusion of KEMET’s upcoming mediation.

Later that day, representatives of Simpson Thacher & Bartlett LLP (“Simpson Thacher”), Yageo’s legal advisor, provided representatives of Skadden with a revised draft of the merger agreement.

On October 3, 2019, representatives of Skadden and Simpson Thacher telephonically discussed the revised draft of the merger agreement received from Simpson Thacher on October 1, 2019, including the size of termination fees, scope of regulatory covenants, certain terms relating to financing and certain closing conditions. Representatives of Skadden and Simpson Thacher also discussed that Yageo potentially required stockholder approval for the transaction, which was contemplated by Yageo’s revised draft of the merger agreement, and potential methods of mitigating the risks of Yageo’s failure to obtain such stockholder approval, including the implementation of a reverse termination fee and entry into voting agreements with certain of Yageo’s large stockholders.

On October 4, 2019, with members of KEMET’s management and representatives of Skadden and Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), who served as legal counsel to KEMET in the In re Capacitors litigation, participating, the Board met telephonically to discuss developments related to the In re Capacitors litigation, including the mediation scheduled for October 7, 2019. The Board discussed the possibility of announcing a favorable settlement in early November. In light of the upcoming mediation, the Board provided Jamie Assaf, the General Counsel of KEMET, with certain financial parameters relating to the possible settlement; provided that any final settlement agreement would remain subject to full Board approval. The Board discussed the sources of cash available for any potential settlement and reiterated that any final settlement agreement would need to be approved by the full Board. Representatives of Skadden updated the Board as to the revised draft of the merger agreement sent by Yageo, including discussions with representatives of Simpson Thacher on October 3, 2019. Representatives of Skadden summarized key outstanding issues in the draft merger agreement, including, among other things, the potential requirement for Yageo to obtain stockholder approval, certain reverse termination fees in connection with failure to obtain CFIUS approval, certain considerations and risks in connection with obtaining CFIUS approval and Yageo’s proposed financing arrangements.

On October 7 and 8, 2019, KEMET, represented by Pillsbury and Mr. Assaf, participated in mediation with the plaintiffs’ counsel for the In re Capacitors litigation. A settlement was not reached at this time, but the parties agreed to continue the discussions with the assistance of the mediator.

On October 9, 2019, KEMET executed a customary confidentiality and standstill agreement with Yageo in order to permit KEMET to conduct reverse due diligence on Yageo in connection with obtaining CFIUS approval, which would be necessary for a potential transaction.

On October 11, 2019, at the direction of the Board, representatives of Goldman Sachs communicated to representatives of Citi that the amount for which the parties would agree to settle the In re Capacitors litigation as a result of the mediation (assuming they reached such an agreement) would likely be known by the end of the following week, and that KEMET’s earnings call could potentially be rescheduled to a date on or about November 11, 2019, to permit the announcement of such litigation settlement, the end of quarter results and a potential merger if an agreement was reached by the parties.

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On October 14, 2019, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the merger agreement. Also on October 14, 2019, representatives of Simpson Thacher provided representatives of Skadden with a draft of the voting agreement to be entered into between KEMET and Mr. Chen of Yageo, in the event that stockholder approval would be required under the laws of Taiwan (also known as the Republic of China). Pursuant to such draft voting agreement, Mr. Chen would be required, among other things: to vote his shares of Yageo common stock in favor of the merger agreement and the transactions contemplated under the merger agreement; and not to sell or transfer his shares of Yageo common stock (unless to an affiliate assuming Mr. Chen’s obligations pursuant to the voting agreement).

On October 16, 2019, with members of KEMET’s management and representatives of Skadden participating, the Board met telephonically to discuss developments in the In re Capacitors litigation mediation and settlement discussions. The Board discussed that Pillsbury should continue to work with the mediator and with the plaintiffs to see if an acceptable agreement could be reached. The Board also discussed newly formed estimates of future tax payments and loss carryovers. At that time, KEMET’s management estimated that this liability could reduce cash from KEMET’s balance sheet and impact KEMET’s net operating losses. KEMET’s management communicated that KEMET’s external accountants and auditors were working to better understand the amount and estimates of future tax payments and loss carryovers. In addition, the Board discussed the upcoming quarter end results for the second quarter of fiscal year 2020 and the softer prospects for the second half of KEMET’s fiscal year. The softer outlook on fiscal year 2020 revenue was due to certain factors anticipated to exert downward pressure on KEMET’s sales, including, among other things, (i) adjustments of inventory levels in KEMET’s distribution channel, (ii) a softening automotive market and (iii) a slowdown in the European market. At this Board meeting, the Board approved the delay of KEMET’s earnings release for the second quarter of fiscal year 2020 until November 11, 2019. Representatives of Skadden reviewed certain legal matters with the Board with respect to the merger agreement, and Mr. Assaf discussed the settlement negotiations. Representatives of Skadden additionally discussed certain legal considerations with respect to a potential share buyback program if no transaction was entered into.

Also on October 16, 2019, representatives of Simpson Thacher provided representatives of Skadden with initial drafts of the debt financing commitment documents.

On October 18, 2019, with members of KEMET’s management and representatives of Skadden participating, the Board met telephonically to discuss the potential In re Capacitors settlement. The Board requested Mr. Brandenberg to call Mr. Chen of Yageo to disclose the settlement situation, and convey a request for Yageo to submit a final proposal by October 24, 2019. The Board also requested that Mr. Brandenberg discuss the estimates of future tax payments and loss carryovers during the call with Mr. Chen. The Board also requested Mr. Lowe to contact Party A CEO to update him on the possible settlement agreement, in an attempt to solicit Party A’s re-engagement regarding a possible transaction.

Also on October 18, 2019, representatives of Simpson Thacher provided representatives of Skadden with a revised draft of the merger agreement.

Later that day, at the direction of the Board, Mr. Lowe contacted Party A CEO to discuss updates with respect to the potential settlement agreement and the estimates of future tax payments and loss carryovers, and invited Party A to re-engage in discussions with KEMET regarding a possible transaction. Party A CEO informed Mr. Lowe that he would respond to such invitation following Party A’s board meeting scheduled for October 24, 2019.

On October 19, 2019, at the direction of the Board, Mr. Brandenberg contacted Mr. Chen of Yageo telephonically, and updated Mr. Chen as to the status of the potential mediation to settle the In re Capacitors litigation and the estimates of future tax payments and loss carryovers.

On October 21, 2019, Pillsbury directly negotiated with the plaintiffs of the In re Capacitors litigation, which resulted in a settlement of $62 million, with $10 million payable within thirty (30) days of executing the settlement agreement, and another $52 million payable within twelve (12) months of the date of the settlement agreement. At the direction of the Settlement Committee, KEMET’s management communicated such development to each of Yageo and Party A.

On October 22, 2019, representatives of KEMET held a tax diligence call with representatives of Yageo and each party’s respective tax advisors, during which representatives of KEMET discussed the estimates of future tax payments and loss carryovers, noting that although such potential liability may affect KEMET’s cash in the short term, it could result in future tax savings.

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On October 23, 2019, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the voting agreement, which contemplated that Mr. Chen would be required to notify KEMET prior to acquiring any additional shares of Yageo common stock.

Also on October 23, 2019, representatives of Skadden discussed telephonically certain outstanding issues in the merger agreement with representatives of Simpson Thacher, and requested that representatives of Simpson Thacher provide a revised draft of the merger agreement or otherwise communicate Yageo’s positions on issues by October 25, 2019. During such call, representatives of Simpson Thacher also communicated to representatives of Skadden that, as part of its financing for the transaction, Yageo would be using a shareholder loan commitment letter from Mr. Chen to finance a portion of the merger consideration, backstopped by an affiliate of Citibank, N.A. (“Citibank”).

Later that day, KEMET held a diligence call with Yageo, during which Pillsbury updated Yageo and Simpson Thacher on the terms of the settlement agreement for the In re Capacitors litigation.

On October 24, 2019, representatives of Simpson Thacher provided representatives of Skadden with revised drafts of the merger agreement, the voting agreement and the draft debt financing commitment documents. The revised draft of the voting agreement contemplated entry into such agreement with two stockholders of Yageo in addition to Mr. Chen.

On October 25, 2019, KEMET held a tax diligence call with Party A to update Party A on the status of the estimates of future tax payments and loss carryovers.

Later that day, Yageo sent what it described as a final non-binding proposal to KEMET (the “Final Yageo Proposal”), to acquire all of the outstanding shares of KEMET for $26.20 per share in cash, which was subsequently shared with the Board and representatives of Goldman Sachs. Such proposal stated that the transaction would be financed with Yageo’s cash on hand, borrowings from a committed facility arranged by Citigroup Global Markets Asia Limited and a personal loan from Mr. Chen of Yageo. The Final Yageo Proposal stated that the proposed merger would not be conditioned on obtaining financing, that Yageo had received approval from its board of directors to proceed with the proposed merger and that Yageo was prepared to make all of the necessary regulatory filings.

Subsequently on October 25, 2019, Party A CEO notified Mr. Lowe that Party A would not re-engage at this time in discussions with KEMET regarding a possible transaction, stating that Party A would require a waiting period of approximately two (2) to three (3) months prior to potentially re-engaging with KEMET after KEMET had publicly announced the In re Capacitors litigation settlement and the estimates of future tax payments and loss carryovers, if applicable.

On October 26, 2019, with the knowledge of the Board, Messrs. Brandenberg and Bedi met in person with Mr. Chen of Yageo in Tokyo, Japan to discuss a potential transaction and the Final Yageo Proposal. During such dinner, the parties discussed and agreed, subject to Board approval, on certain outstanding issues in the merger agreement (including with respect to the size of certain termination fees, reverse termination fees and expense reimbursements, the level of certain regulatory commitments and KEMET’s ability to draw on its line of credit in the period between signing and closing) and commitment documents underlying the financing of the potential transaction. At such meeting, in an effort to obtain a better offer, Messrs. Brandenberg and Bedi again expressed disappointment in the Final Yageo Proposal and informed Mr. Chen that Yageo would need to increase its proposal if a transaction were to be feasible. At such meeting, Mr. Chen again mentioned, without further discussion, the possibility of board positions for Messrs. Brandenberg and Bedi at the combined company (having raised such possibility at a prior meeting). Mr. Chen further noted that he sought an ongoing relationship with Messrs. Brandenberg, Bedi and KEMET’s CEO and senior leadership team, due to his positive opinion of KEMET’s management, business and brand and that he intended to maintain the integrity of KEMET’s management team after the transaction. Messrs. Brandenberg and Bedi immediately informed Mr. Chen that they would not engage in discussions with Yageo regarding any post-transaction arrangements for themselves and would disclose these discussions with Mr. Chen to the Board.

On October 27, 2019, Yageo revised the Final Yageo Proposal by increasing it by $1.00 to $27.20 per share, as noted in an email sent by Mr. Chen of Yageo to Mr. Brandenberg.

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On October 28, 2019, representatives of Simpson Thacher provided representatives of Skadden with a revised draft of the merger agreement, reflecting the terms Messrs. Brandenberg and Bedi discussed with Mr. Chen on October 26, 2019, including with respect to certain termination fees, reverse termination fees, expense reimbursements and regulatory commitments. In addition, Yageo proposed to KEMET that the shareholder loan component of the debt financing be backstopped by a letter of credit from a reputable bank.

On October 29, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met in Fort Lauderdale, Florida at a regularly scheduled Board meeting, to discuss the Final Yageo Proposal and Party A. Representatives of Skadden provided the Board with a summary of the key terms of the merger agreement, noting certain outstanding issues. Representatives of Skadden also discussed with the Board the considerations and merits of adopting an exclusive forum by-law. Mr. Brandenberg advised the Board of Mr. Chen’s overture to Messrs. Brandenberg and Bedi about potentially serving on the board of the combined company and that they communicated to Mr. Chen that they would not engage in any discussions with Yageo regarding post-transaction arrangements for themselves, which approach was agreed upon by the Board. Messrs. Brandenberg and Bedi also updated the Board on the full scope of the conversations they had with Mr. Chen of Yageo in Tokyo, Japan on October 26, 2019. In an effort to determine if the Board could get Party A to re-engage, the Board instructed representatives of Goldman Sachs to reach out to Party A Financial Advisor to update them about the status of the sale process and advise that Party A would need to re-engage now if it wanted to pursue a transaction. In addition, the Board determined it would be preferable for KEMET to execute a merger agreement before, or at the same time as, KEMET’s earnings call on November 11, 2019 in order, among other things, to avoid delaying entry into the merger agreement due to the announcement of the earnings. The Board also agreed to hold a Board meeting on November 2, 2019, to discuss KEMET’s financial projections, which were being updated by KEMET’s management, to reflect certain developments, including the estimates of future tax payments and loss carryovers, the In re Capacitors litigation settlement and the softer outlook for the remainder of fiscal year 2020, at the Board’s direction. The Board directed representatives of Goldman Sachs to communicate to Yageo that KEMET would work expeditiously to finalize the merger agreement with Yageo.

In addition, at the October 29, 2019 Board meeting, the Board confirmed that Messrs. Brandenberg and Bedi should continue to assist KEMET’s management team and external advisors in the strategic review process, ratifying their prior actions and formalizing what had been an ad hoc informal transaction committee of independent directors, consisting of Messrs. Brandenberg and Bedi, by expanding the scope of the Settlement Committee (consisting of Messrs. Brandenberg, Bedi and Maddrey) to include the continuing overview of the transaction (the “Transaction and Settlement Committee”).

Also on October 29, 2019, at the direction of the Board, representatives of Goldman Sachs called Party A Financial Advisor, who informed Goldman Sachs that Party A would not be re-engaging in discussions with KEMET regarding a potential transaction, due, in part, to the In re Capacitors settlement.

On October 29, 2019, Mr. Brandenberg sent an email to Mr. Chen informing him that the Board would move forward with the proposed price of $27.20 per share, that KEMET would focus on a transaction with Yageo and reiterated the need to work expeditiously to finalize the merger agreement and other transaction documents in advance of the November 11, 2019 scheduled earnings call. Mr. Chen responded by email and agreed to have his team work efficiently to meet such deadline.

Later that day, representatives of Simpson Thacher provided representatives of Skadden with revised drafts of the debt financing commitment documents, including a draft letter of credit and shareholder loan agreement (to replace the shareholder loan commitment letter).

On October 30, 2019, representatives of Skadden held a call with representatives of Simpson Thacher to discuss certain outstanding issues in the merger agreement, including, among other things, with respect to the size of termination fees, expense reimbursement caps and Yageo’s potential requirement to obtain shareholder approval. Later that day, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the debt financing commitment letter.

On October 31, 2019, representatives of Skadden provided representatives of Simpson Thacher with revised drafts of the remaining debt financing commitment documents, including the stockholder loan agreement and letter of credit.

On November 1, 2019, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the merger agreement, the voting agreement and the letter of credit.

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Also on November 1, 2019, KEMET announced that it was rescheduling its November 11, 2019 earnings call for the second quarter of fiscal year 2020 to November 12, 2019.

On November 2, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss certain updated financial projections which had been prepared by management based on recent developments. At such Board meeting, KEMET’s management provided an overview of the updated financial projections. The updated projections were lower than the projections previously approved by the Board on April 23, 2019 and provided to Yageo on July 8, 2019, to reflect the estimates of future tax payments and loss carryovers, the In re Capacitors litigation settlement, and the softer outlook for the remainder of fiscal year 2020, which reflected less favorable future financial performance than in the prior financial projections. The Board reviewed the updated financial projections and, after discussion, approved them for distribution to Yageo. For additional information regarding the updated financial projections, see the section entitled “The Merger—Projections Prepared by KEMET’s Management” beginning on page 53 of this Proxy Statement.

Following the November 2, 2019 Board meeting, the Transaction and Settlement Committee, with members of KEMET’s management and representatives of Skadden participating, met telephonically to discuss the potential transaction with Yageo. Representatives of Skadden discussed with the Transaction and Settlement Committee certain outstanding issues in the merger agreement and other transaction documents, as well as general timing of the proposed transaction relative to KEMET’s earnings announcement. The Transaction and Settlement Committee discussed Mr. Chen’s proposal to have Messrs. Brandenberg and Bedi serve as directors within the Yageo corporate structure following the transaction, as well as the possibility of Mr. Chen approaching Mr. Lowe about a future job opportunity with Yageo. The Transaction and Settlement Committee confirmed that any such discussions should be postponed until a later date.

On November 3, 2019, Messrs. Lowe and Chen had a telephonic discussion, during which Mr. Chen expressed his views on the future of KEMET’s brand, employees (in particular the value of its leadership) and key customers, and discussed the status of the potential transaction.

On November 4, 2019, Mr. Lowe exchanged emails with David Wang, Chief Operating Officer of Yageo, to discuss certain open items in the merger agreement, including with respect to expense reimbursement caps in connection with both Yageo’s potential failure to obtain certain Taiwanese regulatory approvals or KEMET’s failure to obtain approval of the merger transaction by its stockholders, and KEMET’s ability to draw on its line of credit in the period between signing and closing.

Also on November 4, 2019, representatives of Goldman Sachs discussed with representatives of Citi, Yageo’s financial advisor, certain timing considerations in connection with the potential transaction.

Later that day, representatives of Simpson Thacher provided representatives of Skadden with a revised draft of the voting agreement.

On November 5, 2019, at the direction of the Board, KEMET’s management provided Yageo with KEMET’s updated projections. Also on November 5, 2019, representatives of Simpson Thacher provided representatives of Skadden with a revised draft of the merger agreement and debt financing commitment documents.

Also on November 5, 2019, Mr. Lowe exchanged emails with Mr. Wang of Yageo to discuss certain open items in the merger agreement, including with respect to Yageo’s indemnification obligations with respect to KEMET’s directors and officers in the event of stockholder litigation, the Board’s entry into negotiations in connection with superior proposals and the level of the parties’ oversight over the antitrust process.

Also on November 5, 2019, KEMET received a proposed final draft of the settlement agreement for the In re Capacitors litigation, which was executed by the plaintiffs.

On November 6, 2019, members of KEMET’s management, certain members of the Board and representatives of Skadden met telephonically to discuss certain remaining outstanding issues in the merger agreement, including, among other items, expense reimbursement caps in connection with both Yageo’s potential failure to obtain Taiwanese regulatory approvals or KEMET’s failure to obtain approval of the merger transaction by its stockholders, the Board’s entry into negotiations in connection with superior proposals, Yageo’s indemnification obligations with respect to KEMET’s directors and officers in the event of stockholder litigation, as well as the level of the parties’ oversight over the antitrust process. Messrs. Brandenberg and Chen subsequently exchanged emails, and negotiated, among other things, reciprocal expense reimbursement caps, the provisions concerning the review of potential competing proposals

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and Yageo’s indemnification obligations. Subsequently, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the merger agreement, as well as comments to the debt financing commitment documents. In addition, Yageo advised KEMET that the letter of credit would be issued by Citibank’s Hong Kong branch instead of its Taipei branch.

Also on November 6, 2019, Messrs. Brandenberg and Lowe exchanged emails with Messrs. Chen and Wang of Yageo to discuss their perspectives on certain outstanding issues, including with respect to the release of director and officer liability in the context of stockholder litigation.

On November 7, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Transaction and Settlement Committee met telephonically to discuss Goldman Sachs’ financial analysis, which was based on the updated financial projections, as approved by KEMET’s management for Goldman Sachs’ use in performing its financial analysis (as set forth in more detail in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement). Subsequently, after KEMET’s management and its tax advisors determined that the estimates of future tax payments and loss carryovers did not result in any need for an adjustment to KEMET’s financial statements, management modified the updated financial projections to reflect the favorable determination with respect to certain estimates of future tax payments and loss carryovers. While such updated financial projections were not provided to Yageo, KEMET verbally communicated to Yageo that the financial projections would be updated to reflect a favorable determination with respect to certain estimates of future tax payments and loss carryovers.

Later that day, representatives of Simpson Thacher provided representatives of Skadden with revised drafts of the merger agreement and the debt financing commitment documents.

On November 8, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically to discuss, among other things, Goldman Sachs’ financial analysis (the same analysis discussed a day earlier by the Transaction and Settlement Committee), as well as updates with respect to the settlement of the In re Capacitors litigation, the favorable determination concerning estimates of future tax payments and loss carryovers and the draft merger agreement. Representatives of Goldman Sachs discussed with the Board its financial analysis of the proposed transaction with Yageo. The Board discussed the assumptions underlying the updated analysis, including with respect to the estimates of future tax payments and loss carryovers and market softness, as well as reasoning in support of accepting Yageo’s proposed $27.20 per share consideration. Representatives of Goldman Sachs additionally reviewed the strategic process that the Board had undertaken. Mr. Assaf provided an update to the Board, noting that the plaintiff class in the In re Capacitors litigation agreed to the terms of the settlement agreement on terms generally favorable to KEMET. The Board then approved KEMET’s entry into such settlement agreement. Representatives of Skadden also discussed certain legal matters, including reiterating the directors’ fiduciary duties in the context of the sale of a public corporation, and provided an update on the key terms of the merger agreement. In addition, representatives of Skadden provided an overview of the reasons for and against the proposed transaction, as further described in the section entitled “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on page 42 of this Proxy Statement. Subsequently, representatives of Skadden provided representatives of Simpson Thacher with a revised draft of the merger agreement, and the parties exchanged drafts of the voting agreement.

On November 8 and 9, 2019, Messrs. Brandenberg and Lowe exchanged emails with Messrs. Chen and Wang of Yageo, with respect to certain remaining outstanding issues in the transaction documentation, including with respect to KEMET’s right to enforce its remedies or obtain the reverse termination fee in the event that the debt financing failed to be funded through no fault of Yageo. The parties subsequently agreed that, because the potential transaction was intended to not be subject to financing, KEMET should be granted such right to either seek its remedies or collect the reverse termination fee.

Also on November 8 and 9, 2019, representatives of Simpson Thacher provided representatives of Skadden with revised drafts of the debt financing commitment documents.

On November 10, 2019, with members of KEMET’s management and representatives of Skadden participating, the Transaction and Settlement Committee met telephonically to discuss timing and updates with respect to the proposed merger agreement. Subsequently, representatives of Skadden and Simpson Thacher exchanged drafts of the merger agreement and the debt financing commitment documents.

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On November 11, 2019, representatives of Skadden and Simpson Thacher exchanged several drafts of the merger agreement. In addition, representatives of Skadden and Simpson Thacher agreed to final forms of the debt financing commitment documents.

On the afternoon of November 11, 2019, with members of KEMET’s management and representatives of Goldman Sachs and Skadden attending, the Board met telephonically. All board members were in attendance except one director, who had a scheduling conflict, but had otherwise stated his support for the proposed transaction. Representatives of Skadden reviewed the terms of the draft of the merger agreement, voting agreements and debt financing commitment documents, and described changes to such agreements since the previous Board meeting. In addition, representatives of Skadden reviewed certain legal matters, including reiterating the Board’s fiduciary duties in connection with the proposed transaction. Also at such Board meeting, representatives of Goldman Sachs reviewed with the Board Goldman Sachs’ financial analysis of the $27.20 per share consideration to be offered to KEMET’s stockholders in the proposed transaction, which analysis was based on the updated financial projections, as approved by KEMET’s management for Goldman Sachs’ use. Following this presentation, representatives of Goldman Sachs rendered the oral opinion of Goldman Sachs to the Board, subsequently confirmed by delivery of a written opinion, dated November 11, 2019, that, as of November 11, 2019, and based upon and subject to the factors, assumptions, qualifications and limitations set forth therein, the $27.20 in cash per share to be paid to the holders of shares of KEMET common stock (other than Yageo and its affiliates) pursuant to the merger agreement was fair from a financial point of view to such holders. For more information about Goldman Sachs’ opinion, see the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement. After discussing potential reasons for and against the proposed transaction, all members of the Board who were in attendance determined that the merger agreement and the transactions contemplated by such agreement are fair to, and in the best interests of, KEMET and its stockholders, approved the merger agreement and recommended that KEMET’s stockholders vote to adopt the merger agreement at any meeting of stockholders of KEMET to be called for the purposes of adopting such agreement. For more information about KEMET’s reasons for and against the proposed transaction, see the section entitled “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on page 42 of this Proxy Statement. The Board additionally determined, among other things, to adopt an exclusive forum by-law provision to KEMET’s Amended and Restated By-laws, as previously discussed at the October 29, 2019 Board meeting. Following the Board meeting, KEMET and Yageo confirmed to each other that their respective boards of directors had approved the proposed transaction.

After the KEMET Board meeting on November 11, 2019, Yageo finalized the debt financing commitment documents with its lender and Mr. Chen of Yageo, and the parties finalized and subsequently executed the Merger Agreement, voting agreements and related ancillary documents in connection with the Merger. In the early evening of November 11, 2019, after the close of trading of KEMET common stock on the NYSE, KEMET and Yageo issued a joint press release announcing the execution of the Merger Agreement.

Recommendation of the Board and Reasons for the Merger

Recommendation of the Board

The Board—after considering various factors as further described in this section, and after consultation with KEMET’s legal and financial advisors—has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are advisable to, fair to and in the best interests of KEMET and its stockholders, and has adopted and approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.

The Board unanimously (with the exception of one (1) director, who had a scheduling conflict but had otherwise stated his support for the Merger) recommends that you vote (i) “FOR” the adoption of the Merger Agreement, (ii) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger and contemplated by the Merger Agreement and (iii) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

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Reasons for the Merger

In evaluating the Merger, the Board consulted with, and received the advice of, KEMET’s management and its financial and legal advisors. The Board also consulted with its legal advisors regarding its obligations, legal due diligence and the terms of the Merger Agreement and other transaction documents. In reaching its determination and recommendation, the Board, including its independent directors, considered a number of factors, including, but not limited to, the following (not necessarily in order of relative importance):

the fact that based on KEMET’s closing price of $23.51 on November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement, the cash consideration to be paid in the Merger was $27.20 per share of KEMET common stock, which represents (i) a sixteen percent (16%) premium over the closing price of KEMET common stock on November 8, 2019, (ii) a twenty-seven percent (27%) premium over the 30-day volume weighted average price of KEMET common stock, for the period through November 8, 2019, (iii) a thirty-eight percent (38%) premium over the 90-day volume weighted average price of KEMET common stock, and (iv) a forty-five percent (45%) premium over the 180-day volume weighted average price of KEMET common stock, in each case, for the period through November 8, 2019;
 

the fact that merger consideration of $27.20 per share (based on KEMET’s closing price of $23.51 on November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement) represents a valuation of KEMET at a multiple of 6.0 times KEMET’s estimated Adjusted EBITDA for the 2020 fiscal year;
 

the belief of the Board that the Merger is more favorable to KEMET stockholders than the opportunities and strategic alternatives reasonably available to KEMET, which the Board evaluated with the assistance of KEMET’s management and its outside financial and legal advisors, taking into account the potential risks, rewards and uncertainties associated with each alternative;
 

the fact that KEMET, with the assistance of Goldman Sachs, acting at the Board’s direction, identified and contacted ten (10) potential bidders (excluding Yageo), in an effort to obtain the best value reasonably available to KEMET stockholders and conducted a robust sales process;
 

the fact that KEMET entered into confidentiality agreements with three (3) potential bidders, that Yageo was the only party to submit a final proposal on October 25, 2019, that the Board, through extensive negotiations, was able to increase Yageo’s proposal from an initial offer of $24.00 to $27.20, and that the Board believed, based on discussions between representatives of KEMET and Yageo, that Yageo would not be able to pay in excess of $27.20;
 

KEMET’s prospects for a merger or sale transaction with a party other than Yageo, including (i) the Board’s belief that Yageo’s offer was likely to be the highest offer with the greatest transaction certainty; (ii) the risk of losing the Yageo offer if KEMET elected to solicit additional offers; and (iii) the belief of the Board that, after consultation with outside financial and legal advisors, a private equity or financial sponsor was not likely to reach the level of the merger consideration offered by Yageo;
 

the fact that the all-cash consideration provides KEMET stockholders (that receive such merger consideration) liquidity and certainty of value, while avoiding long-term business risk, including the risks and uncertainties relating to KEMET’s prospects and the risks of an economic downturn that would adversely affect KEMET;
 

the projected financial results of KEMET as a stand-alone company and the likelihood of KEMET’s long-term ability to achieve strategic goals that could deliver superior benefits to KEMET stockholders;
 

the fact that there was no guarantee that recent KEMET profit margins would be sustained in the future given the potential volatility of supply and demand and potential adverse economic conditions, which is not in KEMET’s control and difficult to predict;
 

the potential impact of industry and macroeconomic factors on KEMET’s future prospects and ability to achieve its projections, including the potential for an economic recession and KEMET’s ability to withstand the impact of any such potential economic recession;
 

the fact that in addition to secular risks, such as the potential for economic recession, there were risks in executing and achieving KEMET’s standalone business plan;

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the fact that segments of KEMET’s business face uncertainty regarding profit margins as they relate to, among other things, increasing or decreasing availability of KEMET’s purchased raw materials, which may have an impact on the volatility and value of KEMET common stock;
 

the cyclical nature of the capacitor industry, which influences KEMET’s sales and profitability;
 

the fact that KEMET and its wholly owned subsidiary, KEMET Electronics Corporation, entered into a settlement agreement with the plaintiffs in the antitrust suit pending in the United States District Court, Northern District of California as In re: Capacitors Antitrust Litigation, No. 3:14-cv-03264-JD, on November 8, 2018, as announced on November 12, 2019, pursuant to which KEMET agreed to pay an aggregate of $62 million to the settlement class of plaintiffs;
 

the fact that KEMET may have significantly less cash at the time of the consummation of the Merger, due, in part, to the settlement of the In re: Capacitors Antitrust Litigation;
 

the fact that KEMET’s stock price as of November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement, does not reflect updates in connection with the settlement of the In re: Capacitors Antitrust Litigation, as announced on November 12, 2019, and KEMET’s revised earnings forecast for the second quarter of fiscal year 2020, as announced on November 11, 2019;
 

the increase in KEMET’s stock price in the days leading up to the earnings announcement for the second quarter of fiscal year 2020;
 

the history of KEMET’s stock price increasing before its earnings announcements and decreasing following such announcements;
 

the financial analyses provided by Goldman Sachs and the fairness opinion of Goldman Sachs, dated November 11, 2019, rendered to the Board to the effect that, as of that date, and subject to the factors, assumptions, qualifications and limitations set forth in such opinion, the merger consideration to be received by the holders of shares of KEMET common stock (other than Yageo and its affiliates) was fair from a financial point of view to such holders, as more fully described in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement;
 

the Board’s view that the Merger Agreement is unlikely to unduly deter third parties from making unsolicited acquisition proposals given that:
 

the Merger Agreement does not preclude KEMET from engaging in discussions or negotiations with, or furnishing information and other access to, third parties that make unsolicited acquisition proposals prior to the time KEMET stockholders adopt the Merger Agreement, if the Board determines in good faith, after consulting with, and receiving advice from, its outside legal counsel and financial advisors, that such unsolicited acquisition proposal is or could reasonably be expected to lead to a “Superior Proposal” (as defined in the section entitled “Terms of the Merger Agreement—Restrictions on Solicitations of Other Offers” beginning on page 75 of this Proxy Statement), subject to certain conditions, including that the failure of the Board to furnish such information or access would be reasonably likely to be inconsistent with its fiduciary duties under applicable law;
 

the structure of the Merger and time required to obtain KEMET stockholder approval would allow sufficient time for a third party to make a Superior Proposal if such third party desires to do so;
 

the Board can change its recommendation to KEMET stockholders with respect to the adoption of the Merger Agreement prior to the adoption of the Merger Agreement by the vote of its stockholders, if, subject to certain limitations, it determines in good faith, after consulting with, and receiving advice from, its legal advisors, that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law;
 

the Board can terminate the Merger Agreement to enter into a Superior Proposal, subject to its compliance with the Merger Agreement, if it determines in good faith, after consultation with its outside legal counsel and financial advisors, that a Competing Proposal constitutes a Superior Proposal and, after consulting with, and receiving advice from, its legal advisors, that the failure to change its recommendation would be reasonably likely to be inconsistent with its fiduciary duties under applicable law; and

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while the Merger Agreement contains a termination fee of $63.75 million, or approximately 3.9% of the aggregate equity value of the transaction, that KEMET would be required to pay to Yageo in certain events described under “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement, the Board believed that this fee is reasonable in light of the circumstances and the overall terms of the Merger Agreement, consistent with fees in comparable transactions and not preclusive of other offers;
 

the likelihood that the Merger Agreement, and the transactions contemplated thereby, including the Merger, would be consummated based on, among other things:
 

the absence of a financing condition in the Merger Agreement and the receipt by Yageo of an executed debt financing commitment letter to provide a substantial portion of the financing needed to complete the Merger from a reputable, large commercial bank, as well as Yageo’s cash on hand and an executed stockholder loan from the chairman of Yageo, backed by a standby letter of credit issued by a reputable, large commercial bank, the amount of which is available to Yageo if Yageo does not receive the cash proceeds of the stockholder loan prior to the consummation of the Merger;
 

the limited number and nature of the conditions to the Debt Financing (as defined in the section entitled “Terms of the Merger Agreement—Financing Efforts” beginning on page 78 of this Proxy Statement) and the obligation of Yageo to use reasonable best efforts to obtain such necessary Debt Financing;
 

the level of commitments made by KEMET and Yageo to obtain applicable regulatory approvals, including with respect to the HSR Act, CFIUS and Taiwan Investment Commission approvals, and antitrust approvals in certain jurisdictions outside of the U.S. including China, which in the view of the Board made it more likely that the Merger would be completed;
 

the possibility of Yageo being required to hold a stockholder vote to approve the Merger Agreement and the Merger, and the willingness of Pierre Chen and certain other stockholders of Yageo to execute voting agreements to vote all their shares of Yageo common stock, collectively constituting approximately 10% of Yageo’s outstanding common stock, in favor of the Merger Agreement and the Merger, if such stockholder vote is required by applicable law;
 

the termination date under the Merger Agreement, which allows for time that is expected to be sufficient to complete the Merger; and
 

the fact that Yageo maintains a strong reputation in the industry.
 

the other terms of the Merger Agreement, including, among others:
 

the ability of KEMET to, under certain circumstances described in the Merger Agreement, receive a reverse termination fee as more fully described in the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement, or seek specific performance or other equitable relief to prevent breaches or to enforce the terms of the Merger Agreement, including with respect to obtaining the debt financing;
 

the continuing obligation on Yageo to provide indemnification to, and maintain insurance for, officers and directors of KEMET, which is common in transactions of this type; and
 

the fact that incentive awards given to KEMET’s employees are being treated in a fair and appropriate manner;
 

the fact that the consummation of the Merger is subject to the approval of KEMET stockholders, who will have the opportunity to approve or reject the Merger;
 

the fact that the consideration and negotiation of the Merger Agreement was conducted through extensive arm’s-length negotiations;
 

the fact that the Merger Agreement would be approved by the Board, which is comprised of a majority of independent directors who are not employees of KEMET or any of its subsidiaries, and which retained and received advice from KEMET’s outside financial and legal advisors in evaluating, negotiating and recommending the terms of the Merger Agreement;

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the fact that appraisal rights under the DGCL are available to holders of KEMET common stock who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their shares of KEMET common stock as determined by the Court of Chancery, as more fully described in the section entitled “Appraisal Rights” beginning on page 96 of this Proxy Statement; and
 

the fact that in December 2018, KEMET’s then-CEO resigned from his roles as CEO and member of the Board, and that its current CEO, a key member of KEMET’s senior management, is nearing retirement and, prior to the resignation of the former CEO, had announced his intent to retire in May 2019 before assuming the role of CEO and that, if not for the Merger, there would be potential uncertainty associated with CEO succession planning.

The Board weighed these advantages and opportunities against a number of other risks and potential negative factors concerning the Merger Agreement and the Merger, including, but not limited to, the following (not necessarily in order of relative importance):

the fact that the consummation of the Merger is subject to certain customary closing conditions, which may delay or prevent the consummation of the Merger, and the adverse impact such event would have on KEMET and its business;
 

the risk that if the Merger is not consummated, KEMET will, with certain exceptions, be required to pay its own expenses associated with the Merger Agreement and the Merger;
 

the requirement that KEMET must pay to Yageo a termination fee of $63.75 million, or approximately 3.9% of the aggregate equity value of the transaction, if the Merger Agreement is terminated under the circumstances described under “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement, which may discourage third parties that might otherwise have an interest in a business combination with, or acquisition of, KEMET from making unsolicited acquisition proposals;
 

the risk that KEMET stockholders may vote down the proposal to adopt the Merger Agreement at the meeting of KEMET stockholders held for such purpose, in which case KEMET must pay to Yageo up to $18 million of Yageo’s reasonable, out-of-pocket expenses incurred in connection with the Merger Agreement and the Merger, as more fully described in the section entitled “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement;
 

the fact that the risk of Yageo’s inability to consummate the Merger may be offset by the requirement that Yageo must pay KEMET up to $18 million of KEMET’s reasonable, out-of-pocket expenses incurred in connection with the Merger Agreement and the Merger, if Yageo fails to obtain the requisite approvals by the Taiwan Investment Commission, as more fully described in the section entitled “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement;
 

the fact that the risk of Yageo’s inability to consummate the Merger may be offset by the requirement that Yageo must pay KEMET a reverse termination fee of $65.4 million, or approximately 4% of the aggregate equity value of the transaction, if Yageo fails to consummate the Merger if the requisite CFIUS clearance is not obtained, as more fully described in the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement;
 

the fact that the risk of Yageo’s inability to consummate the Merger may be offset by the requirement that Yageo must pay KEMET a reverse termination fee of $49.05 million, or approximately 3% of the aggregate equity value of the transaction, if Yageo fails to obtain its stockholder approval, if such approval is deemed necessary by Taiwanese regulatory agencies, as more fully described in the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement;
 

the potential challenges of Yageo obtaining the Yageo Stockholder Approval, if such approval is deemed necessary by Taiwanese regulatory agencies;
 

the fact that the risk of Yageo’s inability to consummate the Merger may be offset by the requirement that, at KEMET’s sole discretion, KEMET may elect to receive from Yageo a reverse termination fee of $63.75 million, or approximately 3.9% of the aggregate equity value of the transaction, if the debt financing fails to be funded after all other conditions to the Merger are satisfied, as more fully described in the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement;

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the fact that under the terms of the Merger Agreement, KEMET is unable to solicit other acquisition proposals during the pendency of the Merger;
 

the restrictions in the Merger Agreement on the conduct of KEMET’s business during the period between execution of the Merger Agreement and the consummation of the Merger, which may delay or prevent KEMET from undertaking business opportunities outside the ordinary course of business that may arise during such period of time;
 

the fact that the Merger is an all-cash transaction, which is taxable to KEMET stockholders for U.S. federal income tax purposes;
 

the fact that the Board and KEMET’s management are delaying important CEO succession planning steps that would otherwise be necessary but for the Merger;
 

the fact that KEMET stockholders would forego the opportunity to realize the potential long-term value of the successful execution of KEMET’s current strategy as an independent company;
 

the risk that the Merger might not be consummated, including as a result of failure to obtain regulatory approvals, and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of KEMET common stock;
 

the fact that KEMET’s business, sales operations and financial results could suffer in the event that the Merger is not consummated and that KEMET’s stock price would likely be adversely affected;
 

the possibility that profitability could continue or grow over a sustainable period, which would provide further opportunity to return additional value, which stockholders would not receive if the Merger is consummated;
 

the potential challenges of obtaining antitrust clearance in the U.S. and certain other jurisdictions including China, and the risk that regulatory approvals might not be obtained on the timetable expected or at all, including the risk that regulatory agencies might impose terms and conditions with respect to such clearances that may adversely affect the business and financial results of the combined company and its ability to realize the expected benefits of the Merger or might seek an injunction to prevent the parties from consummating the Merger, as more fully described in the section entitled “Terms of the Merger Agreement—Regulatory Approvals” beginning on page 81 of this Proxy Statement;
 

the potential challenges of obtaining CFIUS clearance in the U.S., approval by the Taiwan Investment Commission, any potential notification requirements pursuant to Japanese foreign exchange laws, and the risk that regulatory agencies might not be obtained on the timetable expected or at all, including the risk that regulatory agencies might impose terms and conditions with respect to such clearances that may adversely affect the business and financial results of the combined company and its ability to realize the expected benefits of the Merger or might seek an injunction to prevent the parties from consummating the Merger, as more fully described in the section entitled “Terms of the Merger Agreement—Regulatory Approvals” beginning on page 81 of this Proxy Statement;
 

the fact that the reverse termination fee is not available in all instances where the Merger Agreement is terminated and may be KEMET’s only recourse where it is available;
 

the amount of time it could take to consummate the Merger, and the uncertainty of timing to consummate the Merger, including the fact that the consummation of the Merger depends on factors outside of KEMET’s or Yageo’s control, and the risk that the pendency of the Merger for an extended period of time following the announcement of the execution of the Merger Agreement could adversely affect KEMET’s relationships with its customers, suppliers and any other persons with whom KEMET has a business relationship;
 

the potential challenges in enforcing KEMET’s rights and remedies, including, among other things, rights to specific performance or payment of the reverse termination fee, in Taiwanese courts;
 

the potential for diversion of management and employee attention during the period prior to the consummation of the Merger and the potential negative effects on KEMET as a result of such diversion, including with respect to relationships with KEMET’s customers, employees, suppliers or other parties;

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the risk that, despite the retention efforts of KEMET in connection with the Merger, KEMET, in the event the Merger is not consummated, may lose key personnel;
 

the risk that changes in the regulatory landscape, economic landscape (including the possibility of a recession) or new industry developments may adversely affect KEMET, in the event the Merger is not consummated;
 

the risk of potential litigation relating to the Merger that could be instituted against KEMET, Yageo or their respective directors and officers, and the potential effects of any outcomes related thereto;
 

the risks of the type and nature described in the section entitled “Cautionary Statement on Forward-Looking Statements” beginning on page 21 of this Proxy Statement; and
 

the fact that KEMET’s directors and officers may have interests in the Merger that are different from, or in addition to, those of KEMET stockholders generally, as more fully described in the section entitled “The Merger—Interests of Certain Directors and Executive Officers of KEMET in the Merger” beginning on page 59 of this Proxy Statement.

While the Board considered potentially positive and potentially negative factors, the Board concluded that, overall, the potentially positive factors outweighed the potentially negative factors. Accordingly, the Board determined that the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of KEMET and its stockholders.

The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but rather includes material factors considered by the Board. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the Board did not find it practicable to, and did not attempt to, quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the Merger Agreement and to make its recommendations to KEMET stockholders. In addition, individual members of the Board applied their own personal business judgment to the process and may have given differing weights to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the totality of the information presented.

The explanation of the reasoning of the Board and certain information presented in this section are forward-looking in nature and, therefore, the information should be read in light of the factors discussed in the section entitled “Cautionary Statement On Forward-Looking Statements” beginning on page 21 of this Proxy Statement.

Opinion of KEMET’s Financial Advisor

Goldman Sachs rendered its opinion to the Board that, as of November 11, 2019, and based upon and subject to the factors and assumptions set forth therein, the Merger Consideration to be paid to the holders (other than Yageo and its affiliates) of KEMET common stock pursuant to the Merger Agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 11, 2019, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion and which you should read carefully and in its entirety, is attached as Annex B to this Proxy Statement. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the Merger. The Goldman Sachs opinion is not a recommendation as to how any holder of KEMET common stock should vote with respect to the Merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

the Merger Agreement;
 

annual reports to stockholders and Annual Reports on Form 10-K of KEMET for the five (5) fiscal years ended March 31, 2019;
 

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of KEMET;

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certain other communications from KEMET to its stockholders;
 
certain publicly available research analyst reports for KEMET; and
 
certain internal financial analyses and forecasts for KEMET prepared by its management and approved for Goldman Sachs’ use by KEMET, which are referred to as the “KEMET Forecasts.”

Goldman Sachs also held discussions with members of KEMET’s senior management regarding their assessment of the past and current business operations, financial condition and future prospects of KEMET; reviewed the reported price and trading activity for the KEMET common stock; compared certain financial and stock market information for KEMET with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the technology industry and in other industries; and performed such other studies and analyses, and considered such other factors, as Goldman Sachs deemed appropriate.

For purposes of rendering its opinion, Goldman Sachs, with KEMET’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, Goldman Sachs, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with KEMET’s consent that the KEMET Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of KEMET’s management. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of KEMET or any of its subsidiaries, and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on the expected benefits of the Merger in any way meaningful to its analysis. Goldman Sachs also assumed that the Merger will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of KEMET to engage in the Merger or the relative merits of the Merger as compared to any strategic alternatives that may be available to KEMET; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than Yageo and its affiliates) of KEMET common stock, as of the date of the opinion, of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Goldman Sachs does not express any view on, and Goldman Sachs’ opinion does not address, any other term or aspect of the Merger Agreement or the Merger or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger, including the fairness of the Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of KEMET; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of KEMET, or class of such persons, in connection with the Merger, whether relative to the Merger Consideration to be paid to the holders (other than Yageo and its affiliates) of KEMET common stock pursuant to the Merger Agreement or otherwise. Goldman Sachs is not expressing any opinion as to the impact of the Merger on the solvency or viability of KEMET or Yageo or the ability of KEMET or Yageo to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions, as in effect on, and the information made available to it as of, the date of the opinion, and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 8, 2019, the last full trading day before the Board’s approval of the Merger Agreement and the transactions contemplated by the Merger Agreement, and is not necessarily indicative of current market conditions.

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Implied Premia and Multiple Analysis. Goldman Sachs calculated and compared certain implied premia and multiples using $23.51, the closing price of shares of KEMET common stock on November 8, 2019, the last full trading day before the Board’s approval of the Merger Agreement and the transactions contemplated by the Merger Agreement, which we refer to in this section as the “KEMET Pre-Approval Closing Price,” and the Merger Consideration of $27.20 to be paid by Yageo for each share of KEMET common stock pursuant to the Merger Agreement.

Goldman Sachs calculated the following:

The premia represented by the KEMET Pre-Approval Closing Price and the Merger Consideration relative to:

$23.51, the closing price of shares of KEMET common stock on November 8, 2019, the last full trading day before the Board’s approval of the Merger Agreement and the transactions contemplated by the Merger Agreement;
 
$21.48, the volume weighted average price (which we refer to in this section as “VWAP”) of shares of KEMET common stock over the 30 trading day period ended on November 8, 2019 (which we refer to in this section as the “KEMET 30-day VWAP”);
 
$19.75, the VWAP of shares of KEMET common stock over the 90 trading day period ended on November 8, 2019 (which we refer to in this section as the “KEMET 90-day VWAP”);
 
$18.80, the VWAP of shares of KEMET common stock over the 180 trading day period ended on November 8, 2019 (which we refer to in this section as the “KEMET 180-day VWAP”);
 
$18.74, the average closing share price of shares of KEMET common stock over the 1 year period ended November 8, 2019 (which we refer to in this section as the “KEMET 1 Year Average”);
 
$18.36, the average closing share price of shares of KEMET common stock over the 3 year period ended November 8, 2019 (which we refer to in this section as the “KEMET 3 Year Average”);
 
$23.76, the highest closing share price of KEMET common stock over the 52-week period ended November 8, 2019 (which we refer to in this section as the “KEMET 52-week high”); and
 
$15.90, the lowest closing share price of shares of KEMET common stock over the 52-week period ended November 8, 2019 (which we refer to in this section as the “KEMET 52-week low”).

The results of these calculations are as follows:

KEMET Reference Share Price       Implied Premium
(Discount) Represented by
the KEMET Pre-Approval
Closing Price of $23.51
      Implied Premium
Represented by the
Merger Consideration of
$27.20 per KEMET Share
KEMET Pre-Approval Closing Price $23.51            0%                       16%           
KEMET 30-day VWAP of $21.48 9% 27%
KEMET 90-day VWAP of $19.75 19% 38%
KEMET 180-day VWAP of $18.80 25% 45%
KEMET 1 Year Average of $18.74 25% 45%
KEMET 3 Year Average of $18.36 28% 48%
KEMET 52-week high of $23.76 (1)% 14%
KEMET 52-week low of $15.90 48% 71%

Goldman Sachs also calculated implied equity values for KEMET by multiplying each of the KEMET Pre-Approval Closing Price and the Merger Consideration by the total number of fully diluted shares of KEMET common stock outstanding as of November 7, 2019 (which was 60.02 million shares at the KEMET Pre-Approval Closing Price and 60.11 million shares at the Merger Consideration), as provided by KEMET’s management. Goldman Sachs then calculated implied enterprise values for KEMET by adding to each of the implied equity values KEMET’s net debt as of September 30, 2019 (which was $129 million), as provided by KEMET’s management.

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Using the foregoing implied enterprise values, Goldman Sachs calculated the following multiples:

The implied enterprise value as a multiple of revenue for calendar year 2020 (“EV/Revenue”), as reflected in (i) the KEMET Forecasts and (ii) the median estimates published by the Institutional Brokers’ Estimate System (which we refer to in this section as the “IBES Estimates”) for KEMET; and
 
The implied enterprise value as a multiple of earnings before interest, tax, depreciation and amortization, or EBITDA, for calendar year 2020 (“EV/EBITDA”), as reflected in (i) the KEMET Forecasts and (ii) IBES Estimates for KEMET.

Using the KEMET Pre-Approval Closing Price and the Merger Consideration, Goldman Sachs also calculated KEMET’s price as a multiple of earnings for calendar year 2020 (“P/E”), as reflected in (i) the KEMET Forecasts and (ii) IBES Estimates for KEMET.

The results of these calculations are as follows:

Multiple       KEMET Pre-Approval
Closing Price of $23.51
      Merger Consideration
of $27.20
CY20 EV/Revenue (Forecasts)          1.1x                  1.3x        
CY20 EV/Revenue (IBES Estimates) 1.1x 1.3x
CY20 EV/EBITDA (Forecasts) 5.2x 6.0x
CY20 EV/EBITDA (IBES Estimates) 5.2x 6.0x
CY20 P/E (Forecasts) 9.5x 11.0x
CY20 P/E (IBES Estimates) 8.1x 9.4x

Discounted Cash Flow Analysis. Using the KEMET Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis of KEMET. Using discount rates ranging from 11.0% to 13.0%, reflecting estimates of KEMET’s weighted average cost of capital, Goldman Sachs discounted to present value as of September 30, 2019 (i) estimates of unlevered free cash flow for KEMET for fiscal years 2020 through 2027, as reflected in the KEMET Forecasts and (ii) a range of illustrative terminal values for KEMET, which were calculated by applying exit terminal year enterprise value to EBITDA (“EV/EBITDA”) multiples ranging from 3.5 times to 5.5 times to the $477 million terminal year estimate of EBITDA to be generated by KEMET, as reflected in the KEMET Forecasts. Goldman Sachs derived such range of discount rates by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The range of exit terminal year EV/EBITDA multiples was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the historical trading multiples of KEMET. Goldman Sachs derived ranges of illustrative enterprise values for KEMET by adding the ranges of present values it derived above. Goldman Sachs then subtracted net debt of $129 million, as provided by KEMET’s management, from the range of illustrative enterprise values it derived for KEMET to derive a range of illustrative equity values for KEMET. Goldman Sachs then divided the range of illustrative equity values by the fully diluted outstanding shares of KEMET (which ranged from 60.02 million shares to 60.03 million shares based on the share price implied by the analysis), as provided by KEMET’s management, to derive a range of illustrative present values per share ranging from $24.39 to $34.44.

Illustrative Present Value of Future Stock Price Analysis. Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share of KEMET common stock, which is designed to provide an indication of the present value of a theoretical future value of KEMET’s equity as a function of KEMET’s financial multiples. For this analysis, Goldman Sachs used the KEMET Forecasts for each of the fiscal years 2020 to 2023. Goldman Sachs first calculated the implied future enterprise value of KEMET as of March 31, 2020, 2021 and 2022, by applying a range of enterprise value to forward EBITDA (“forward EV/EBITDA”) multiples of 4.0 times to 6.0 times to the EBITDA estimates for KEMET contained in the KEMET Forecasts for each of the fiscal years 2020 through 2022. These illustrative multiples were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account historical forward EV/EBITDA multiples for KEMET. For each of the fiscal years 2020 through 2022, Goldman Sachs then subtracted projected net debt (which was $105 million for fiscal year 2020, $(2) million for fiscal year 2021 and $(186) million for fiscal year 2022) as provided by KEMET’s management from the range of illustrative enterprise values it derived for KEMET to derive a range of implied future illustrative equity values for KEMET. Goldman Sachs then divided the range of illustrative equity values by the fully diluted outstanding shares of KEMET

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(which was 59.52 million shares for fiscal year 2020, 60.46 million shares for fiscal year 2021 and 61.62 million shares for fiscal year 2022), as provided by KEMET’s management to obtain a range of illustrative equity values per share. Goldman Sachs then discounted the implied March 31, 2020, 2021 and 2022 per share equity values back to September 30, 2019, using an illustrative discount rate of 12.1%, reflecting an estimate of KEMET’s cost of equity. Goldman Sachs derived such illustrative discount rate by application of the capital asset pricing model, which requires certain companyspecific inputs, including a beta for KEMET, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then added, to this illustrative range of implied per share present equity values, the projected cumulative dividends per share (which was $0.10 for fiscal year 2020, $0.29 for fiscal year 2021 and $0.49 for fiscal year 2022), as provided by KEMET’s management, discounted to present value as of September 30, 2019, using the mid-year convention and applying an illustrative discount rate of 12.1%. This analysis resulted in an illustrative range of implied present values (including dividends) of $17.85 to $32.22 per share of KEMET common stock.

Goldman Sachs also calculated the implied future share price of KEMET as of March 31, 2020, 2021 and 2022, by applying a range of price to forward earnings (“forward P/E”) multiples of 6.0 times to 12.0 times to the earnings per share estimates for KEMET contained in the KEMET Forecasts for each of the fiscal years 2020 through 2022. These illustrative multiples were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account historical forward P/E multiples for KEMET. Goldman Sachs then discounted the implied March 31, 2020, 2021 and 2022 per share equity values back to September 30, 2019 using an illustrative discount rate of 12.1%, reflecting an estimate of KEMET’s cost of equity. Goldman Sachs derived such illustrative discount rate by application of the CAPM, which requires certain company-specific inputs, including a beta for KEMET, as well as certain financial metrics for the United States financial markets generally. Goldman Sachs then added, to this illustrative range of implied per share present equity values, the projected cumulative dividends per share (which was $0.10 for fiscal year 2020, $0.29 for fiscal year 2021 and $0.49 for fiscal year 2022), as provided by KEMET’s management, discounted to present value as of September 30, 2019 using the mid-year convention and applying an illustrative discount rate of 12.1%. This analysis resulted in an illustrative range of implied present values (including dividends) of $14.54 to $33.42 per share of KEMET common stock.

Premia Analysis. Using publicly available information, Goldman Sachs reviewed and analyzed acquisition premia for all transactions (1,379 in total) valued at greater than $200 million enterprise value with unaffected premia between 0% and 150% involving a public company based in the United States as the target announced during the time period from January 1, 2009 through October 31, 2019. For the entire period, Goldman Sachs calculated the 25th and 75th percentile premia of the price paid in the transactions relative to the target company’s stock price as of certain dates and certain time periods, as described below.

Goldman Sachs calculated the 25th percentile and 75th percentile premia of the price paid in the transactions relative to the target’s stock price one trading day prior to announcement of the applicable transaction. This analysis indicated 25th and 75th percentile premia of 17% and 43%, respectively. Using this analysis, Goldman Sachs applied an illustrative reference range of premia ranging from 17% to 43% to the closing price per share of KEMET common stock of $23.51 per share as of November 8, 2019, which was the last full trading day prior to the Board’s approval of the Merger Agreement and the transactions contemplated by the Merger Agreement, and calculated a range of implied equity values per share of KEMET common stock of $27.51 to $33.62.

Goldman Sachs calculated the 25th percentile and 75th percentile premia (discount) of the price paid in the transactions relative to the target’s stock price at its 52-week high prior to the announcement of the applicable transaction. This analysis indicated a 25th and 75th percentile premium (discount) of (5)% and 18%, respectively. Using this analysis, Goldman Sachs applied an illustrative reference range of premia (discount) ranging from (5)% to 18% to the closing price per share of KEMET common stock of $23.76 per share as of November 7, 2019, which was the date that the KEMET common stock reached its 52-week high prior to the announcement of the Merger, and calculated a range of implied equity values per share of KEMET common stock of $22.57 to $28.04.

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to KEMET or the Merger.

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Goldman Sachs prepared these analyses for purposes of Goldman Sachs’ providing its opinion to the Board as to the fairness from a financial point of view of the Merger Consideration to be paid to the holders (other than Yageo and its affiliates) of KEMET common stock pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of KEMET, Yageo, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The Merger Consideration was determined through arm’s-length negotiations between KEMET and Yageo and was approved by the Board. Goldman Sachs provided advice to KEMET during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to KEMET or the Board or that any specific amount of consideration constituted the only appropriate consideration for the Merger.

As described above, Goldman Sachs’ opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B to this Proxy Statement.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of KEMET, Yageo, any of their respective affiliates and third parties, or any currency or commodity that may be involved in the Merger. Goldman Sachs acted as financial advisor to KEMET in connection with, and participated in certain of the negotiations leading to, the Merger. During the two (2) year period ended November 11, 2019, the Investment Banking Division of Goldman Sachs has not been engaged by KEMET, Yageo or any of their respective affiliates to provide financial advisory or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs may also in the future provide investment banking services to KEMET, Yageo and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation.

The Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Merger. Pursuant to a letter agreement dated May 6, 2019, KEMET engaged Goldman Sachs to act as its financial advisor in connection with the Merger. The engagement letter between KEMET and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement of the Merger, at approximately $22  million, all of which is contingent upon consummation of the Merger. In addition, KEMET has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Projections Prepared by KEMET’s Management

KEMET does not, as a matter of course, publicly disclose projections as to its future financial performance due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, as part of its regular annual strategic planning process, the Board reviews with KEMET’s management estimates and forecasts for future periods prepared by KEMET’s management. In connection with such strategic planning process, on March 19, 2019, KEMET’s management provided the Board with, and the Board approved, its forecasts for fiscal years 2020 through 2022, assuming a “base plan” with KEMET continuing to operate as a standalone company as well as a recession case (the “recession plan”). On April 23, 2019, KEMET’s management presented to the Board, and the Board subsequently approved, additional forecasts (further described below) for fiscal years 2020 through 2024. In July 2019, KEMET provided potential buyers, including Yageo, in connection with their due diligence review, with non-public financial forecasts prepared by KEMET’s management. Such forecasts were provided to the Board on June 28, 2019 (the “Initial

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Forecasts”), which differed from the base plan forecasts previously presented to the Board on March 19, 2019, in terms of fiscal years covered, certain interest and tax expenses contemplated, and adjustments to selling, general and administrative expenses (“SG&A”). In November 2019, KEMET provided Yageo, the only remaining potential buyer, with updated non-public financial forecasts, as presented to the Board on November 2, 2019, which reflected revised expectations with respect to KEMET’s financial performance based on, among other things, a softer outlook on fiscal year 2020 revenue, the settlement of the In re: Capacitors Antitrust Litigation (pursuant to which KEMET agreed to make a settlement payment in the amount of $62 million) and developments with respect to estimates of future tax payments and loss carryovers (the “November 2 Updated Forecasts”). Subsequently, on November 9, 2019, KEMET’s management prepared and provided to the Board further updated non-public financial forecasts with revised expectations with respect to KEMET’s financial performance, based on a favorable determination with respect to certain estimates of future tax payments and loss carryovers (the “November 9 Updated Forecasts,” together with the November 2 Updated Forecasts and the Initial Forecasts, the “KEMET Forecasts”). Copies of the base plan in the Initial Forecasts and the November 2 Updated Forecasts were provided to Yageo and copies of the Initial Forecasts and the November 9 Updated Forecasts were provided to Goldman Sachs, and KEMET approved the November 9 Updated Forecasts for use by Goldman Sachs in performing its financial analysis as set forth in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement. While the November 9 Updated Forecasts were not provided to Yageo, KEMET verbally communicated to Yageo that such forecasts would be revised due to the favorable determination with respect to estimates of future tax payments and loss carryovers.

The KEMET Forecasts were not prepared with a view toward public disclosure and are included in this Proxy Statement only because such information was made available, in whole or in part, to potential buyers, including Yageo, in connection with their due diligence review of KEMET, and the November 9 Updated Forecasts was made available to Goldman Sachs for use in connection with its financial analysis as set forth in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement. The KEMET Forecasts were not prepared with a view toward compliance with generally accepted accounting principles as applied in the United States (“GAAP”), the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, Ernst & Young LLP, our independent auditor, has not examined, reviewed, compiled or otherwise applied procedures to the KEMET Forecasts and, accordingly, assumes no responsibility for, and expresses no opinion on, them. The KEMET Forecasts included in this Proxy Statement have been prepared by, and are the responsibility of, our management. The KEMET Forecasts were prepared solely for internal use of KEMET and are subjective in many respects.

Although a summary of the KEMET Forecasts is presented with numerical specificity, they reflect numerous variables, assumptions and estimates as to future events made by KEMET’s management that it believed were reasonable at the time the KEMET Forecasts were prepared, taking into account the relevant information available to management at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Updated Forecasts not to be achieved include, among other factors: adverse economic conditions; an increase in the cost or decrease in the availability of raw materials; changes in the competitive environment; economic, political or regulatory changes in the countries in which KEMET operates; difficulties, delays or unexpected costs in completing KEMET’s restructuring plans; and other factors as set forth in the section entitled “Cautionary Statement On Forward-Looking Statements” beginning on page 21 of this Proxy Statement.

In addition, the KEMET Forecasts do not take into account any circumstances or events occurring after the date that they were prepared. The forecasts provided to the Board on April 23, 2019 contemplated three (3) scenarios based on KEMET (i) as a standalone company but assuming additional potential for increased revenues (the “organic growth plan”), (ii) executing an acquisition plan with three (3) acquisitions (the “acquisition plan”) and (iii) the recession plan (each, as further described below). Only the base plan of the Initial Forecasts, assuming KEMET as a standalone company, and a version of the Updated Forecasts, which reflected certain estimates of future tax payments and loss carryovers based on KEMET as a standalone company, were provided to potential buyers (including Yageo). The November 9 Updated Forecasts were subsequently prepared following a favorable determination with respect to certain estimates of future tax payments and loss carryovers but was not shared with Yageo. The November 2 Updated Forecasts and the November 9 Updated Forecasts were prepared based solely on KEMET as a standalone company and did not include any assumptions of the acquisition plan or the recession plan; such forecasts do not take into

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account the Merger, including the impact of negotiating or executing the Merger, the expenses that may be incurred in connection with consummating the Merger, the effect of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement having been executed, or the effect of any business or strategic decisions or actions which would likely have been taken if the merger agreement had not been executed but which were instead altered, accelerated, postponed or not taken in anticipation of the Merger. As a result, there can be no assurance that the KEMET Forecasts will be realized, and actual results may be materially better or worse than those contained in the KEMET Forecasts. Portions of the KEMET Forecasts cover multiple years. Such information by its nature becomes less predictive with each successive year. The inclusion of this information should not be regarded as an indication that KEMET, the Board, Goldman Sachs or any other recipient of this information considered, or now considers, the KEMET Forecasts to be predictive of actual future results. The summary of the KEMET Forecasts is not included in this Proxy Statement in order to induce any stockholder to vote in favor of the proposal to adopt the Merger Agreement or any of the other proposals to be voted on at the Special Meeting. In light of the foregoing factors and the uncertainties inherent in the KEMET Forecasts, stockholders are cautioned not to place undue, if any, reliance on the KEMET Forecasts included in this Proxy Statement.

The KEMET Forecasts are forward-looking statements, as set forth in the section entitled “Cautionary Statement On Forward-Looking Statements” beginning on page 21 of this Proxy Statement. For additional information, see also the sections entitled “Where You Can Find More Information” and “The Merger—Recommendation of the Board and Reasons for the Merger” beginning on pages 103 and 42, respectively, of this Proxy Statement.

The following tables summarize the KEMET Forecasts. The November 9 Updated Forecasts were approved by KEMET for use by Goldman Sachs in its financial analysis in connection with rendering its oral opinion to the Board, subsequently confirmed in writing, that, as of November 11, 2019, and subject to the factors, assumptions, qualifications and limitations set forth in such opinion, the merger consideration to be received by the holders of shares of KEMET common stock (other than Yageo and its affiliates) was fair from a financial point of view to such holders, as more fully described in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement.

Certain of the measures included in the KEMET Forecasts may be considered non-GAAP financial measures, including Adjusted EBIT, Adjusted EBITDA, Adjusted EPS and Free Cash Flow. Adjusted EBIT means earnings before interest and taxes; Adjusted EBITDA means earnings before interest, taxes, depreciation and amortization; and Adjusted EPS means earnings per share; in each case, exclusive of stock-based compensation and one-time expenses. Free Cash Flow means EBITDA minus cash taxes, antitrust and legal fees, restructuring and integration, changes in other balance sheet items, changes in working capital, capital expenditure and joint venture investments, and plus cash interest income. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by KEMET may not be comparable to similarly titled amounts used by other companies.

Key material assumptions underlying the Initial Forecasts (for the base plan), which forecasts are set forth in Table 1 below, include the following:

Overall, assumptions were made to exclude the impact of potential acquisitions made using business group by business group bottom-up projections (i.e., analysis beginning with the business group and expanding out) through fiscal year 2022 and top-down projections (i.e., analysis beginning with the market as a whole and working down) thereafter.
 
Revenue assumptions, for fiscal years 2023-2024, used a top-down approach (i.e., analysis beginning with the market as a whole and working down) and were based on a compound annual growth rate of 6%.
 
Operating expenses and EBITDA margins assumed, for fiscal years 2022-2024, a variable margin held constant at 55.6%, a payroll cost increase of 3% per year, R&D expenses held constant at 3.5% of revenue. Capital expenditures were assumed to be reduced for fiscal years 2023-2024 to approximately 5% of sales per year. Working capital was assumed to be kept constant at 17.5% of revenues for fiscal years 2021-2024. Depreciation and amortization for fiscal years 2022, 2023 and 2024 were assumed to be $81 million, $82 million and $84 million, respectively.
 
Developments with respect to estimates of future tax payments and loss carryovers.

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Table 1
Initial Forecasts (Provided to Yageo)

(US$ in millions, except per share
amounts and percentages)
FYE 31-Mar       FY2020E       FY2021E       FY2022E       FY2023E       FY2024E
Revenue $ 1,429 $ 1,501 $ 1,611 $ 1,708 $ 1,810
Net Income $ 175 $ 194 $ 229 $ 262 $ 291
Adjusted EBIT $ 239 $ 262 $ 304 $ 345 $ 394
Adjusted EBITDA $ 301 $ 333 $ 385 $ 428 $ 478
Adjusted EBITDA Margin 21 % 22 % 24 % 25 % 26 %
Adjusted EPS $ 2.91 $ 3.16 $ 3.67 $ 4.11 $ 4.48
Capex $ (181 ) $ (102 ) $ (82 ) $ (82 ) $ (88 )
Cash Taxes $ (15 ) $ (55 ) $ (64 ) $ (77 ) $ (101 )
Antitrust Payments and Related Legal Fees $ (31 ) $ (13 ) $ (10 ) $ (9 ) $ (6 )

Key material assumptions underlying the November 2 and November 9 Updated Forecasts, which forecasts are set forth in Tables 2 and 3 below, included the following:

Revenue for fiscal year 2020 was assumed to be re-forecasted to $1.28 billion, down 7.6% from fiscal year 2019; the gross margin percentage for fiscal year 2020 was assumed to increase to 33.6%, up 0.3% from fiscal year 2019; adjusted EBITDA for fiscal year 2020 was assumed to decrease to $265  million, down $25 million from fiscal year 2019. The softer outlook on fiscal year 2020 revenue was due to certain factors anticipated to exert downward pressure on KEMET’s sales, including, among other things, (i) adjustments of inventory levels in KEMET’s distribution channel, (ii) a softening automotive market and (iii) a slowdown in the European market.
 
Revenue growth for fiscal years 2021-2024 was assumed to be re-forecasted at 7.1%, 7.4%, 6% and 6%, for each respective year.
 
SG&A for fiscal year 2020 was based on a detailed bottom-up current forecast (i.e., analysis beginning with the business group and expanding out), with expenses for fiscal year 2021 held constant related to fiscal year 2020 and fiscal years 2022-2024 adjusted for a 3% annual payroll cost increase. Capital expenditures were assumed to be reduced by $10 million in fiscal year 2021 as compared to the Initial Forecasts.
 
The settlement of the In re: Capacitors Antitrust Litigation (pursuant to which KEMET agreed to make a settlement payment in the amount of $62 million) and developments with respect to estimates of future tax payments and loss carryovers.

Table 2*
November 2 Updated Forecasts (Provided to Yageo)

(US$ in millions, except per share
amounts and percentages)
FYE 31-Mar       FY2020E       FY2021E       FY2022E       FY2023E       FY2024E
Revenue $ 1,277 $ 1,368 $ 1,470 $ 1,558 $ 1,652
Net Income $ 144 $ 165 $ 196 $ 230 $ 269
Adjusted EBIT $ 206 $ 235 $ 277 $ 321 $ 370
Adjusted EBITDA $ 265 $ 306 $ 358 $ 403 $ 454
Adjusted EBITDA Margin 21 % 22 % 24 % 26 % 28 %
Adjusted EPS $ 2.42 $ 2.73 $ 3.19 $ 3.65 $ 4.17
Capex $ (181 ) $ (92 ) $ (82 ) $ (82 ) $ (88 )
Cash Taxes $ (30 ) $ (29 ) $ (54 ) $ (74 ) $ (87 )
Antitrust Payments and Related Legal Fees $ (40 ) $ (59 ) $ (6 ) $ (4 ) $ (3 )
____________________

* Table 2 represents non-public forecasted financials shared by KEMET with Yageo. These forecasts differ from the November 9 Updated Forecasts shown in Table 3, because Table 2 gives effect to certain estimates of future tax payments and loss carryovers.

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Table 3 below, which was not provided to Yageo, reflects revisions to Table 2 above, based on the favorable determination of future tax payments and loss carryovers. While the Updated Forecasts in Table 3 below were not provided to Yageo, KEMET verbally communicated to Yageo that such forecasts would be revised due to the favorable determination with respect to estimates of future tax payments and loss carryovers and provided the November 9 Updated Forecasts to Goldman Sachs, which KEMET’s management approved for use by Goldman Sachs in performing its financial analysis as set forth in the section entitled “The Merger—Opinion of KEMET’s Financial Advisor” beginning on page 48 of this Proxy Statement.

Table 3**, ***
November 9 Updated Forecasts (Not Provided to Yageo)

(US$ in millions, except per share
amounts and percentages)
FYE 31-Mar       FY2020E       FY2021E       FY2022E       FY2023E       FY2024E
Revenue $ 1,277 $ 1,368 $ 1,470 $ 1,558 $ 1,652
Revenue Growth (8)% 7% 7% 6% 6%
Net Income $ 134 $ 154 $ 197 $ 231 $ 269
Adjusted EBIT $ 206 $ 235 $ 277 $ 321 $ 370
Adjusted EBITDA $ 265 $ 306 $ 358 $ 403 $ 454
Adjusted EBITDA Margin 21% 22% 24% 26% 28%
Adjusted EPS $ 2.25     $ 2.55   $ 3.20   $ 3.66   $ 4.18
Capex $ (181 )   $ (92 ) $ (82 ) $ (82 ) $ (88 )
Cash Taxes $ (9 )   $ (12 ) $ (49 ) $ (75 ) $ (88 )
Antitrust Payments and Related Legal Fees $ (40 )   $ (59 ) $ (6 ) $ (4 ) $ (3 )
Free Cash Flow $ 17 $ 123 $ 200 $ 230 $ 264
____________________

**

Table 3 represents non-public forecasted financials provided by KEMET to Goldman Sachs but not shared with Yageo. These forecasts differ from the November 2 Updated Forecasts shown in Table 2, because Table 3 does not give effect to certain estimates of future tax payments and loss carryovers, after a favorable determination was made with respect to such estimates.

 
***

In connection with the November 9 Updated Forecasts, KEMET’s management additionally provided the following unlevered free cash flow projections, which KEMET’s management approved for use by Goldman Sachs for its discounted cash flow analysis. Unlevered free cash flow projections were $(22) million for the second half of fiscal year 2020, $7 million for fiscal year 2020, $112 million for fiscal year 2021, $187 million for fiscal year 2022, $215  million for fiscal year 2023, $247  million for fiscal year 2024, $270  million for fiscal year 2025, $278 million for fiscal year 2026 and $281 million for fiscal year 2027. These figures were based on the following assumptions: (i) year over year revenue growth rates of 7.1% for fiscal year 2021, 7.4% for fiscal year 2022, 6.0% for each of fiscal years 2023 and 2024, 3.0% for fiscal year 2025, and 1.0% for each of fiscal years 2026 and 2027; (ii) EBITDA as a percentage of margin of 20.7% for fiscal year 2020, 22.4% for fiscal year 2021, 24.4% for fiscal year 2022, 25.9% for fiscal year 2023 and 27.5% for each of fiscal years 2024, 2025, 2026 and 2027; and (iii) capital expenditure as a percentage of sales of 14.2% for fiscal year 2020, 6.7% for fiscal year 2021, 5.6% for fiscal year 2022 and 5.3% for each of fiscal years 2023, 2024, 2025, 2026 and 2027.

Initial Forecasts for Organic Growth Plan, Acquisition Plan and Recession Plan

As part of the Initial Forecasts, KEMET’s management prepared forecasts assuming the base plan as a base and an additional $70 million in revenue in fiscal year 2022. Such forecasts were based on assumptions excluding the impact of potential acquisitions, with business group by business group bottom-up projections (i.e., analysis beginning with the business group and expanding out) through fiscal year 2020 and top-down projections (i.e., analysis beginning with the market as a whole and working down) thereafter. Revenue build, for fiscal years 2020-2022, was based on volume, average selling price and mix; revenue assumptions, for fiscal years 2022-2024, used a top-down approach (i.e., analysis beginning with the market as a whole and working down) and, for fiscal years 2019-2023, were based on

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a compound annual growth rate of 7%. Operating expenses and EBITDA margins assumed, for fiscal years 2022-2024, a variable margin held constant at 55.7%, a payroll cost increase of 3% per year, R&D expenses held constant at 3.5% of revenue; and also assumed an EBITDA margin expansion from 21% in fiscal year 2019 to 26% in fiscal year 2024.

i.

increased revenues of $1,429 million in fiscal year 2020, $1,501 million in fiscal year 2021, $1,681 million in fiscal year 2022, $1,782 million in fiscal year 2023 and $1,889 million in fiscal year 2024;

 

ii.

increased adjusted EBIT of $239 million in fiscal year 2020, $262 million in fiscal year 2021, $337 million in fiscal year 2022, $385 million in fiscal year 2023 and $436 million in fiscal year 2024;

 

iii.

increased adjusted EBITDA of $301 million in fiscal year 2020, $333 million in fiscal year 2021, $419 million in fiscal year 2022, $468 million in fiscal year 2023 and $520 million in fiscal year 2024; and

 

iv.

increased adjusted EPS of $3.61 per share in fiscal year 2020, $3.29 per share in fiscal year 2021, $4.25 per share in fiscal year 2022, $4.84 per share in fiscal year 2023 and $5.44 per share in fiscal year 2024.

As part of the Initial Forecasts, KEMET’s management also prepared the acquisition plan, which was presented to the Board and Goldman Sachs, but not provided to any potential buyers (including Yageo). Such forecasts were based on the standalone financials as a baseline and assumed three identical acquisitions in the first quarter of each of fiscal years 2021, 2023 and 2024. Revenue assumptions, for fiscal years 2019-2024, were based on a compound annual growth rate of 14% and a target year one (1) revenue of $250 million for each of the three (3) acquisitions. Operating expenses and EBITDA margins assumed no cost synergies or restructuring and an EBITDA margin expansion from 21% in fiscal year 2019 to 22% in fiscal year 2024, with a target year one (1) EBITDA of $25 million for each of the three (3) acquisitions. Cash flow assumptions were based on annual dividends of $11.6 million, and acquisition and joint venture investments of $250 million in each of fiscal years 2021, 2023 and 2024. Such forecasts contemplated:

i.

increased revenues of $1,429 million in fiscal year 2020, $1,751 million in fiscal year 2021, $1,956 million in fiscal year 2022, $2,323 million in fiscal year 2023 and $2,713 million in fiscal year 2024;

 

ii.

increased adjusted EBIT of $239 million in fiscal year 2020, $273 million in fiscal year 2021, $352 million in fiscal year 2022, $418 million in fiscal year 2023 and $489 million in fiscal year 2024;

 

iii.

increased adjusted EBITDA of $301 million in fiscal year 2020, $358 million in fiscal year 2021, $448 million in fiscal year 2022, $522 million in fiscal year 2023 and $602 million in fiscal year 2024; and

 

iv.

increased adjusted EPS of $3.61 per share in fiscal year 2020, $3.41 per share in fiscal year 2021, $4.36 per share in fiscal year 2022, $5.08 per share in fiscal year 2023 and $5.86 per share in fiscal year 2024.

As part of the Initial Forecasts, KEMET’s management also prepared the recession plan, assuming an economic downturn or recession during fiscal years 2020 and 2021, which was presented to Goldman Sachs and the Board, but not provided to any potential buyers (including Yageo). Such forecasts also assumed that business groups would be provided with top-line recession assumptions and budget accordingly. Revenue assumptions for fiscal years 2019-2024 were based on a compound annual growth of 0.3% and a year-over-year decline in revenue of 10% between fiscal years 2020 and 2021. Operating expenses and EBITDA margin assumptions were based on an EBITDA margin compression from 21% in fiscal year 2019 to 20% in fiscal year 2024. Cash flow assumptions were based on annual dividends of $11.6 million, and capital expenditures and net working capital projected in line with KEMET’s forecasts as a standalone company. Such forecasts contemplated:

i.

decreased revenues of $1,239 million in fiscal year 2020, $1,115 million in fiscal year 2021, $1,227 million in fiscal year 2022, $1,300 million in fiscal year 2023 and $1,378 million in fiscal year 2024;

 
ii.

decreased adjusted EBIT of $165 million in fiscal year 2020, $101 million in fiscal year 2021, $140 million in fiscal year 2022, $168 million in fiscal year 2023 and $198 million in fiscal year 2024;

  

iii.

decreased adjusted EBITDA of $224 million in fiscal year 2020, $168 million in fiscal year 2021, $212 million in fiscal year 2022, $244 million in fiscal year 2023 and $279 million in fiscal year 2024; and

  

iv.

decreased adjusted EPS of $2.46 per share in fiscal year 2020, $1.22 per share in fiscal year 2021, $1.67 per share in fiscal year 2022, $2.18 per share in fiscal year 2023 and $2.65 per share in fiscal year 2024.

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Except to the extent required by applicable federal securities laws, KEMET does not intend, and expressly disclaims any responsibility, to update or otherwise revise the KEMET Forecasts to reflect circumstances existing after the date when KEMET prepared the KEMET Forecasts or to reflect the occurrence of future events or changes in general economic or industry conditions, even in the event that any or all of the assumptions underlying the KEMET Forecasts are no longer appropriate or shown to be in error. By including in this document a summary of certain financial forecasts, neither KEMET nor any of its representatives or advisors nor Yageo, Yageo’s representatives and affiliates makes any representation to any person regarding the ultimate performance of KEMET or the Surviving Corporation compared to the information contained in such financial forecasts and should not be read to do so.

Interests of the Directors and Executive Officers of KEMET in the Merger

When considering the recommendation of the Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that some of KEMET’s directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of KEMET stockholders generally, as more fully described below. The Board was aware of and considered these interests, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by KEMET stockholders.

Treatment of Equity-Based Awards

Treatment of Stock Options

As of December 31, 2019, there were no outstanding stock options held by KEMET’s directors or executive officers. As of the Effective Time, each outstanding stock option to purchase shares of KEMET common stock, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such stock option as of the Effective Time and (ii) the amount, if any, by which the Merger Consideration exceeds the exercise price per share of KEMET common stock underlying such stock option. If the exercise price per share of KEMET common stock underlying such stock option is equal to or greater than the Merger Consideration, then the stock option will be canceled without any cash payment or other consideration being made in respect thereof.

Treatment of Restricted Stock Units

As of December 31, 2019, there were 702,974 outstanding restricted stock units (“RSUs”) held by KEMET’s directors or executive officers (502,974 RSUs held by the directors and 200,000 RSUs held by the executive officers), excluding the time- and performance-based portion of long-term incentive plan awards. As of the Effective Time, each then-outstanding RSU, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such RSU and (ii) the Merger Consideration.

Treatment of Long-Term Incentive Plan Awards

As of December 31, 2019, no directors held LTIP awards and there were (i) 115,092 shares of KEMET common stock subject to the time-based vesting portions of outstanding LTIP awards held by our executive officers and (ii) 142,354 shares of KEMET common stock and an aggregate cash amount equal to $2,561,461 subject to the performance-based vesting portions of outstanding LTIP awards held by our executive officers assuming target level of performance (189,262 shares of KEMET common stock and an aggregate cash amount equal to $3,409,729 assuming maximum level of performance). As of the Effective Time, each then-outstanding LTIP award, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to: (i) with respect to the time-based vesting portion of the LTIP award, the product of (x) the total number of shares of KEMET common stock subject to such LTIP award and (y) the Merger Consideration and (ii) with respect to the performance-based vesting portion of the LTIP award, the total value of the payout that would have been earned (whether in the form of shares of KEMET common

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stock or cash) assuming (x) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (y) the greater of target and actual level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021.

The table below sets forth the estimated value of unvested RSUs and LTIP awards held as of December 31, 2019, the last practicable date prior to the date of this Proxy Statement, by KEMET’s executive officers, based on the Merger Consideration. All of the RSUs held by KEMET’s directors are fully vested on the date of grant and are not reflected in the table below. Depending on when the Merger is consummated, certain outstanding equity awards shown in the table below may become vested in accordance with their terms without regard to the Merger. The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after December 31, 2019 and before the Effective Time.

Number of Value of
Number of Unvested Unvested Value of
Unvested Value of Performance- Performance- Unvested Total Value
Number of Value of Time- Unvested Based LTIP Based LTIP Performance- of Unvested
Unvested Unvested Based LTIP Time-Based Awards Awards Based LTIP Equity
    RSUs RSUs Awards LTIP Awards (Shares) (Shares) Awards (Cash) Awards
Name    (#)    ($)    (#)    ($)    (#) (1)    ($)    ($) (2)    ($)
Named Executive Officers                                                
Mr. Lowe 50,000 1,360,000 22,039 599,461 61,321 1,667,931 1,100,000 4,727,392
Mr. Thompson 75,000 2,040,000 12,673 344,706 9,504 258,509 172,500 2,815,714
Mr. Meeks 20,782 565,270 18,451 501,867 331,691 1,398,829
Mr. Lollini 11,705 318,376 10,408 283,098 187,127 788,601
Mr. Vetralla 10,461 284,539 9,581 260,603 172,234 717,376
Other Executive Officers
       as a Group (3) 75,000 2,040,000 37,432 1,018,150 33,089 900,021 597,909 4,556,080
____________________

(1)

Reflects the number of shares of KEMET common stock subject to the performance-based vesting portions of outstanding LTIP awards held by KEMET’s executive officers, assuming (i) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (ii) for purposes of this table, the target level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021.

 
(2)

Reflects the cash amount subject to the performance-based vesting portions of outstanding LTIP awards held by KEMET’s executive officers, assuming (i) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (ii) for purposes of this table, the target level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021.

 
(3)

Includes the following executive officers: Shigenori (Sean) Oyama, R. James Assaf and Robert S. Willoughby.

Future Grants of Equity Awards in Fiscal Year 2021

If the Merger has not been consummated prior to the date on which we would normally make annual grants of equity awards, including RSUs and LTIP awards, to our employees and officers (including our executive officers) in fiscal year 2021, KEMET may grant such equity awards for fiscal year 2021; provided that such equity awards will be cash-settled only and the aggregate grant date value (assuming maximum performance) of such equity awards will not exceed $20.8 million. KEMET has agreed that the applicable plan design and performance metrics for such equity awards will be the same as those in place for the prior fiscal year and that the establishment of the EBITDA targets for the LTIP awards with a two (2)-year performance period ending on March 31, 2022 will be subject to the review and approval of Yageo, which may not be unreasonably withheld. Any equity awards granted in fiscal year 2021 that remain outstanding immediately prior to the Effective Time will be subject to the same treatment at the Effective Time as applied to the corresponding type of equity award described in the section above entitled “The Merger—Interests of Directors and Executive Officers of KEMET in the Merger—Treatment of Equity-Based Awards” beginning on page 59 of this Proxy Statement, except that (i) the payment due with respect to each RSU and the time-based vesting portion of each LTIP award will be pro-rated based on the number of days elapsed during the period commencing on the grant date and ending on the date the Merger is consummated and (ii) the payment due with respect to the performance-based vesting portion of each LTIP award will be calculated based on the actual level of achievement of the applicable

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performance targets through the date the Merger is consummated and pro-rated based on the number of days elapsed during the period commencing on the first (1st) day of the applicable performance period and ending on the date the Merger is consummated.

KEMET may continue to make annual grants of RSUs or restricted shares of KEMET common stock (or, in each case, cash awards in lieu thereof) to each of its non-employee directors, with a grant date value not to exceed the grant date value of such awards granted in the prior fiscal year, in the ordinary course of business in accordance with the terms of KEMET’s director compensation program. Such equity awards will be subject to the same treatment that applies to RSUs generally, as described in the section above entitled “The Merger—Interests of Directors and Executive Officers of KEMET in the Merger—Treatment of Equity-Based Awards” beginning on page 59 of this Proxy Statement.

Change in Control Severance Agreements

KEMET has entered into change in control severance agreements (the “CIC Agreements”) with each of its executive officers. The consummation of the Merger will constitute a change of control under the CIC Agreements.

Under each CIC Agreement, if, during the two (2)-year period following the consummation of the Merger, the applicable executive officer’s employment is terminated without cause or the executive officer resigns for “good reason” (as defined in the CIC Agreements and summarized below), such executive officer will be entitled to receive:

a lump-sum cash severance payment equal to twenty-four (24) (or, for certain executive officers who are not KEMET’s named executive officers, eighteen (18)) times the sum of (i) the executive officer’s monthly base salary in effect at the time a notice of termination is given and (ii) the monthly amount of the executive officer’s annual target incentive bonus, determined by dividing the annual target incentive bonus by twelve (12) for the year in which the consummation of the Merger occurs;
 
maintenance of all KEMET life insurance and medical insurance plans and programs for eighteen (18) months following the date of termination or until the executive officer becomes eligible for the same type of coverage under another employer’s plan, whichever is earlier;
 
payment of all reasonable legal fees and expenses incurred by the executive officer as a result of his or her termination; and
 
payment of the costs of reasonable outplacement services until the executive officer is employed on a full-time basis, up to $15,000.

For purposes of the CIC Agreements, “good reason” means, in summary: (i) the assignment to the executive officer of any duties inconsistent with his or her position, duties, responsibilities and status with KEMET, a change in his or her titles or offices or any removal of him or her from, or any failure to reelect him or her to, any of such positions; (ii) a reduction in the executive officer’s base salary; (iii) a material reduction in the benefits provided under, a material increase in cost to the executive officer with respect to or the failure of KEMET to continue in effect, in each case, any compensation, welfare or benefit plan in which the executive officer is participating at the time of a change in control of KEMET, without substituting or providing a substantially similar benefit at substantially the same cost; (iv) any purported termination for “cause” or “disability” (each as defined in the CIC Agreements) without grounds therefor; or (v) the relocation of the executive officer’s primary work location to a location that is more than fifty (50) miles from his or her primary work location immediately prior to a change in control of KEMET.

The CIC Agreements do not provide for a gross-up for any excise tax imposed on amounts that constitute “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). Instead, any payment to an executive officer under his or her CIC Agreement may be reduced to an amount such that it does not constitute an excess parachute payment under Section 280G of the Code, if such reduction would result in the executive officer receiving a greater after-tax payment. If the executive officer would receive a greater after-tax payment absent a reduction and payment of applicable taxes, including any excise taxes, no reduction will be made.

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The table below sets forth the amounts that would be payable to each of KEMET’s executive officers assuming that the consummation of the Merger occurred on December 31, 2019, the last practicable date prior to the date of this Proxy Statement, and the employment of each of our executive officers was terminated by KEMET without cause or by the executive officer for good reason, in each case, immediately following the Effective Time. The amounts shown are estimates based on multiple assumptions and do not reflect compensation actions that could occur after December 31, 2019 and before the Effective Time.

Total Severance
Cash Benefits Payments and
Severance Continuation Outplacement Benefits
Name       ($) (1)       ($) (2)       ($)       ($) (3)
Named Executive Officers
Mr. Lowe     2,900,000         58,921         15,000         2,973,921    
Mr. Thompson 1,955,000 41,533 15,000 2,011,533
Mr. Meeks 1,568,250 57,774 15,000 1,641,024
Mr. Lollini 1,159,200 20,479 15,000 1,194,679
Mr. Vetralla 1,023,360 20,621 15,000 1,058,981
Other Executive Officers as a Group 3,445,810 69,723 45,000 3,560,533
____________________

(1)

Reflects a lump-sum cash severance amount equal to twenty-four (24) times the sum of (i) the executive officer’s monthly base salary in effect at the time a notice of termination is given and (ii) the monthly amount of the executive officer’s annual target incentive bonus, determined by dividing the annual target incentive bonus by twelve (12) for the year in which the change in control occurs.

 
(2)

Reflects the cost of maintenance of all KEMET life insurance and medical insurance plans and programs for eighteen (18) months following the termination of each executive officer’s employment.

 
(3)

For purposes of this table, KEMET has not attributed any value to the executive officer’s right to receive payment of all reasonable legal fees and expenses incurred by the executive officer as a result of his or her termination.

Pro-Rated Annual Bonus Payments

If the Merger is consummated on or prior to March 31, 2021, KEMET will calculate, as of immediately prior to the Effective Time, the pro-rated amount of the annual cash bonus for each participating employee (including our executive officers) in respect of fiscal year 2021 under KEMET’s cash bonus plans for such year, which pro-rated amount will be (i) determined based on actual performance through the Effective Time and (ii) prorated based on the number of days elapsed during the period commencing on April 1, 2020 and ending on the date the Merger is consummated, and such pro-rated amount of the annual cash bonus will be paid to each participating employee (including KEMET’s executive officers) on the normal payment dates for such bonuses, in each case, in the ordinary course of business consistent with past practice.

280G Mitigation Actions

In connection with the Merger, KEMET may take certain tax-planning actions to mitigate any adverse tax consequences under Section 280G of the Code that could arise in connection with the completion of the Merger, including, without limitation: (i) payment in calendar year 2019 of short- or long-term cash incentive compensation that would otherwise be payable to our executive officers in 2020, (ii) settlement of equity-based awards held by our executive officers in calendar year 2019 that would otherwise be settled in 2020 and (iii) obtaining third-party valuations of restrictive covenant provisions applicable to our executive officers; provided that we may not take any actions that would materially increase the cost of providing such payments or provide for tax gross-ups to any individual.

As of the date of this Proxy Statement, KEMET has determined that no specific actions will need to be taken.

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Compensation Arrangements with Yageo

As of the date of this Proxy Statement, none of KEMET’s executive officers has entered into any agreement with Yageo or any of its affiliates regarding employment with, or the right to purchase or participate in the equity of, the Surviving Corporation or one or more of its affiliates. Prior to, or following the closing of the Merger, however, some or all of KEMET’s executive officers may discuss or enter into agreements with Yageo regarding employment with, or the right to purchase or participate in the equity of, Yageo or one or more of its affiliates.

Merger Related Compensation

In accordance with Item 402(t) of Regulation S-K, the table below entitled “Golden Parachute Compensation” sets forth the compensation that is based on or otherwise relates to the Merger that will or may become payable to each of KEMET’s named executive officers in connection with the Merger. Please see the previous portions of this section for further information regarding this compensation.

The amounts indicated in the table below titled “Golden Parachute Compensation” are estimates of the amounts that would be payable assuming, solely for purposes of this table, that the Merger was consummated on December 31, 2019, and the employment of each of the named executive officers (other than Mr. Loof, who is no longer an employee) was terminated by KEMET without cause or by the named executive officer for good reason, in each case, on that date.

As described below, some of the amounts set forth in the table below would be payable only if such a termination of employment occurs in connection with the Merger (“double-trigger” payments), but other amounts would be “single-trigger” payments. In addition to the assumptions regarding the consummation date of the Merger and termination of the employment of the named executive officers, these estimates are based on certain other assumptions that are described in the footnotes accompanying both tables below. Accordingly, the ultimate values to be received by a named executive officer in connection with the Merger may differ from the amounts set forth below.

Golden Parachute Compensation

Perquisites/
Cash Equity Benefits Total
Name       ($) (1)       ($) (2)       ($) (3)       ($)
Mr. Lowe 2,900,000 4,727,392     73,921     7,701,313
Mr. Loof (4)
Mr. Thompson 1,955,000 2,815,714 56,533 4,827,247
Mr. Meeks 1,568,250 1,398,829 72,774 3,039,853
Mr. Lollini 1,159,200 788,601 35,479 1,983,280
Mr. Vetralla 1,023,360 717,376 35,621 1,776,357
____________________

(1)

Reflects a lump-sum cash severance amount equal to twenty-four (24) times the sum of (i) the named executive officer’s monthly base salary in effect at the time a notice of termination is given and (ii) the monthly amount of the named executive officer’s annual target incentive bonus, determined by dividing the annual target incentive bonus by twelve (12) for the year in which the change in control occurs. The amounts reflected in this column are attributable to a “double-trigger” arrangement under the CIC Agreements.

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(2)

The amounts in this column reflect the value of KEMET’s named executive officers’ unvested equity awards that would be canceled in exchange for the right to receive the Merger Consideration as of the Effective Time, as provided by the Merger Agreement. All of the amounts payable are attributable to a “single-trigger” arrangement upon the occurrence of the consummation of the Merger. The following table breaks down these amounts by type of award:


Value of Value of
Value of Unvested Unvested
Unvested Performance- Performance-
Value of Time-Based Based LTIP Based LTIP
Unvested RSUs LTIP Awards Awards (Shares) Awards (Cash) Total
          Name       ($)       ($)       ($) (a)       ($) (b)       ($)
Mr. Lowe     1,360,000         599,461          1,667,931          1,100,000     4,727,392
Mr. Loof
Mr. Thompson 2,040,000 344,706 258,509 172,500 2,815,714
Mr. Meeks 565,270 501,867 331,691 1,398,829
Mr. Lollini 318,376 283,098 187,127 788,601
Mr. Vetralla 284,539 260,603 172,234 717,376
____________________

(a)

Reflects the number of shares of KEMET common stock subject to the performance-based vesting portions of outstanding LTIP awards held by our named executive officers, assuming (i) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (ii) for purposes of this table, the target level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021. For further discussion of the payments of the performance-based vesting portions of outstanding LTIP awards under the Merger Agreement, please see the section above entitled “The Merger—Interests of Directors and Executive Officers of KEMET in the Merger—Treatment of Equity-Based Awards” beginning on page 59 of this Proxy Statement.

 
(b)

Reflects the cash amount subject to the performance-based vesting portions of outstanding LTIP awards held by KEMET’s named executive officers, assuming (i) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (ii) for purposes of this table, the target level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021. For further discussion of the payments of the performance-based vesting portions of outstanding LTIP awards under the Merger Agreement, please see the section above entitled “The Merger—Interests of Directors and Executive Officers of KEMET in the Merger— Treatment of Equity-Based Awards” beginning on page 59 of this Proxy Statement.

 
(3)

The amounts in this column reflect (i) the value of maintenance of all life insurance and medical insurance plans and programs for eighteen (18) months by KEMET, to which the named executive officers would be entitled under their CIC Agreements and (ii) KEMET’s payment of the costs of reasonable outplacement services until the named executive officer is employed on a full-time basis, up to $15,000. The amounts reflected in this column are attributable to a “double-trigger” arrangement under the CIC Agreements.

 
(4)

Mr. Loof resigned as a KEMET executive officer as of December 19, 2018 and is not entitled to any payments or benefits in connection with the Merger.

Financing of the Merger

The total amount of funds necessary to consummate the Merger and related transactions, including payment of related fees and expenses, will be approximately $1,800 million. In connection with the Merger and related transactions, Yageo has obtained the debt financing described below.

Commitment Letter: Yageo has obtained debt financing on the terms and conditions set forth in the Commitment Letter, from Citi, pursuant to which Citi has provided commitments in respect of a senior secured bridge loan facility in an aggregate principal amount of $1,100 million (the “Bridge Facility”), the proceeds of which would be used, together with the proceeds of the Shareholder Loan Agreement or Standby Letter of Credit, as appropriate, and cash on hand of Yageo and its subsidiaries, for the purpose of financing the consummation of the Merger and paying fees and expenses incurred in connection with the Merger. The initial borrowing

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under the Bridge Facility is subject to the satisfaction (or waiver by Citi) of a number of limited conditions, including, without limitation: consummation of the Merger in all material respects on the terms contemplated by the Merger Agreement (without giving effect to any amendment, waiver, consent or other modification that is materially adverse to the lenders unless it is approved by Citi); since November 11, 2019, there has not occurred any change, event, occurrence, state of facts, condition, development or circumstances that has had or would reasonably be expected to have a “Material Adverse Effect” (as defined in the section entitled “Terms of the Merger Agreement—Representations and Warranties” beginning on page 71 of this Proxy Statement); delivery of certain financial statements of Yageo and KEMET; delivery of customary closing documents; certain representations being true and correct in all material respects as of the closing date; delivery of a customary certificate certifying as to the solvency of Yageo on a consolidated basis after giving effect to the Merger and related transactions; delivery by Yageo of definitive documentation with respect to the Bridge Facility, executed by Yageo and each guarantor party thereto; subject to certain exceptions, delivery of all documents required to perfect the security interest granted to the agent under the Bridge Facility in the collateral provided thereunder; delivery of documentation with respect to Yageo required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations; and payment of required fees and expenses (together with those conditions contained in the Commitment Letter not expressly described above, collectively, the “Funding Conditions”). The Commitment Letter terminates in the event that (i) the Funding Conditions are not satisfied (or are waived by Citi) on or before the date that is five (5) business days after the Termination Date, (ii) the Merger Agreement is terminated in accordance with its terms without consummation of the Merger having occurred, or (iii) the closing of the Merger occurs without use of the Bridge Facility.
 
Shareholder Loan Agreement: Yageo has obtained debt financing on the terms and conditions set forth in the Shareholder Loan Agreement with Pierre Chen, pursuant to which Pierre Chen has provided commitments in respect of the Shareholder Loan, the proceeds of which would be used, together with the proceeds of the Bridge Facility and cash on hand of Yageo and its subsidiaries, for the purpose of financing a portion of the Merger. Citicorp International Limited, in its capacity as administrative agent under the Bridge Facility, and Pierre Chen have entered a subordination agreement, the terms of which subordinate the Shareholder Loan in right and time of payment to Yageo’s obligations under the Bridge Facility. The initial borrowing of the Shareholder Loan is subject to advance delivery of a utilisation notice to Pierre Chen, satisfaction (or waiver) of all conditions to closing of the Merger set forth in Article VII of the Merger Agreement five (5) business days before closing of the Merger (except those conditions that, by their nature, are to be satisfied at the closing of the Merger) and it not being illegal or unlawful in any applicable jurisdiction for Pierre Chen to perform his funding obligations under the Shareholder Loan Agreement. The Shareholder Loan Agreement terminates upon (i) Yageo’s failure to deliver a utilisation notice on or before the date that is five (5) business days after the Termination Date, (ii) valid termination of the Merger Agreement without consummation of the Merger or (iii) closing of the Merger without use of the Shareholder Loan.
 
Standby Letter of Credit: Yageo has obtained debt financing on the terms and conditions set forth in the Standby Letter of Credit issued by Citibank, N.A., Hong Kong Branch (the “Issuer”), pursuant to which, in the event that Pierre Chen does not advance the Shareholder Loan to Yageo, Yageo will draw an aggregate amount of $195 million under the Standby Letter of Credit. The proceeds would be used for the purpose of financing a portion of the Merger. The availability of funds under the Standby Letter of Credit is subject to Yageo’s presentation of the Standby Letter of Credit at the specified counter of the Issuer, and delivery by Yageo to the Issuer, of a written statement of demand certifying that (i) Pierre Chen has not advanced the Shareholder Loan to Yageo and (ii) the amount of funds to be drawn by Yageo is the same as the amount of funds not advanced by Pierre Chen. The Standby Letter of Credit terminates at the earlier of (x) the close of business at the specified counter of the Issuer on February 16, 2021 (the “Expiry Date”) and (y) any date on or prior to the Expiry Date, subject to payment in full of the undrawn aggregate amount of the Standby Letter of Credit at such time by the Issuer to Yageo.

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Closing and Effective Time

The closing of the Merger will take place no later than the fifth (5th) business day following the satisfaction or waiver in accordance with the Merger Agreement of all of the conditions to the closing of the Merger (as described in the section entitled “Terms of the Merger Agreement—Conditions to the Closing of the Merger” beginning on page 86 of this Proxy Statement), other than conditions that by their terms are to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver of such conditions.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

U.S. Federal Income Tax Consequences of the Merger

The following is a summary of the U.S. federal income tax consequences of the Merger to holders of KEMET common stock whose shares of KEMET common stock are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities, all as in effect on the date of this Proxy Statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of KEMET common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes). For purposes of this discussion, a “holder” means either a U.S. Holder (as defined below) or a Non-U.S. Holder (as defined below) or both, as the context may require.

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial institutions; tax-exempt organizations; S corporations or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes; insurance companies; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; Non-U.S. Holders that hold, directly or constructively (or that held, directly or constructively, at any time during the five (5) year period ending on the date of the Merger), five percent (5%) or more of the outstanding KEMET common stock; or certain expatriates or former long-term residents of the United States;
 
tax consequences to holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reducing transaction;
 
tax consequences to holders that received their shares of KEMET common stock in a compensatory transaction;
 
tax consequences to holders who own an equity interest, actually or constructively, in Yageo or the Surviving Corporation following the Merger;
 
tax consequences to holders whose functional currency is not the U.S. dollar;
 
tax consequences to holders who are required to accelerate the recognition of any item of gross income with respect to KEMET common stock as a result of such income being recognized on an applicable financial statement;
 
tax consequences to holders of Dissenting Shares who have properly exercised and perfected a demand for appraisal pursuant to the DGCL;
 
tax consequences under any U.S. federal law other than income tax laws (including, for example, the U.S. federal estate tax, gift tax, Medicare tax on certain net investment income, and alternative minimum tax laws); or
 
any state, local or foreign tax consequences.

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If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of KEMET common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding shares of KEMET common stock and partners therein should consult their tax advisors regarding the consequences of the Merger to their particular circumstances.

No ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, regarding the U.S. federal income tax consequences of the Merger described herein. This summary is not binding on the IRS or a court, and there can be no assurance that the tax consequences described in this summary will not be challenged by the IRS or that they would be sustained by a court if so challenged.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of KEMET common stock who is, for U.S. federal income tax purposes:

an individual who is a citizen or resident of the United States;
 
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
 
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
 
a trust (i) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in section 7701(a)(30) of the Code or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person as defined in section 7701(a)(30) of the Code.

The receipt of cash by a U.S. Holder in exchange for shares of KEMET common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one (1) year at the time of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder. There are limitations on the deductibility of capital losses.

Non-U.S. Holders

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of shares of KEMET common stock who is neither a U.S. Holder nor a partnership (or entity or arrangement treated as a partnership) for U.S. federal income tax purposes.

Special rules not discussed below may apply to certain Non-U.S. Holders subject to special tax treatment, such as “controlled foreign corporations” or “passive foreign investment companies.” Non-U.S. Holders should consult their tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them in light of their particular circumstances.

Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income

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tax at rates generally applicable to a United States person as defined under the Code, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of thirty percent (30%) (or a lower rate under an applicable tax treaty); or
 
such Non-U.S. Holder is an individual who is present in the United States for one hundred eighty-three (183) days or more in the taxable year of that disposition, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of thirty percent (30%) (or a lower rate under an applicable tax treaty).

Holders of KEMET common stock should consult their tax advisors regarding the tax consequences of the Merger to their particular circumstances, including the applicability and effect of any state, local, foreign or other tax laws.

Regulatory Approvals

General

Under the Merger Agreement, the Merger cannot be consummated until the approval required from CFIUS has been obtained, the applicable waiting periods under the HSR Act have expired or been terminated, the following clearances or approvals under applicable antitrust laws have been obtained in Austria, China, Germany, Mexico and Taiwan, and approval has been obtained from the Taiwan Investment Commission. KEMET and Yageo have agreed to use their reasonable best efforts to comply with all regulatory notification requirements and obtain all regulatory approvals required to consummate the Merger and the other transactions contemplated by the Merger Agreement. For more information, see the sections entitled “Terms of the Merger Agreement—Regulatory Approvals” and “Terms of the Merger Agreement—Efforts to Close the Merger” beginning on page 81 and page 83 of this Proxy Statement, respectively.

Legal Proceedings Regarding the Merger

Following the filing of the preliminary proxy statement issued in connection with the proposed merger between KEMET and Yageo, between December 27, 2019 and January 10, 2020, the Actions were filed against KEMET and the members of the Board in the United States District Court for the District of Delaware and the United States District Court for the Southern District of New York under the following captions: Stein v. KEMET Corp., et al., Case No. 1:19-cv-02361 (D. Del.); Braunstein v. KEMET Corp., et al., Case No. 1:20-cv-00035 (S.D.N.Y.); Rosenblatt v. KEMET Corp., et al., Case No. 1:20-cv-00023 (D. Del.); Conrad v. KEMET Corp., et al., Case No. 1:20-cv-00139 (S.D.N.Y.); Landau v. KEMET Corp., et al., Case No. 1:20-cv-00219 (S.D.N.Y.); and Silverberg v. KEMET Corp., et al., Case No. 1:20-cv-00036 (D. Del.). The complaints filed in the Actions allege that the preliminary proxy statement omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act, rendering it false and misleading. Among other things, some or all of the complaints filed in the Actions allege that the preliminary proxy statement failed to disclose: material information regarding the financial projections for KEMET, including by failing to disclose additional details about the November 2 Updated Forecasts and by providing values for certain non-GAAP measures but failing to provide line items used in their calculation or a reconciliation of these non-GAAP measures to their respective most comparable GAAP measures; various inputs and assumptions underlying Goldman Sachs’ financial analyses; and certain details relating to the background of the proposed merger, including whether KEMET entered into any nondisclosure agreements that contained “don’t ask, don’t waive” provisions. The Actions seek orders enjoining the Merger unless and until additional disclosures are issued; rescinding the Merger, to the extent it closes; directing the defendants to disseminate an amendment to this Proxy Statement that does not contain material misstatements or omissions; declaring that the defendants violated Sections 14(a) and 20(a) of the Exchange Act; awarding damages; awarding costs, including attorneys’ fees, expert fees and expenses; and awarding such other relief as the court deems proper.

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TERMS OF THE MERGER AGREEMENT

The discussion of the terms of the Merger Agreement in this section and elsewhere in this Proxy Statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this Proxy Statement and is incorporated into this Proxy Statement by reference. This summary does not purport to be complete and may not contain all of the information about the Merger that is important to you. You are encouraged to read the entire Merger Agreement carefully and in its entirety as it is the legal document that governs the Merger.

Explanatory Note Regarding the Merger Agreement

The representations, warranties, covenants and agreements described below and included in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement and may be subject to important qualifications, limitations and supplemental information agreed to by KEMET, Yageo and Acquisition Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk among KEMET, Yageo and Acquisition Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Investors and security holders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of KEMET, Yageo and Acquisition Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may have changed and may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of KEMET, Yageo and Acquisition Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosures to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A hereto, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding KEMET or its business. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding KEMET and its business. Please see the section entitled “Where You Can Find More Information” beginning on page 103 of this Proxy Statement.

Effects of the Merger

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Acquisition Sub will be merged with and into KEMET, with the Surviving Corporation continuing under the name “KEMET Corporation” as a wholly owned subsidiary of Yageo. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, immunities, powers, franchises and liabilities of KEMET and Acquisition Sub.

Closing and Effective Time

The closing of the Merger will take place no later than the fifth (5th) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below in the section entitled “Terms of the Merger Agreement—Conditions to the Closing of the Merger” beginning on page 86 of this Proxy Statement) (other than conditions that by their terms are to be satisfied at the closing of the Merger). Concurrently with the closing of the Merger, the parties will file a certificate of Merger with the Secretary of State for the State of Delaware as provided under the DGCL.

Directors and Officers; Certificate of Incorporation; By-laws

The Merger Agreement provides that the parties to the Merger Agreement will take all necessary action to ensure that, effective as of, and immediately following, the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Acquisition Sub, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors have been duly elected and qualified, or until their earlier death, resignation or removal in accordance with the certificate of incorporation and by-laws of the Surviving Corporation.

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At the Effective Time, the certificate of incorporation and by-laws of KEMET as the Surviving Corporation will be amended and restated to be identical to the certificate of incorporation and by-laws set forth in Exhibit B and Exhibit C, respectively, to the Merger Agreement, in each case, until amended in accordance with their terms, or by applicable law.

Merger Consideration

Common Stock

Upon consummation of the Merger, each share of KEMET common stock, par value $0.01 per share, of KEMET common stock issued and outstanding immediately prior to the Effective Time (other than (i) shares held by KEMET or held, directly or indirectly, by Yageo or Acquisition Sub, which will be canceled for no consideration, and (ii) Dissenting Shares) will be canceled and automatically converted into the right to receive $27.20 in cash, without interest and subject to any applicable withholding taxes (the “Merger Consideration”).

Outstanding Equity Awards and Long-Term Incentive Plan Awards

The Merger Agreement provides that KEMET’s equity awards and long-term incentive plan awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment as of the Effective Time:

Options. Each then-outstanding option to purchase shares of KEMET common stock (a “KEMET Option”), whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such KEMET Option and (ii) the amount, if any, by which the Merger Consideration exceeds the exercise price per share of KEMET common stock underlying the KEMET Option. If the exercise price per share of KEMET common stock underlying a KEMET Option is equal to or greater than the Merger Consideration, then the KEMET Option will be canceled without any cash payment or other consideration being made in respect thereof.
 
Restricted Stock Units. Each then-outstanding RSU, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to the product of (i) the total number of shares of KEMET common stock subject to such RSU and (ii) the Merger Consideration.
 
Long-Term Incentive Plan Awards. Each then-outstanding LTIP award, whether or not vested, will be canceled in exchange for the right to receive an amount in cash (subject to any applicable withholding or other taxes, or other amounts required by applicable law to be withheld) equal to: (i) with respect to the time-based vesting portion of such LTIP award, the product of (x) the total number of shares of KEMET common stock subject thereto and (y) the Merger Consideration and (ii) with respect to the performance-based vesting portion of such LTIP award, the total value of the payout that would have been earned (whether in the form of shares of KEMET common stock or cash) assuming (x) the maximum level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2020 and (y) the greater of target and actual level of performance for each LTIP award relating to the two (2)-year performance period ending on March 31, 2021.

KEMET may continue to make annual grants of RSUs or restricted shares of KEMET common stock (or, in each case, cash awards in lieu thereof) to each of KEMET’s non-employee directors prior to the completion of the Merger. Such non-employee director equity awards will be subject to the same treatment that applies to RSUs generally, as described above.

Notwithstanding the above, if the Merger has not been consummated prior to the date on which KEMET would normally make annual grants of equity awards, including RSUs and LTIP awards, to KEMET’s employees and officers (including KEMET’s executive officers) in fiscal year 2021, and KEMET grants such equity awards for fiscal year 2021, any equity awards granted in fiscal year 2021 that remain outstanding immediately prior to the Effective Time will be subject to the same treatment upon the Effective Time as applies to the corresponding type of award outstanding immediately prior to the Effective Time that was granted prior to the date of the Merger Agreement, except that (i) the payment due with respect to each RSU and the time-based vesting portion of each LTIP award will be pro-rated based on the number of days elapsed during the period commencing on the grant date and ending on the date the Merger is consummated and (ii) the payment with respect to the performance-based vesting portion of each LTIP award will be

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calculated based on the actual level of achievement of the applicable performance targets through the date the Merger is consummated and pro-rated based on the number of days elapsed during the period commencing on the first (1st) day of the applicable performance period and ending on the date the Merger is consummated.

Exchange and Payment Procedures

Prior to the closing of the Merger, Yageo will designate the Paying Agent to make payments of the Merger Consideration to stockholders. At or prior to the Effective Time, Yageo will deposit, or cause to be deposited, with the Paying Agent, cash constituting an amount equal to the aggregate Merger Consideration, reduced as if holders of dissenting shares had not been a stockholder on the closing date, to other stockholders.

As promptly as reasonably practicable (but no later than the second (2nd) business day) after the Effective Time, the Paying Agent will send to each holder of KEMET common stock a letter of transmittal and instructions advising stockholders how to surrender stock certificates and book-entry shares in exchange for the per share Merger Consideration. Upon receipt of (i) surrendered certificates (or affidavits of loss in lieu thereof) or book-entry shares representing the shares of KEMET common stock and (ii) a duly completed and validly executed letter of transmittal and such other documents as may be required pursuant to such instructions, the holder of such shares will be entitled to receive the Merger Consideration in exchange therefor upon the later to occur of (x) the Effective Time and (y) the Paying Agent’s receipt of such certificate (or affidavit of loss in lieu thereof) or book-entry shares. The amount of any Merger Consideration paid to the stockholders may be reduced by any applicable withholding taxes. No interest will be paid or accrued on the Merger Consideration payable upon surrender of the certificates or evidence of book-entry shares.

If any cash deposited with the Paying Agent is not claimed within one (1) year following the Effective Time, such cash will be returned to the Surviving Corporation, upon written demand, and any holders of KEMET common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to the Surviving Corporation as general creditor for payment of the Merger Consideration. None of Yageo, Acquisition Sub, KEMET, the Paying Agent or any other person will be liable to any person for any cash held in the exchange fund properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

The letter of transmittal will include instructions if a stockholder has lost a share certificate or if such certificate has been stolen or destroyed. If a stockholder has lost a certificate, or if such certificate has been stolen or destroyed, then before such stockholder will be entitled to receive the Merger Consideration, such stockholder will have to make an affidavit of the loss, theft or destruction, in a form and substance reasonably acceptable to Yageo, and if required by the Surviving Corporation, post a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such certificate.

These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.

Representations and Warranties

The Merger Agreement contains representations and warranties of KEMET, Yageo and Acquisition Sub.

Certain of the representations and warranties in the Merger Agreement made by KEMET are qualified by knowledge and/or “materiality” qualifications or a “Material Adverse Effect” clause. For purposes of the Merger Agreement, “Material Adverse Effect” means, with respect to KEMET, any change, event, occurrence, state of facts, development, effect or circumstance which, individually or in the aggregate, has resulted in or would reasonably be expected to result in a material adverse effect on the business, condition (financial or otherwise) or results of operations of KEMET and its subsidiaries, taken as a whole. Changes, events, occurrences, state of facts, conditions, developments, effects or circumstances which, directly or indirectly, to the extent they relate to or result from the following, are excluded from the determination of Material Adverse Effect:

any condition, change, effect or circumstance generally affecting any of the industries or markets in which KEMET or its subsidiaries operate;
 
any change after the date of the Merger Agreement in any law or GAAP (or changes in interpretations of any law or GAAP);

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general economic, regulatory or political conditions (or changes therein) or conditions (or changes therein) in the financial, credit or securities markets (including changes in interest or currency exchange rates) in any country or region in which KEMET or its subsidiaries conduct business;
 
any acts of God, natural disasters, terrorism, armed hostilities, sabotage, war or any escalation or worsening of acts of war;
 
any change, event, occurrence, state of facts, development, effect or circumstances attributable to the announcement, consummation or existence of the Merger Agreement or the transactions contemplated by the Merger Agreement, including by reason of the identity of Yageo or any public communication by Yageo or its subsidiaries regarding the plans or intentions of Yageo with respect to the conduct of the business of KEMET or any of its subsidiaries and including the impact of any of the foregoing on any relationships with customers, suppliers, vendors, collaboration partners, employees, unions or regulators;
 
any action taken, or refrained from being taken, that is required by (or expressly permitted pursuant to) the terms of the Merger Agreement or with the written consent or at the written direction of Yageo or Acquisition Sub;
   
any changes in the market price or trading volume of KEMET common stock, any failure by KEMET or its subsidiaries to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period, any changes in credit ratings and any changes in any analysts’ recommendations or ratings with respect to KEMET or any of its subsidiaries (provided that, with respect to KEMET, the facts, events, developments, circumstances, effects or occurrences giving rise to or contributing to such changes or failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been or would reasonably be expected to be a Material Adverse Effect); and
 
certain matters disclosed in KEMET’s disclosure letter to the Merger Agreement delivered in connection therewith.

However, in the case of the first four (4) exclusions above, such matters will be taken into account to the extent (and only to the extent) that any change, event, occurrence, state of facts, development, effect or circumstance disproportionately impacts KEMET and its subsidiaries relative to other businesses in the industries in which KEMET and its subsidiaries operate.

In addition, for purposes of the Merger Agreement, “Material Adverse Effect” means: (i) with respect to Yageo, any change, effect or circumstance which, individually or in the aggregate, has prevented or materially delayed or materially impaired, or would reasonably be expected to prevent or materially delay or materially impair, the ability of Yageo to consummate the Merger and the other transactions contemplated by the Merger Agreement; and (ii) with respect to the Merger, any change, effect or circumstance which, individually or in the aggregate, has prevented or materially delayed or materially impaired, or would reasonably be expected to prevent or materially delay or materially impair, the ability of KEMET and its subsidiaries to consummate the Merger and the other transactions contemplated by the Merger Agreement.

In the Merger Agreement, KEMET has made customary representations and warranties to Yageo and Acquisition Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement or in KEMET’s disclosure letter to the Merger Agreement delivered in connection therewith. These representations and warranties relate to, among other things:

due organization, good standing and authority and qualification to conduct business with respect to KEMET and its subsidiaries;
 
capital structure of KEMET, KEMET’s ownership of its subsidiaries, KEMET’s and its subsidiaries’ non-ownership of equity or debt interests other than of subsidiaries of KEMET and KEMET’s equity awards granted;
 
KEMET’s corporate authority to enter into, perform its covenants and obligations under, and consummate the transactions contemplated by, the Merger Agreement and the enforceability of the Merger Agreement;
 
subject to the ability to make an Adverse Recommendation Change (as defined below), the approval of, and recommendation by, the Board in favor of the proposal to adopt the Merger Agreement;
 
the absence of conflicts with laws, KEMET’s organizational documents and KEMET’s contracts;

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required consents and regulatory filings and approvals (including from CFIUS and pursuant to U.S. and foreign antitrust laws) in connection with the Merger Agreement;
 
KEMET’s possession of necessary permits and KEMET’s compliance with laws (including, but not limited to, anti-corruption laws and international trade laws);
 
the accuracy of KEMET’s SEC filings and financial statements;
 
the accuracy of the information supplied by or on behalf of KEMET or any of its subsidiaries for inclusion in this Proxy Statement;
 
KEMET’s disclosure controls and procedures;
 
the conduct of business of KEMET and its subsidiaries in the ordinary course; the absence of any change, event, occurrence, state of facts, condition, development or circumstance that has had or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect; and the absence of certain actions taken that would otherwise have been prohibited if taken between the date of the Merger Agreement and the closing, in each case, since April 1, 2019;
   

the absence of specified undisclosed liabilities of KEMET and its subsidiaries;
 

the absence of suits, actions or other proceedings relating to KEMET and its subsidiaries;
 

KEMET’s employee benefit plans;
 

certain labor matters;
 

intellectual property rights (including privacy, data protection and other cybersecurity matters);
 

the filing of tax returns, the payment of taxes and certain other tax matters related to KEMET and its subsidiaries;
 

the existence and enforceability of, and compliance with, specified categories of KEMET’s material contracts;
 

certain real property matters;
 

environmental matters;
 

the inapplicability of anti-takeover statutes to the Merger;
 

votes of KEMET stockholders required in connection with the Merger Agreement;
 

payment of fees to brokers in connection with the Merger Agreement;
 

Goldman Sachs’ fairness opinion to the Board;
 

certain insurance matters;
 

the absence of certain affiliate party transactions;
 

the absence of disputes with KEMET’s significant customers and suppliers; and
 

the acknowledgment by KEMET of the absence of any other representations and warranties of Yageo or Acquisition Sub, other than as set forth in the Merger Agreement.

In the Merger Agreement, Yageo and Acquisition Sub have made customary representations and warranties to KEMET that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

due organization, good standing and authority and qualification to conduct business with respect to Yageo and Acquisition Sub;
 

authority to enter into, perform their covenants and obligations under, and consummate the transactions contemplated by, the Merger Agreement and enforceability of the Merger Agreement;
 

the absence of conflicts with laws, Yageo’s or Acquisition Sub’s organizational documents and Yageo’s or Acquisition Sub’s contracts;

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required consents, regulatory filings and approvals (including from CFIUS and the Taiwan Investment Commission, and pursuant to U.S. and foreign antitrust laws) in connection with the Merger Agreement;
 

the absence of other agreements relating to the Merger;
 

the accuracy of the information supplied by or on behalf of Yageo or any of its subsidiaries for inclusion in this Proxy Statement;
 

the absence of suits, actions or other proceedings related to Yageo, Acquisition Sub or any of their subsidiaries;
 

matters with respect to Yageo’s financing and sufficiency of funds;
 

Yageo’s ownership of Acquisition Sub and the capital structure of Acquisition Sub;
 

Yageo and Acquisition Sub ownership interests in competitors of KEMET;
 

payment of fees to brokers in connection with the Merger Agreement;
 

solvency of Yageo and the Surviving Corporation following the consummation of the Merger and the transactions contemplated by the Merger Agreement;

   

ownership of KEMET common stock;
 

votes of Yageo stockholders required, if required by applicable law, in connection with the Merger Agreement; and
 

the acknowledgment by Yageo and Acquisition Sub of the absence of any other representations and warranties of KEMET, other than as set forth in the Merger Agreement.

None of the representations and warranties contained in the Merger Agreement survive the consummation of the Merger.

Conduct of Business Pending the Merger

The Merger Agreement provides that, prior to the Effective Time, except as (i) may be required by applicable law; (ii) may be agreed in writing by Yageo (which consent will not be unreasonably withheld, delayed or conditioned); (iii) may be expressly required or permitted pursuant to the Merger Agreement; or (iv) set forth in KEMET’s disclosure letter, (x) KEMET will, and will cause its subsidiaries to, use their respective commercially reasonable efforts to conduct the business of KEMET and its subsidiaries in the ordinary course of business, consistent with past practice and use, and cause its subsidiaries to use, commercially reasonable efforts to preserve in all material respects their respective current business organizations (including keeping available the services of the key employees of KEMET and its subsidiaries) and their respective present relationships with key customers, suppliers and other persons with which it has material business relationships and (y) KEMET will not, and will not permit any of its subsidiaries to, subject in each case to specified exceptions:

amend its or any of its subsidiaries’ organizational documents;
 

split, combine, reclassify, redeem, repurchase or otherwise acquire or amend the terms of any capital stock or other equity interests or rights;
 

issue, sell, pledge, dispose of, encumber or grant any shares of its or any of its subsidiaries’ capital stock or other equity interests, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of the capital stock or other equity interests of KEMET or its subsidiaries;
 

authorize, declare, pay or make any dividends or other distributions, payable in cash, stock, property or otherwise, with respect to KEMET’s or any of its subsidiaries’ capital stock or other equity interests;
 

increase the compensation payable or to become payable or benefits provided or to be provided to (i) any current or former director of KEMET or any of its subsidiaries or (ii) any current or former employee or independent contractor of KEMET or any of its subsidiaries with an annual base salary of $150,000 or more;
 

grant the opportunity to participate in any severance or termination pay plans;
 

establish, adopt, enter into, materially amend or terminate any KEMET benefit plans or similar arrangements;

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hire or terminate any employee or consultant with an annual base salary of $150,000 or more;
 

loan or advance any money or other property to any present or former director, officer, employee or consultant of KEMET or any of its subsidiaries;
 

grant, confer or award any equity awards, convertible securities or any other rights to acquire KEMET’s or any of its subsidiaries’ capital stock, or take any action to accelerate the vesting, funding or payment of, or lapsing of restrictions with respect to, any equity-based compensation or other long-term incentive compensation;
 

acquire any corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof for a purchase price in excess of $1,500,000;
 

sell, lease, license, abandon, encumber, subject to a lien or otherwise dispose of any properties of KEMET or any of its subsidiaries having a value in excess of $1,500,000;
 

repurchase, redeem, defease, cancel, prepay, forgive, issue, sell or otherwise incur, or amend in any material respect the terms of, any indebtedness or any debt securities of KEMET or any of its subsidiaries, unless prepaying indebtedness or incurring indebtedness under existing credit facilities in an amount under $1 million, or replacing, renewing, extending, refinancing or refunding the BofA Loan Agreement (as defined in the Merger Agreement) in an aggregate amount not exceeding $200 million;
 

enter into, modify, amend, cancel or terminate any material contract of KEMET;
 

change accounting methods;
 

change the security of KEMET’s information technology systems;
 

adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or reorganization;
 

settle or compromise litigation involving KEMET;
 

make capital expenditures in excess of KEMET’s capital expenditures budget;
 

materially change tax accounting methods, elections, or returns, surrender any claim for a material tax refund, enter into any closing agreement with respect to any material taxes, settle or compromise any material tax liability, seek any tax ruling from any tax authority, or consent to any extension or waiver of the limitation period applicable to any material taxes;
 

effect or permit a plant closing or mass layoff under the United States Workers Adjustment and Retraining Notification Act;
 

recognize any labor union, work council or similar organization, or enter into any collective bargaining agreements;
 

enter into any affiliate transactions or make certain payments to affiliates;
 

adopt a stockholder rights plan or similar agreement; or
 

enter into agreements to do any of the foregoing.

Restrictions on Solicitations of Other Offers

In the Merger Agreement, KEMET agreed that it will, and will cause each of its directors, officers and subsidiaries to, and will instruct and use its reasonable best efforts to cause its subsidiaries other representatives to, after the date of the Merger Agreement:

immediately cease and terminate any existing solicitation of, or discussions or negotiations with, any third parties relating to a Competing Proposal; and
 

promptly request the prompt return or destruction of all confidential information previously furnished and immediately terminate all dataroom access previously granted to any such person or their representatives.

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Until the Effective Time, except as otherwise expressly provided in the Merger Agreement, KEMET agreed that it will not, and will cause its directors, officers and subsidiaries not to, and will instruct and use its reasonable best efforts to cause its and its subsidiaries’ other representatives not to, directly or indirectly:

solicit, initiate, knowingly encourage or knowingly facilitate, whether publicly or otherwise, any inquiry, discussion, offer or request that constitutes, or would reasonably be expected to lead to, a Competing Proposal;
 

engage, continue or otherwise participate in negotiations or discussions with or furnish or provide access to any of KEMET’s or its subsidiaries books and records, properties or non-public information or data to, any person relating to a Competing Proposal or any inquiry or proposal that would reasonably be expected to lead to a Competing Proposal;
 

approve or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or similar agreement providing for or relating to a Competing Proposal or require KEMET to abandon consummating the Merger;
 

approve, endorse, recommend, or publicly propose to approve, endorse or recommend, any Competing Proposal;
 

take any action to make any provision of any “fair price,” “moratorium,” “control share acquisition” or other form of antitakeover statute, regulation or provision of KEMET’s organizational documents inapplicable to a transaction contemplated by a Competing Proposal; or
 

terminate, amend, modify or waive any provision of any confidentiality, standstill or similar agreement to which KEMET or any of its subsidiaries is a party. However, KEMET may grant a waiver of any standstill or similar obligation of any person with respect to KEMET or any of its subsidiaries solely to the extent to allow such person to submit a confidential Competing Proposal to the Board if the Board determines in good faith, after consultation with outside legal counsel, that the failure to do so would be reasonably expected to be inconsistent with its fiduciary duties.

In addition, until the Effective Time, except as otherwise expressly provided in the Merger Agreement, KEMET agreed to:

promptly (and within forty-eight (48) hours) advise Yageo of any Competing Proposal (or any inquiry, proposal, offer or request that would reasonably be expected to lead to a Competing Proposal), the identity of the person making such Competing Proposal and the material terms and conditions of any such Competing Proposal (including copies of written proposals and other documents); and
 

keep Yageo reasonably informed of any material change, amendment or other modification of any such Competing Proposal.

Notwithstanding any other restrictions in the Merger Agreement, at any time prior to obtaining stockholder approval at the Special Meeting, in the event KEMET receives a Competing Proposal (as defined below) in writing, KEMET, the Board and its representatives may engage in negotiations or discussions with, or furnish any information and other access to, any person making such Competing Proposal if the Board determines in good faith (i) after consultation with KEMET’s outside legal and financial advisors, that such Competing Proposal constitutes or would reasonably be expected to result in a Superior Proposal (as defined below) and (ii) after consultation with outside legal counsel that the Board’s failure to take action would reasonably be expected to be inconsistent with its fiduciary duties; provided that, (x) prior to furnishing or providing access to any non-public information, KEMET must notify Yageo in writing that it has determined to provide such access or information and receive an executed confidentiality agreement containing terms that are not materially less favorable to KEMET than those contained in the confidentiality agreement with Yageo and (y) any non-public information furnished to such person must have been previously provided to Yageo or must be provided to Yageo substantially concurrently to its being provided to such person. Prior to, or substantially concurrently with, taking any actions referred to in this paragraph, KEMET must notify Yageo that it proposes to furnish, and thereafter make available to Yageo, any non-public information and promptly notify Yageo if it has entered, or intends to enter into, discussions.

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For purposes of the Merger Agreement:

a “Competing Proposal” is any bona fide inquiry, proposal or offer made by any person (other than Yageo, Acquisition Sub or any affiliate thereof) or group of persons to purchase or otherwise acquire, directly or indirectly, in one (1) transaction or a series of transactions, (i) beneficial ownership of twenty percent (20%) or more of the voting power or any class of equity securities of KEMET (or any of KEMET’s subsidiaries representing twenty percent (20%) or more of the revenue, net income or assets of KEMET and its subsidiaries, taken as a whole) pursuant to a merger, consolidation or other business combination, recapitalization, liquidation, dissolution, partnership, joint venture, sale of shares of capital stock or of equity interests in KEMET (or any of KEMET’s subsidiaries representing twenty percent (20%) or more of the revenue, net income or assets of KEMET and its subsidiaries, taken as a whole), tender offer, exchange offer or similar transaction or (ii) any one (1) or more assets or businesses of KEMET and its subsidiaries that constitute twenty percent (20%) or more of the revenues, net income or assets of KEMET and its subsidiaries, taken as a whole;
 

a “Superior Proposal” is a written Competing Proposal (with all percentages in the definition of Competing Proposal increased to fifty percent (50%)) made by a third party on terms that the Board determines in good faith, after consultation with outside legal counsel and financial advisors and considering all financial (including financing terms), legal, timing, regulatory and other aspects and risks of such Competing Proposal and after taking into account any revisions, changes, modifications, adjustments and amendments to the terms of the Merger Agreement offered by Yageo in response to such Competing Proposal, (i) is reasonably capable of being consummated in accordance with its terms and (ii) would be, if consummated, more favorable to KEMET stockholders from a financial point of view than the transactions contemplated by the Merger Agreement; and
 

an “Intervening Event” is any positive change, event, effect or circumstance or change in circumstances or facts (including any change in probability or magnitude of circumstances) that (i) is material to KEMET and its subsidiaries, taken as a whole, (ii) was not known and was not reasonably foreseeable to the Board on or prior to the date of the Merger Agreement and (iii) does not relate to any Competing Proposal.

Adverse Recommendation Changes

As described above, and subject to the provisions described below, the Board has made the recommendation that KEMET stockholders vote “FOR” the proposal to adopt the Merger Agreement (the “KEMET Recommendation”). The Merger Agreement provides that the Board will not effect an Adverse Recommendation Change (as defined below) except as described below.

Under the terms of the Merger Agreement, neither the Board nor any committee thereof may:

(i) withhold, withdraw, qualify or modify, or propose publicly to withhold, withdraw, qualify or modify, in a manner adverse to Yageo or Acquisition Sub, the KEMET Recommendation (ii) approve, adopt or recommend, or propose publicly to approve, adopt or recommend, to KEMET stockholders any Competing Proposal, (iii) fail to include the KEMET Recommendation in this Proxy Statement or any filing, amendment or supplement relating to this Proxy Statement, (iv) fail to publicly recommend against any tender offer or exchange offer that constitutes a Competing Proposal within ten (10) business days after it is launched or (v) fail to publicly reaffirm the KEMET Recommendation within ten (10) business days after the written request of Yageo following a Competing Proposal that has been publicly announced (any of the foregoing actions in this bullet being, an “Adverse Recommendation Change”); or
 

approve or recommend, or allow KEMET or any of its subsidiaries to enter into, any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or similar agreement with respect to any Competing Proposal (other than a confidentiality agreement) or require KEMET to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement.

In the event KEMET receives an unsolicited written Competing Proposal, the Board is entitled to make an Adverse Recommendation Change or enter into an agreement with respect to such Competing Proposal (concurrently with the termination of the Merger Agreement and subject to the payment of a termination fee by KEMET) prior to obtaining the KEMET Stockholder Approval if the Board determines in good faith (after consultation with outside legal counsel

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and financial advisors) that such Competing Proposal constitutes a Superior Proposal and (after consultation with outside legal counsel) the failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties. No Adverse Recommendation Change and no termination may be effected, in each case, unless:

Yageo has received four (4) business days’ prior written notice from KEMET that the Board intends to take such action and specifying the reasons therefor, including, the identity of the person making such Superior Proposal and the material terms and conditions of any such Superior Proposal, including a complete copy of such Superior Proposal;
 

if requested by Yageo in writing, during the four (4) business day period following Yageo’s receipt of such notice, KEMET negotiates with Yageo in good faith so that such Superior Proposal no longer constitutes a Superior Proposal and/or so that the failure to make an Adverse Recommendation Change would not be reasonably likely to be inconsistent with the Board’s fiduciary duties; and
 

following the end of the four (4) business day period, the Board has determined (after consultation with outside legal counsel and financial advisors) in good faith, and after considering any revisions, changes, modifications, adjustments and amendments proposed by Yageo and Acquisition Sub, that the Superior Proposal giving rise to the notice described above continues to constitute a Superior Proposal and/or that the failure to make an Adverse Recommendation Change would still be reasonably likely to be inconsistent with the directors’ fiduciary duties.

Any amendment to the financial terms or any other material amendment of such Superior Proposal requires a new notice thereof and KEMET will be required to comply again with the requirements described above in the previous paragraph (except that the four (4) business day period above will be a two (2) business day period).

In addition, at any time prior to obtaining the KEMET Stockholder Approval, in response to any positive change, event, effect or circumstance or change in circumstances or facts (including any change in probability or magnitude of circumstances) that (i) is material to KEMET and its subsidiaries, taken as a whole, (ii) was not known and was not reasonably foreseeable to the Board on or prior to the date of the Merger Agreement and (iii) does not relate to any Competing Proposal (an “Intervening Event”), the Board may make an Adverse Recommendation Change if the Board determines in good faith (after consultation with outside legal counsel and financial advisors) that failure to take such action would be reasonably expected to be inconsistent with its fiduciary duties; provided that no such adverse recommendation can be made unless (a) the Board has delivered notice to Yageo identifying and describing in reasonable detail such Intervening Event, (b) if requested in writing by Yageo—during the four (4) business day period after delivery of the adverse recommendation notice—KEMET and its representatives will negotiate in good faith with Yageo (and its representatives) regarding any changes to the Merger Agreement that would permit the Board not to take such action and (c) no earlier than the end of such four (4) business day period, the Board determines (after consultation with outside legal counsel and financial advisors) in good faith, after considering the changes to the Merger Agreement proposed by Yageo, that such Competing Proposal continues to constitute a Superior Proposal and that failure to make an Adverse Recommendation Change would reasonably be expected to be inconsistent with its fiduciary duties.

The Merger Agreement does not restrict KEMET from taking or disclosing a position contemplated by Rule 14d-9 or Rule 14e-2(a)(2) or (3) under the Exchange Act, or otherwise making disclosure to comply with any applicable law.

Financing Efforts

Each of Yageo and Acquisition Sub must use, and must cause its subsidiaries to use, reasonable best efforts to obtain the proceeds of the Bridge Facility and Shareholder Loan (collectively, the “Debt Financing”), and if applicable, draw on the Standby Letter of Credit, on the terms and conditions described in the Commitment Letter, Shareholder Loan Agreement and Standby Letter of Credit (together with all related fee letters or other agreements, collectively, the “Debt Commitment Documents”), including using reasonable best efforts to:

enter into definitive agreements, to the extent applicable, with respect to the Debt Financing and the Standby Letter of Credit on the terms and conditions contained in the Debt Commitment Documents on a timely basis, but in no event later than the closing of the Merger, or on such other terms and conditions not less favorable, in any material respect, to Yageo and Acquisition Sub or KEMET than those contained in the Debt Commitment Documents (provided that such other terms, without the written consent of KEMET, will not, among other things, prevent, impede, delay or adversely impact, or be reasonably expected to prevent, impede, delay or adversely impact the closing of the Merger);

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satisfy on a timely basis (or obtain a waiver of) all conditions applicable to Yageo, Acquisition Sub or their respective representatives in the Commitment Letter and Shareholder Loan Agreement (and any definitive agreements entered into in connection with the Debt Commitment Documents);
 

accept to the fullest extent all “market-flex” contemplated by the Commitment Letter (including the fee letter relating thereto);
 

enforce its rights under the Commitment Letter and, if applicable, the Shareholder Loan Agreement, in the event of a breach by the debt financing sources party thereto that impedes or delays (or could reasonably be expected to impede or delay) the closing of the Merger and, if necessary, seeking specific performance of the debt financing sources of their obligations thereunder; and
 

draw down upon and consummate the Debt Financing, and if applicable, draw on the Standby Letter of Credit, in each case, at or prior to the closing of the Merger.

Neither Yageo nor its affiliates may agree to any amendments, supplements or modifications to, obtain any replacement of, or grant any waivers of, any condition or other provision under the Debt Financing or the Standby Letter of Credit (other than pursuant to any “market-flex” provisions set forth in the Debt Commitment Documents) without the prior written consent of KEMET, if such amendment, modification or waiver would (i) reduce the aggregate amount of the net proceeds of the Debt Financing or Standby Letter of Credit (including by changing the amount of fees or other amounts to be paid (including original issue discount) with respect to the Debt Financing), (ii) impose new or additional conditions or otherwise expand, amend or modify any of the conditions under the Commitment Letter, Shareholder Loan Agreement or Standby Letter of Credit or (iii), or would reasonably be expected to, (x) prevent, delay or impair the ability of Yageo to consummate the Merger or (y) adversely impact the ability of Yageo or Acquisition Sub to enforce its rights against the debt financing sources under the Debt Commitment Documents. Yageo may not permit, release or consent to the withdrawal, termination, repudiation or rescission of the Commitment Letter, Shareholder Loan Agreement and/or Standby Letter of Credit or any definitive agreement with respect to the Debt Financing or the Standby Letter of Credit and may not permit, release or consent to the termination or assignment of any of the obligations of the debt financing sources under the Debt Financing or the Standby Letter of Credit, in each case, without the prior written consent of KEMET.

Neither Yageo nor Acquisition Sub, nor any of their affiliates (including each direct or indirect investor in Yageo or Acquisition Sub) may (i) award any person, except for Citigroup Global Markets Taiwan Securities Co. Limited, any financial advisory role on an exclusive basis in connection with the Merger or the other transactions contemplated by the Merger Agreement or (ii) prohibit or seek to prohibit any potential provider of debt or equity financing from providing or seeking to provide financing to any person in connection with a transaction relating to KEMET or its subsidiaries or in connection with the Merger or the other transactions contemplated by the Merger Agreement.

If any portion of the Debt Financing or the Standby Letter of Credit becomes or could reasonably be expected to become unavailable in the manner or from the sources contemplated in the Debt Commitment Documents (including pursuant to any “market-flex” provisions set forth therein) (i) Yageo must promptly notify KEMET and (ii) Yageo and Acquisition Sub must, and must cause their affiliates to, use their reasonable best efforts to obtain, and negotiate and enter into definitive agreements with respect to, alternative financing in an amount sufficient to consummate the transactions contemplated by the Merger Agreement upon terms and conditions not less favorable, in any material respect, to Yageo and Acquisition Sub or the KEMET than those in the Commitment Letter and Shareholder Loan Agreement, as promptly as practicable.

Obtaining the Debt Financing (or alternative financing) or the Standby Letter of Credit is not a condition to the closing of the Merger. Yageo has agreed to keep KEMET reasonably and promptly informed of the status of its efforts to arrange the Debt Financing (or alternative financing).

KEMET has agreed, on behalf of itself and its subsidiaries, to provide reasonable cooperation, at Yageo’s sole expense, that is necessary and customary in connection with Yageo’s efforts to, (a) obtain the Debt Financing under the Commitment Letter, including (i) providing Yageo and the lenders financial information, (ii) participating in a reasonable number of meetings with lenders and rating agencies, (iii) assisting with the preparation of customary materials for rating agency presentations, customary bank memoranda and similar documents reasonably and customarily required in connection with the Debt Financing under the Commitment Letter, (iv) using reasonable efforts to obtain payoff letters with respect to existing third-party indebtedness for borrowed money of KEMET that

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will be paid off and discharged at the closing of the Merger and (v) providing documentation and other information requested in writing by the debt financing sources with respect to compliance under applicable “know your customer” or anti-money laundering rules and regulations and (b) if reasonably requested by Yageo, obtain any consents or waiver required or reasonably desirable under the BofA Loan Agreement (as defined in the Merger Agreement) or the Portuguese Loan Agreements (as defined in the Merger Agreement) to permit the consummation of the transactions contemplated by the Merger Agreement. Subject its prior written consent, KEMET also agreed to the reasonable use of its logos in connection with the Debt Financing under the Commitment Letter. KEMET is not, however, required to, among other things, (i) make any binding commitment which is not conditioned on the closing of the Merger or (ii) enter into or approve any Debt Financing, Standby Letter of Credit or related agreement. Additionally, (i) KEMET is not required to pay any commitment or similar fee, enter into any definitive agreement, or incur any other liability in connection with the Debt Financing or Standby Letter of Credit prior to the Effective Time of the Merger, (ii) no officer of KEMET or its subsidiaries will be required to take any action to the extent such action could be reasonably expected to result in liability to such officer and (iii) the Board will not be required to approve any financing or related agreement prior to the Effective Time of the Merger.

Yageo and Acquisition Sub agreed that, prior to the Effective Time of the Merger, KEMET and its affiliates are not required to incur any liability under any financing that Yageo and Acquisition Sub may raise in connection with the transactions contemplated by the Merger Agreement or any cooperation provided and that Yageo and Acquisition Sub will indemnify KEMET and its affiliates from all losses, damages, claims, costs or expenses incurred in connection with the financing, except with to the extent any such losses, damages, claims, costs or expenses are found in a final judgment by a court of competent jurisdiction to have been primarily caused by the gross negligence or willful misconduct of KEMET and its affiliates.

Employee Benefits

Yageo has agreed to honor, as of the Effective Time, the terms of KEMET’s benefit plans in effect as of the date of the Merger Agreement. For the period commencing at the Effective Time and ending on the first (1st) anniversary of the date on which such Effective Time occurs, Yageo will, or will cause the Surviving Corporation or an affiliate thereof to, provide to each employee of KEMET and its subsidiaries immediately prior to the Effective Time who remains employed with Yageo, the Surviving Corporation or any of their affiliates following the Merger (each, a “continuing employee”), compensation and employee benefits that are, in the aggregate, substantially comparable to the compensation and benefits, in the aggregate, being provided as of the date of the Merger Agreement under KEMET’s benefit plans (including any equity-based compensation, but excluding, retention arrangements or any other compensation or benefits payable in connection with, or as a result of, the Merger and any employee benefits that are frozen, discontinued or, as of the Effective Time, being frozen or discontinued). However, Yageo is not required to provide such compensation and benefits in the form of equity or equity-based awards or defined benefit pension plans.

Yageo will use commercially reasonable efforts to give the continuing employees credit for their service with KEMET, to the extent recognized by KEMET’s benefit plans, for purposes of eligibility, vesting and determination of the level of benefits (other than for benefit accrual purposes under a defined benefit pension plan) under any employee benefit plan established following the closing date of the Merger or covering the continuing employees following the Effective Time (“post-closing plans”) to the extent that such recognition of service will not result in the duplication of any benefits.

Yageo will use commercially reasonable efforts to ensure that, for the calendar year in which the Merger occurs, continuing employees will not be required to satisfy any deductible, co-payment, out-of-pocket maximum or similar requirements under post-closing plans that provide medical, dental and other welfare benefits to such employees to the extent amounts were previously credited under comparable KEMET benefit plans. Additionally, during such time period, Yageo will use commercially reasonable efforts to ensure any waiting periods, pre-existing condition exclusions and requirements to show evidence of good health pursuant to such post-closing plans are waived for continuing employees.

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Regulatory Approvals

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder by the FTC, the Merger cannot be consummated until KEMET and Yageo each file a notification and report form with the FTC and the Antitrust Division of the DOJ under the HSR Act and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be consummated until the expiration of a thirty (30) calendar day waiting period following the parties’ filing of their respective HSR Act notification forms, unless extended by a request for additional information or the waiting period is terminated earlier. KEMET and Yageo and its affiliates completed the filing of their HSR notifications on December 31, 2019.

At any time before or after consummation of the Merger, notwithstanding the termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Pursuant to the Merger Agreement, Yageo and Acquisition Sub are not required to take or agree to any action that would result in, either individually or in the aggregate, the one (1) year loss of net worldwide sales revenue (as measured by 2019 sales revenue) in excess of $95 million dollars to Yageo, KEMET and their respective subsidiaries, taken as a whole after giving effect to the Merger. At any time before or after the completion of the Merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Foreign Competition Laws

Consummation of the Merger is conditioned on approval under, or filing of notices pursuant to, the competition laws of Austria, China, Germany, Mexico and Taiwan.

Under the Austrian Cartel Act, the Merger cannot be consummated until the Merger has been filed for approval with the Austrian Federal Competition Authority, and approval has been obtained from the Austrian Federal Competition Authority and the Austrian Federal Cartel Prosecutor, within the regulatory time frames for review. KEMET and Yageo and its affiliates submitted the filing to the Austrian Federal Competition Authority on January 2, 2020.

Under the Anti-Monopoly Law of China, the Merger cannot be consummated until notifications have been filed with the State Administration for Market Regulation, People’s Republic of China and clearances, approvals or authorizations have been obtained or the applicable waiting periods have expired. KEMET and Yageo and its affiliates submitted the filing to the State Administration for Market Regulation, People’s Republic of China on December 30, 2019.

Under the German Act Against Restraints in Competition and the Federal Cartel Office’s Guidelines on the Substantive Assessment of Mergers, the Merger cannot be consummated until the Merger has been filed for approval with, and approval has been obtained from, the German Federal Cartel Office within the regulatory time frames for review. KEMET and Yageo and its affiliates submitted the filing to the German Federal Cartel Office on December 30, 2019.

Under the Mexican Federal Law on Economic Competition, the Merger cannot be consummated until the Merger has been filed for approval with, and approval has been obtained from, the Mexican Federal Economic Competition Commission within the regulatory time frames for review. KEMET and Yageo and its affiliates submitted the filing to the Mexican Federal Economic Competition Commission on December 20, 2019.

Under the Taiwan Fair Trade Act, the Merger cannot be consummated until the Merger has been filed for approval with, and approval has been obtained from, the Taiwanese Fair Trade Commission within the regulatory time frames for review. KEMET and Yageo and its affiliates submitted the filing to the Taiwanese Fair Trade Commission on December 31, 2019.

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude

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obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by KEMET stockholders and the consummation of the Merger.

Although it is expected that all required regulatory clearances and approvals will be obtained, there are no assurances that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the consummation of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

CFIUS Approval

The Merger Agreement provides for the parties to file a joint notice with CFIUS under the Defense Production Act of 1950, as amended (the “DPA”). The DPA provides for national security reviews and, where appropriate, investigations by CFIUS of transactions in which a foreign person or entity acquires control of a U.S. business (a “covered transaction”). The parties made a draft filing of such notice on December 3, 2019 and a final filing of that notice on January 3, 2020 and are awaiting confirmation from CFIUS that it has accepted the final filing of such notice. CFIUS review of a covered transaction is subject to an initial forty-five (45) day review period that may be extended by CFIUS for an additional forty-five (45) day investigation period. Both the initial review period and the investigation period may be suspended if the parties to the Merger Agreement fail to respond promptly to additional questions or requests from CFIUS. As a result of its review or investigation, CFIUS may determine that the Merger is not a covered transaction; may find that the covered transaction presents no unresolved national security concerns, may propose mitigation terms to resolve any national security concerns presented by the covered transaction, may send a report to the President of the United States recommending that the Merger be suspended or prohibited, or may send a report notifying the President of the United States that CFIUS cannot agree on a recommendation related to the covered transaction. Should CFIUS send a report to the President of the United States, the President of the United States then has fifteen (15) days to decide whether to block the Merger or to take other action. Under the terms of the Merger Agreement, consummation of the Merger is subject to the condition that, either: (i) CFIUS has determined that none of the transactions contemplated by the Merger Agreement is a “covered transaction” under the DPA; (ii) CFIUS has concluded its review and determined that there are no unresolved national security concerns with respect to the transactions contemplated by the Merger

Agreement; or (iii) following the investigation period, CFIUS reports the transactions contemplated by the Merger Agreement to the President of the United States and the President of the United States has either made a decision not to suspend or prohibit the transactions contemplated by the Merger Agreement or has taken no action within fifteen (15) days after the earlier of the date that CFIUS completed its investigation or the date the President of the United States received such report from CFIUS (the satisfaction of one (1) of the foregoing options, “CFIUS approval”).

Taiwan Investment Commission Approval

Under Taiwan laws and regulations, including the Statute for Industrial Innovation, the Regulations Governing Foreign Investment of Companies, the Act Governing Regulations between the People of the Taiwan Area and the Mainland area, the Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China and the Principle of Examination on Investment and Technical Cooperation in Mainland China, Yageo is required to obtain approvals both for foreign investment and for investment in China from the Taiwan Investment Commission before it can consummate the Merger. The Taiwan Investment Commission will review the applications for concerns regarding economic development, national security and other issues. The Taiwan Investment Commission’s general guidance is that an investment in the amount contemplated by the Merger typically requires at least thirty (30) to forty (40) days to review, but this timing guidance is not mandatory.

The Merger Agreement provides that Yageo must obtain both the Taiwan Investment Commission approvals as a condition to the Merger. Yageo has previously obtained a separate approval from Taiwan Investment Commission that provides Yageo with an exemption from limitations on the amount of its investment in China. Nonetheless, there can be no assurance that either of the Taiwan Investment Commission approvals will be obtained or will be obtained in a timely fashion.

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One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by KEMET stockholders and the consummation of the Merger.

Although KEMET expects that all required regulatory clearances and approvals will be obtained, there can be no assurances that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

Efforts to Close the Merger

The parties to the Merger Agreement agreed to use their reasonable best efforts to consummate the transactions contemplated by the Merger Agreement and to cause the conditions to the Merger to be satisfied, including effecting (within the time limits set forth in the Merger Agreement) the regulatory filings and obtaining clearances in the U.S. (including pursuant to the HSR Act and the DPA), Austria, China, Germany, Mexico and Taiwan, as further described in the section entitled “Terms of the Merger Agreement—Regulatory Approvals” beginning on page 81 of this Proxy Statement. The parties to the Merger Agreement will also use reasonable best efforts to (i) obtain all necessary actions or non-actions, consents and approvals from government authorities, including making all necessary notices, registrations and filings, (ii) take all reasonable steps as may be necessary to obtain approval from, or avoid an action or proceeding by, any government authority, (iii) obtain all other necessary consents, approvals or waivers from or the making of notices to third parties and (iv) respond as promptly as reasonably practicable to any inquiries from, and supply as promptly as reasonably practicable any additional information or documentation that may be requested by, a governmental authority in connection with the Merger.

In connection with obtaining the required antitrust approvals, each party to the Merger Agreement will

make its respective filings under the HSR Act, and any other applications and filings required under any competition laws in Austria, China, Germany, Mexico and Taiwan, within thirty-five (35) business days of the date of the Merger Agreement;
  
use reasonable best efforts (and will cause their subsidiaries to use reasonable best efforts to) avoid or eliminate each and every impediment and obtain all consents under any antitrust laws that may be required by any foreign or U.S. federal, state or local governmental authority, including committing to or effecting, by consent decree, hold separate orders, trust or otherwise, the sale or other disposition of such assets or businesses of Yageo, KEMET or their respective subsidiaries as are required to be divested in order to avoid the entry of, to effect the dissolution of, or vacate or lift any order that would otherwise prevent or materially delay the Merger; provided that Yageo and Acquisition Sub are not required to take or agree to any action that would result in, either individually or in the aggregate, the one (1) year loss of net worldwide sales revenue (as measured by 2019 sales revenue) in excess of $95 million dollars to Yageo, KEMET and their respective subsidiaries, taken as a whole after giving effect to the Merger;
  
furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with the preparation of any required governmental filings or submissions or substantive communications and will cooperate in responding to any inquiry from a governmental authority, including (i) promptly informing the other party of such inquiry, (ii) consulting in advance before making any presentations or submissions to a governmental authority, (iii) giving the other party the opportunity to attend and participate in any meetings, discussions or substantive telephone calls with any governmental authority, to the extent not prohibited by such governmental authority and (iv) supplying each other with copies of all material correspondence, filings or communications between any party and any governmental authority with respect to the Merger Agreement;

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consult with the other party in advance of any meeting, discussion or teleconference with any governmental entity or, in connection with any proceeding by a private party, with any other person, and, to the extent not prohibited by the governmental entity or other person, give the other party the opportunity to attend and participate in such meetings, discussions and teleconferences; and
  
discuss in advance the strategy and timing for obtaining any clearances required or advisable under any applicable Law in connection with the Merger Agreement. However, Yageo will take the lead in all meetings and communications with any governmental authority in connection with obtaining such clearances required under any antitrust law.

Each party to the Merger Agreement will, and will cause its affiliates to, use its reasonable best efforts to obtain CFIUS approval for the Merger. Yageo has agreed to take or cause to take all customary action necessary to obtain such CFIUS approval so as to enable the consummation of the Merger, including entering into a mitigation agreement, letter of assurance, national security agreement, proxy agreement trust agreement or other similar arrangement or otherwise divesting or agreeing to divest assets of Yageo; provided that KEMET and Yageo are not required to take any such actions unless conditioned upon closing or following closing of the Merger.

In connection with obtaining the CFIUS approval, each party to the Merger Agreement will:

promptly, and not later than fifteen (15) business days after the date of the Merger Agreement, make any draft filing required in connection with the CFIUS approval in accordance with the DPA. The parties made this draft filing on December 3, 2019;
  
promptly make any final filing in connection with the CFIUS approval and in accordance with the DPA after receipt of confirmation that CFIUS has no further comment to the draft filing (the parties made this filing on January 3, 2020 and are awaiting confirmation from CFIUS that it has accepted such filing);
  
provide any information requested by CFIUS or any other agency or branch of the U.S. government in connection with the CFIUS review or investigation of the transactions contemplated by the Merger Agreement within the time frames set forth in the DPA; and
  
if CFIUS suggests or requests that, or if the parties determine it to be appropriate that, the parties withdraw and resubmit the filing submitted to CFIUS, cooperate in withdrawing and resubmitting the CFIUS filing.

Each party to the Merger Agreement will, and will cause its affiliates to, use its reasonable best efforts to avoid or eliminate each and every impediment to obtain the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission.

If required by applicable law, each party to the Merger Agreement will, and will cause its affiliates to, use reasonable best efforts to provide prior notifications, and obtain any approvals or clearance from any applicable governmental bodies, including, in connection with Japanese foreign exchange law.

Access to Information

Subject to certain exceptions and limitations, KEMET will, and will cause its subsidiaries to, afford Yageo’s representatives reasonable access, in a manner not disruptive in any material respect to the operations of the business of KEMET and its subsidiaries, during normal business hours and upon reasonable written notice throughout the period commencing on the date of the Merger Agreement until the earlier of the Effective Time and the termination of the Merger Agreement, to the properties, books and records of KEMET and its subsidiaries. During such period, KEMET will, and will cause each of its subsidiaries to, promptly furnish to Yageo’s representatives all information concerning the business, properties and personnel of KEMET and its subsidiaries as may be reasonably requested in writing, in each case, for any reasonable business purpose related to the consummation of the Merger. However, KEMET or its subsidiaries will not be required to disclose any information to Yageo or its representatives if such disclosure would, in KEMET’s reasonable judgment, (i) cause significant competitive harm to KEMET or its subsidiaries if the transactions contemplated by the Merger Agreement are not consummated, (ii) violate applicable law or confidentiality provisions of agreements entered into prior to the date of the Merger Agreement to which KEMET or any of its subsidiaries is party or (iii) jeopardize any attorney-client or other legal privilege. Each of Yageo and Acquisition Sub also agrees that it will not, and will instruct and use its reasonable best efforts to cause its representatives not to, use any information disclosed for any competitive or other purpose unrelated to the transactions contemplated by the Merger Agreement.

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Indemnification and Insurance

In the Merger Agreement, Yageo and Acquisition Sub agreed that all rights to exculpation and indemnification for acts or omissions occurring at or prior to the Effective Time existing as of the date of the Merger Agreement in favor of the current or former directors or officers of KEMET or KEMET’s subsidiaries (the “KEMET Indemnified Parties”), as provided in the respective organizational documents or in any agreement for indemnification, will survive the Merger and will continue in full force and effect.

The Merger Agreement further requires Yageo to also cause the Surviving Corporation to indemnify and hold harmless and advance expenses to the KEMET Indemnified Parties with respect to all acts or omissions by them in their capacities as such at any times prior to the Effective Time and with respect to the Merger Agreement or the transactions contemplated by the Merger Agreement. Further, the Merger Agreement requires that Yageo will not, and will cause the Surviving Corporation not to, settle, compromise or consent to the entry of any judgment, or otherwise seek termination of an action, unless such settlement, compromise, consent or termination includes an unconditional release of the KEMET Indemnified Parties covered by such action from all liability arising out of such action.

Unless KEMET has purchased a “tail” policy prior to the Effective Time (which it may purchase or will purchase upon Yageo’s request; provided that the premium for such insurance does not exceed three hundred percent (300%) of the aggregate annual premiums currently paid), the Merger Agreement requires Yageo to maintain in full force and effect the coverage provided by the existing KEMET directors’ and officers’ liability insurance and fiduciary insurance as of the date of the Merger Agreement and maintained by KEMET for six (6) years following the Effective Time, or provide substitute insurance on terms no less advantageous to the indemnified parties. Yageo will not be required to pay premiums which on an annual basis exceed three hundred percent (300%) of the aggregate annual premiums currently paid by KEMET; however, Yageo must obtain the greatest coverage available at such cost.

Other Covenants

Stockholders’ Meetings

KEMET has agreed to duly call, convene and hold a meeting of stockholders as promptly as practicable after the date of the mailing of this Proxy Statement to KEMET stockholders (and no later than forty-five (45) days after the SEC confirms that it has no comments on this Proxy Statement) for the purpose of obtaining the KEMET Stockholder Approval.

At this time, no determination with respect to the Yageo Stockholders’ Meeting (as described below) has been made. Yageo has agreed to, as promptly as practicable following the date it is determined that a meeting of Yageo’s stockholders (the “Yageo Stockholders’ Meeting”) is required by applicable law: (i) take all action required to establish a record date for, and give notice of, an extraordinary meeting of its stockholders, for the purpose of voting upon the approval of the Merger (the “Yageo Stockholder Approval”); and (ii) take all action required to duly call, convene and hold the Yageo Stockholders’ Meeting. Yageo will provide KEMET and its advisors with a reasonable opportunity to review and propose comments to the meeting materials for the Yageo Stockholders’ Meeting, and Yageo will consider such comments reasonably and timely proposed for inclusion in such meeting materials.

In connection with the Yageo Stockholder Approval, if required by applicable law, as a condition and inducement to KEMET’s willingness to enter into the Merger Agreement, certain stockholders of Yageo (holding approximately ten percent (10%) of Yageo’s outstanding common stock) have executed, concurrently with the Merger Agreement, voting agreements, pursuant to which such stockholders have agreed to, among other things, vote all of their Yageo securities in favor of the approval and adoption of the Merger Agreement and the Merger at the Yageo Stockholders’ Meeting, if such meeting is required to be held by applicable law.

Stockholder Litigation

KEMET has agreed to provide Yageo with a reasonable opportunity to participate in the defense and settlement of any stockholder litigation or claim against KEMET or its directors or officers relating to the Merger Agreement and the transactions contemplated by the Merger Agreement, and KEMET will not settle or seek to settle any such stockholder litigation without the prior written consent of Yageo (which consent will not be unreasonably withheld, conditioned or delayed). In addition, as described in the section entitled “Terms of the Merger Agreement—Indemnification and Insurance” beginning on page 85 of this Proxy Statement, Yageo will not settle, or cause the Surviving Corporation to settle, any action unless such settlement includes an unconditional release of all indemnified parties covered by the action from all liability arising out of such action.

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Conditions to the Closing of the Merger

The respective obligations of each party to consummate the Merger are subject to the satisfaction or (to the extent permitted by applicable law) waiver by KEMET and Yageo, by the Effective Time, of the following conditions:

the KEMET Stockholder Approval having been obtained;
  
the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited by any law or order of any governmental authority;
  
(i) the expiration or early termination of any waiting periods (or any extensions thereof) applicable to the consummation of the Merger under the HSR Act and (ii) the termination or expiration of all waiting periods (and any extensions thereof), and all related approvals or clearances of the Merger by the relevant antitrust authorities, pursuant to any antitrust laws in Austria, China, Germany, Mexico and Taiwan that are required to be terminated or expired prior to the consummation of the Merger;
  
the CFIUS approval having been obtained;
  
approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission having been obtained; and
  
if required by applicable law, the Yageo Stockholder Approval having been obtained.

The obligations of Yageo and Acquisition Sub to consummate the Merger are also subject to the satisfaction or (to the extent permitted by applicable law) waiver by Yageo of the following conditions:

the representations and warranties of KEMET:
  
regarding KEMET’s organization and qualification, subsidiaries, certain aspects of capitalization, corporate authority and resolutions, the absence of non-ordinary course conduct since April 1, 2019, vote required by KEMET stockholders in connection with the Merger Agreement and the absence of any undisclosed brokers fees being true and correct in all material respects as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date (except to the extent expressly made as of a specific earlier date, in which case such representations and warranties will be true and correct as of such specific date);
   
regarding KEMET’s capital structure being true and correct in all respects as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date (except for any inaccuracies that are de minimis in the aggregate);
   
regarding the absence of Material Adverse Effect, with respect to KEMET, from April 1, 2019 to the date of the Merger Agreement, being true and correct in all respects as of the closing date of the Merger, as if made on and as of the closing date (giving effect to the reference to Material Adverse Effect in such representation); and
   
other than the representations and warranties described in the three (3) clauses above, being true and correct (without giving effect to any materiality or Material Adverse Effect qualifications set forth therein) as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date, except for such failures to be so true and correct as would not have a Material Adverse Effect (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be so true and correct as of such specific date only);
  
KEMET having complied, in all material respects, with all covenants required by it in the Merger Agreement on or prior to the closing date;
  
Yageo’s receipt of a certificate of KEMET signed by an officer confirming the satisfaction of the foregoing conditions; and
  
since the date of the Merger Agreement, no change, event, occurrence, state of facts, condition, development or circumstances has had, individually or in the aggregate, with respect to KEMET, a Material Adverse Effect.

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The obligations of KEMET to effect the Merger are also subject to the satisfaction or waiver by KEMET of the following conditions:

the representations and warranties of Yageo and Acquisition Sub:
  
regarding Yageo’s organization and qualification, corporate authority and resolutions and Yageo stockholder vote required (if applicable) being true and correct in all material respects as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date);
   
other than the representations and warranties described in the clause above, being true and correct (without giving effect to any materiality or Material Adverse Effect qualifications set forth therein) as of the date of the Merger Agreement and the closing date of the Merger, as if made on and as of the closing date, except where the failure of such representations and warranties to be so true and correct would not have, with respect to Yageo or Acquisition Sub, a Material Adverse Effect (except to the extent such representations and warranties are expressly made as of a specific date, in which case such representations and warranties will be true and correct as of such specific date);
   
Yageo and Acquisition Sub each having complied, in all material respects, with all covenants required by it in the Merger Agreement on or prior to the closing date; and
  
KEMET’s receipt of a certificate of Yageo signed by an officer of Yageo confirming the satisfaction of the foregoing conditions.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the KEMET Stockholder Approval:

by mutual written consent of Yageo and KEMET;
  
by either Yageo or KEMET if:
  
the Merger has not been consummated by the Termination Date. However, if the condition relating to antitrust approvals has not been satisfied or waived but all other conditions to the Merger have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the Merger) as of November 11, 2020, the Termination Date will be automatically extended for ninety (90) days, in which case the Termination Date will be deemed for all purposes to be February 9, 2021. Additionally, the right to terminate the Merger Agreement as a result of the occurrence of the Termination Date will not be available to any party if the failure of such party (and, in the case of Yageo, the failure of Acquisition Sub) to materially perform any of its obligations under the Merger Agreement results in the failure of the Merger to be consummated by the Termination Date;
   
prior to the Effective Time, any governmental authority has, by law or order, permanently restrained, enjoined, rendered illegal or otherwise prohibited the transactions contemplated by the Merger Agreement and such law or order has become final or nonappealable; provided that the party seeking to terminate the Merger Agreement pursuant to this clause has used its reasonable best efforts to remove the law, order or action. However, the right to terminate the Merger Agreement pursuant to the previous sentence will not be available to a party if (i) the issuance of such law or order was primarily due to the failure of such party (including in the case of Yageo, the failure of Acquisition Sub) to perform any of its obligations under the Merger Agreement and (ii) exercised in connection with CFIUS approval, CFIUS turndown or the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission;
   
KEMET has failed to obtain the KEMET Stockholder Approval at the KEMET Stockholders’ Meeting, or any adjournment or postponement thereof, at which a vote of the Merger was taken;
   
Yageo has failed to obtain the Yageo Stockholder Approval at the Yageo Stockholders’ Meeting, or any adjournment or postponement thereof, at which a vote of the Merger was taken, if such approval is required by applicable law;

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a CFIUS turndown has occurred at any time or the parties have failed to obtain CFIUS approval before the Termination Date; or
   
the parties have failed to obtain the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission before the Termination Date;
   
by KEMET:
  
if Yageo or Acquisition Sub has breached any of their respective representations, warranties, covenants or agreements set forth in the Merger Agreement, which (i) would give rise to the failure of a related closing condition and (ii) is not capable of being cured, or is not cured, before the earlier of the Termination Date or the date that is thirty (30) calendar days following KEMET’s delivery of written notice of such breach. However, KEMET will not have the right to terminate the Merger Agreement pursuant to this provision if KEMET is then in material breach of any of its representations, warranties, covenants or agreements under the Merger Agreement;
   
prior to the KEMET Stockholder Approval (and only if KEMET is not in breach of its non-solicitation obligations under the Merger Agreement pursuant to this provision, other than non-consequential, immaterial breaches), to enter into a definitive agreement with respect to a superior proposal, subject to the terms of KEMET’s non-solicitation obligations, and provided that KEMET pays the related termination fee of $63.75 million to Yageo (see the section entitled “Terms of the Merger Agreement—Termination Fees” beginning on page 89 of this Proxy Statement); or
   
if (i) all of the conditions to Yageo’s and Acquisition Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing of the Merger; provided that such actions would then be capable of being satisfied), (ii) Yageo has failed to consummate the Merger by the time the closing should have occurred as a result of the failure of the debt financing to be funded, (iii) KEMET has notified Yageo in writing that the conditions to the Merger have been satisfied or, with respect to KEMET’s conditions, waived (to the extent such waiver is permitted under applicable law) and that it is prepared to consummate the Merger and (iv) Yageo has failed to consummate the Merger within five (5) business days of the later of the date on which closing was required to occur or the delivery of KEMET’s notice of termination; or
   
by Yageo if:
  
KEMET has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that specified conditions set forth in the Merger Agreement are not satisfied and such breach is not capable of being cured, or is not cured, prior to the earlier of the Termination Date or the date that is thirty (30) calendar days following Yageo’s delivery of written notice of such breach. However, Yageo will not have the right to terminate the Merger Agreement pursuant to this provision if Yageo or Acquisition Sub is then in material breach of any of its representations, warranties, covenants or agreements under the Merger Agreement; or
   
prior to the adoption of the Merger Agreement by KEMET stockholders, the Board (or any committee of the Board), (i) makes an Adverse Recommendation Change or (ii) approves or recommends, or allows KEMET or any of its subsidiaries to enter into, an Alternative Acquisition Agreement.

In the event that the Merger Agreement is terminated pursuant to the termination rights above, written notice of the termination will be given to the other party or parties, specifying the provisions of the Merger Agreement pursuant to which the termination was made. The Merger Agreement will become null and void and of no effect without liability on the part of any party thereto (or any of its representatives), and all rights and obligations of any party thereto will cease. However, except as otherwise provided in the Merger Agreement, no such termination will relieve any party of liability or damages resulting from any knowing and intentional breach of the Merger Agreement prior to such termination (with the parties understanding that the failure to consummate the Merger by the date the closing was to have occurred as a result of the failure of debt financing to be funded would be deemed a knowing and intentional breach), in which case, except as otherwise provided in the Merger Agreement, the aggrieved party will be entitled to all remedies available at law or in equity. Additionally, certain related documents, and the expense reimbursement and

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indemnity obligations of Yageo in relation to the financing, and the provisions of the Merger Agreement relating to the effect of termination of the Merger Agreement, termination fees, expenses and certain general provisions will survive any termination of the Merger Agreement.

Termination Fees

If the Merger Agreement is terminated in specified circumstances, the terminating party may be required to pay a termination fee.

Yageo would be entitled to receive a termination fee of $63.75 million from KEMET if the Merger Agreement is terminated:

(i) (a) either by KEMET or Yageo because (x) the Merger has not been consummated by the Termination Date or (y) KEMET stockholders have failed to adopt the Merger Agreement or (b) by Yageo because KEMET has breached its representations, warranties, covenants or agreements in the Merger Agreement that would cause conditions to the Merger to not be satisfied, (ii) a Competing Proposal has been publicly announced, publicly disclosed or otherwise has become known to KEMET, the Board or KEMET stockholders prior to such termination and (iii) KEMET enters into an agreement relating to, or consummates, a transaction involving such Competing Proposal within twelve (12) months of such termination;
  
by KEMET, to enter into a definitive agreement with respect to a Superior Proposal; or
  
by Yageo, because KEMET:

has made an Adverse Recommendation Change; or
 
approved or recommended, or allowed KEMET or any of its subsidiaries to enter into, a Alternative Acquisition Agreement.

KEMET would be entitled to receive a reverse termination fee of $49.05 million from Yageo if the Merger Agreement is terminated by KEMET or Yageo because Yageo has failed to obtain the Yageo Stockholder Approval (if required by applicable law).

KEMET would be entitled to receive a reverse termination fee of $63.75 million from Yageo if the Merger Agreement is terminated by KEMET because Yageo has failed to consummate the Merger by the time the closing should have occurred as a result of the failure of the debt financing to be funded. KEMET must irrevocably elect in writing whether to accept such termination fee or maintain its right to seek monetary damages within thirty (30) days of the time of termination.

KEMET would be entitled to receive a reverse termination fee of $65.40 million from Yageo if the Merger Agreement is terminated by KEMET or Yageo because Yageo fails to obtain CFIUS approval or a CFIUS turndown occurs, or if all conditions have been met by the Termination Date, except with respect to CFIUS approval.

Expense Reimbursement

If either party terminates the Merger Agreement because KEMET fails to obtain the KEMET Stockholder Approval, KEMET would be required to reimburse up to $18 million of reasonable out-of-pocket expenses of Yageo, Acquisition Sub or their affiliates in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement; provided that such expense reimbursement would be credited against a termination fee payable by KEMET to Yageo, if any, that subsequently becomes payable to Yageo.

If either party terminates the Merger Agreement because Yageo fails to obtain the approvals of foreign investment and investment in mainland China for the purpose of the Merger and the other transactions contemplated by the Merger Agreement issued by the Taiwan Investment Commission, Yageo is required to reimburse up to $18 million of reasonable out-of-pocket expenses of KEMET and its affiliates in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement; provided that such expense reimbursement would be credited against a reverse termination fee payable by Yageo to KEMET, if any, that subsequently becomes payable to KEMET.

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Specific Performance

Yageo, Acquisition Sub and KEMET are entitled to seek specific performance to prevent breaches of the Merger Agreement and to enforce the terms of the Merger Agreement in addition to any other remedy to which they are entitled at law or in equity. KEMET is entitled to seek specific performance or other equitable relief to cause Yageo to effect the closing of the Merger if and only if (i) all conditions to the parties’ obligation to consummate the Merger (other than conditions to be satisfied at the closing of the Merger, each of which is capable of being satisfied at that time) have been satisfied at the time when the closing of the Merger would have occurred, (ii) the debt financing has been funded or will be funded at the closing of the Merger and (iii) KEMET has irrevocably confirmed that (x) all of the conditions to consummating the Merger have been and continue to be satisfied (other than those conditions that by their nature are to be satisfied at the closing, each of which shall then and continues to be capable of being satisfied as of the closing) or waived (to the extent such waiver is permitted under applicable law) and (y) KEMET is prepared to consummate the Merger.

Fees and Expenses

Except for the provisions described above in the section entitled “Terms of the Merger Agreement—Expense Reimbursement” beginning on page 89 of this Proxy Statement, all fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement will be paid by the party incurring such fees or expenses.

Amendment; Extension and Waiver

The Merger Agreement provides that it may be amended by the parties at any time before or after receipt of the KEMET Stockholder Approval; provided that after the KEMET Stockholder Approval has been obtained, there will not be any amendment that by law (or in accordance with the rules of any stock exchange) requires further approval by KEMET stockholders without such further approval of such stockholders. In addition, any amendment to certain sections of the Merger Agreement that would adversely affect the rights of the debt financing source parties must also be approved by such parties.

At any time prior to the Effective Time, subject to applicable law, KEMET, Yageo and Acquisition Sub may: (i) extend the time period for the performance of any of the obligations or other acts of the other parties; (ii) waive any inaccuracies in the representations and warranties contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement; and/or (iii) waive compliance with any of the agreements or conditions contained in the Merger Agreement. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure or delay of any party to assert any rights or remedies will not constitute a waiver of such rights or remedies, and or a partial exercise of any rights or remedies will not preclude any other or further exercise of any rights or remedies.

Jurisdiction

KEMET, Yageo and Acquisition Sub have agreed to submit to the exclusive personal jurisdiction of the Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware in connection with any dispute arising out of or relating to the Merger Agreement or the transactions contemplated by the Merger Agreement; provided that, with respect to actions brought against debt financing sources in connection with the Merger, the parties consent to the exclusive jurisdiction of the New York state and U.S. federal courts sitting in New York County, State of New York. The parties have also agreed to waive jury trial to the fullest extent permitted by law and not to bring any action relating to the Merger Agreement or the transactions contemplated by the Merger Agreement in any court other than the Court of Chancery, any other court of the State of Delaware or any federal court sitting in the State of Delaware. Further, the parties have agreed to consent to the entry of any final Delaware judgment in any foreign court or tribunal, including the courts of the Republic of China.

Governing Law

Except for disputes involving the financing-related parties (which will be governed by the laws of the State of New York), the Merger Agreement is governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.

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PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED EXECUTIVE
COMPENSATION ARRANGEMENTS

The Non-Binding Advisory Proposal

Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that KEMET provide KEMET stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the payment of certain compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger, as disclosed in the section entitled “The Merger—Interests of the Directors and Executive Officers of KEMET in the Merger—Merger Related Compensation” beginning on page 63 of this Proxy Statement.

KEMET stockholders are asked to indicate their approval of the various compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger. These payments are set forth in the section entitled “The Merger—Interests of the Directors and Executive Officers of KEMET in the Merger—Merger Related Compensation” beginning on page 63 of this Proxy Statement and the accompanying footnotes. In general, the various plans and arrangements pursuant to which these compensation payments may be made have previously formed part of KEMET’s overall compensation program for its named executive officers, and previously have been disclosed to KEMET stockholders as part of the “Compensation Discussion and Analysis” and related sections of KEMET’s annual proxy statements. These historical arrangements were adopted and approved by the Compensation Committee of the Board, which is composed solely of independent directors, and are believed to be reasonable and in line with marketplace norms.

Accordingly, KEMET is seeking approval of the following resolution at the Special Meeting:

RESOLVED, that the stockholders of KEMET Corporation approve, on a nonbinding, advisory basis, the compensation that will or may become payable to KEMET’s named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section entitled “The Merger—Interests of the Directors and Executive Officers of KEMET in the Merger—Merger Related Compensation” in KEMET’s Proxy Statement for the special meeting of stockholders.”

KEMET stockholders should note that this proposal is not a condition to completion of the Merger, and as an advisory vote, the result will not be binding on KEMET, the Board or Yageo. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Merger is consummated, KEMET’s named executive officers will be eligible to receive the compensation that is based on, or otherwise relates to, the Merger in accordance with the terms and conditions applicable to those payments.

Vote Required and Board Recommendation

Approval of the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger requires the affirmative vote of a majority of those shares of KEMET common stock which are present, in person or represented by proxy at the Special Meeting, provided that a quorum is present.

The Board recommends that you vote “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by KEMET to its named executive officers in connection with the Merger.

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PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

The Adjournment Proposal

KEMET is requesting that KEMET stockholders approve a proposal to adjourn the Special Meeting to a later date or dates (if necessary or appropriate to solicit additional proxies), if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If KEMET stockholders approve the proposal to adjourn the Special Meeting, KEMET could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the proposal to adjourn the Special Meeting could mean that, even if KEMET had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, KEMET could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present at the Special Meeting.

Vote Required and Board Recommendation

Approval of the proposal to adjourn the Special Meeting, whether or not a quorum is present, requires the affirmative vote of the majority of the voting power of the shares of common stock entitled to vote, represented either in person or by proxy.

The Board believes that it is in the best interests of KEMET and its stockholders to be able to adjourn the Special Meeting, if necessary or appropriate, for the purpose of soliciting additional proxies in respect of the proposal to adopt the Merger Agreement if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

The Board recommends that you vote “FOR” adjournment of the Special Meeting.

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MARKET PRICES AND DIVIDEND DATA

KEMET common stock is listed on the NYSE under the symbol “KEM.” As of January 9, 2020, there were 58,267,253 shares of KEMET common stock outstanding, held by approximately 80 stockholders of record.

The following table sets forth, for the indicated periods, the high and low sales prices of KEMET common stock for the periods shown as reported by the NYSE:

Market Price
2020       High       Low
Third Quarter (through December 31, 2019) $ 27.61 $ 17.94
Second Quarter (ended September 30, 2019) $ 22.75 $ 16.23
First Quarter (ended June 30, 2019) $ 19.03 $ 15.87
2019
Fourth Quarter (ended March 31, 2019) $ 21.41 $ 15.55
Third Quarter (ended December 31, 2018) $ 23.13 $ 15.55
Second Quarter (ended September 30, 2018) $ 29.85 $ 18.43
First Quarter (ended June 30, 2018) $ 26.33 $ 16.94
2018
Fourth Quarter (ended March 31, 2018) $ 21.00 $ 15.07
Third Quarter (ended December 31, 2017) $ 27.35 $ 13.73
Second Quarter (ended September 30, 2017) $ 24.64 $ 12.65
First Quarter (ended June 30, 2017) $ 14.92 $ 10.70

The closing price of KEMET common stock on November 8, 2019, the last full trading day prior to the Board’s approval of the Merger Agreement, was $23.51. On January 13, 2020, the latest practicable trading day before the date of this Proxy Statement, the closing price of KEMET common stock was $26.60 per share.

Under the terms of the Merger Agreement, between the date of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger, neither KEMET nor any of its subsidiaries may authorize, declare, pay or make any dividends or other distributions without the prior written consent of Yageo.

Following the Merger, there will be no further market for shares of KEMET common stock and, KEMET anticipates that its stock will be delisted from the NYSE and deregistered under the Exchange Act. As a result, following the Merger and such deregistration, KEMET would no longer file periodic reports with the SEC.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of January 9, 2020, there were 58,267,253 shares of KEMET common stock outstanding, held by approximately 80 stockholders of record. The following tables set forth certain information regarding the beneficial ownership of KEMET common stock as of January 9, 2020 (except as otherwise noted below), by: (i) each person known by KEMET to be the beneficial owner of more than five percent (5%) of the outstanding shares of KEMET common stock; (ii) each of KEMET’s directors; (iii) each of KEMET’s named executive officers; and (iv) all directors and executive officers as a group. Based on information furnished by such stockholders, KEMET believes that each person has sole voting and dispositive power over the shares indicated as owned by such person unless otherwise indicated. The address of each director and officer is the same as the address for KEMET’s executive offices. KEMET determines beneficial ownership of KEMET common stock in accordance with the rules of the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power.

Name and Address       Number of Shares
Beneficially Owned
      Percentage
Beneficially Owned
BlackRock, Inc.(1)                        
55 East 52nd Street
New York, New York 10055 8,196,629 14.07%
 
The Vanguard Group(2)
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 3,594,374 6.17%
                 
Dimensional Fund Advisors LP(3)
Building One, 6300 Bee Cave Road
Austin, Texas 78746 3,033,442 5.21%
____________________

(1) In a Schedule 13G/A filed with the SEC on January 31, 2019, BlackRock, Inc. reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act, to have sole voting power for 8,068,240 shares and sole dispositive power for 8,196,629 shares.
 
(2) In a Schedule 13G/A filed with the SEC on February 11, 2019, The Vanguard Group reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act, to have sole voting power for 54,422 shares, sole dispositive power for 3,541,254 shares, shared voting power for 3,600 shares and shared dispositive power for 53,120 shares.
 
(3) In a Schedule 13G/A filed with the SEC on February 8, 2019, Dimensional Fund Advisors LP reported that, as of December 31, 2018, it was deemed, pursuant to Rule 13d-1 of the Exchange Act, to have sole voting power for 2,894,360 shares and sole dispositive power for 3,033,442 shares.

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Name       Number of Shares
Beneficially Owned
      Percentage
Beneficially Owned
William M. Lowe, Jr.(1)       188,244             *      
Gregory C. Thompson(2) 27,404 *
Claudio Lollini(3) 143,996 *
Charles C. Meeks, Jr.(4) 70,830 *
Stefano Vetralla(5) 41,107 *
Dr. Wilfred Backes(6) 85,932 *
Gurminder S. Bedi(7) 77,599 *
Frank G. Brandenberg(8) 77,599 *
Jacob T. Kotzubei(9) 73,828 *
E. Erwin Maddrey, II(10) 89,694 *
Yasuko Matsumoto(11) 25,570 *
Robert G. Paul(12) 90,101 *
Karen M. Rogge(13) 15,981 *
All directors and executive officers as a group(14) 1,105,320 1.90%
____________________

* Less than 1%
   
(1) Represents 188,244 restricted shares of common stock (“Restricted Shares”). Restricted Shares cannot be sold until ninety (90) days after termination of service with KEMET or until the director or officer achieves the targeted ownership under KEMET’s stock ownership guidelines, and only to the extent that such ownership exceeds the target.
   
(2) Includes 16,304 Restricted Shares.
   
(3) Represents 143,996 Restricted Shares.
   
(4) Includes 68,330 Restricted Shares.
   
(5) Represents 41,107 Restricted Shares.
   
(6) Represents 8,333 Restricted Shares and 77,599 vested director restricted stock units (“Director RSUs”).
   
(7) Represents 100 Restricted Shares and 77,599 vested Director RSUs.
   
(8) Represents 77,599 vested Director RSUs.
   
(9) Represents 100 Restricted Shares and 73,728 vested Director RSUs.
   
(10) Includes 10,762 Restricted Shares and 77,599 vested Director RSUs.
   
(11) Represents 100 Restricted Shares and 25,470 vested Director RSUs.
   
(12) Includes 10,000 Restricted Shares and 77,599 vested Director RSUs.
   
(13) Represents 100 Restricted Shares and 15,881 vested Director RSUs.
   
(14) All directors and executive officers as a group includes only those directors and executive officers serving as of the date of this Proxy Statement, including three (3) executive officers not listed herein. Includes 582,748 Restricted Shares and 502,974 vested Director RSUs.

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APPRAISAL RIGHTS

If the Merger is consummated, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the proposal to adopt the Merger Agreement, and who properly exercise and perfect their demand for appraisal of their shares and who do not withdraw such demand or lose their right to appraisal will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL (“Section 262”).

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this Proxy Statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of KEMET common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of KEMET common stock held of record in the name of another person, such as a broker, bank or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of KEMET common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or the other nominee.

Under Section 262, holders of KEMET common stock who (i) do not vote in favor of the proposal to adopt the Merger Agreement, (ii) continuously are the record holders of such shares through the Effective Time, and (iii) otherwise follow the procedures set forth in Section 262, will be entitled to have their shares appraised by the Court of Chancery and to receive in lieu of the Merger Consideration payment in cash of the amount determined by the Court of Chancery to be the “fair value” of the shares of KEMET common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value as determined by the Court of Chancery (subject, in the case of interest payments, to any voluntary cash payments made by the Surviving Corporation pursuant to subsection (h) of Section 262). Unless the Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at five percent (5%) over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period; provided that, if at any time before the Court of Chancery enters judgment in the appraisal proceeding, the Surviving Corporation pays to each stockholder entitled to appraisal an amount in cash, interest will accrue after the time of such payment only on the amount that equals the sum of (1) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Court of Chancery and (2) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the $27.20 per share Merger Consideration payable pursuant to the Merger Agreement if they did not seek appraisal of their shares.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than twenty (20) days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This Proxy Statement constitutes KEMET’s notice to KEMET stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this Proxy Statement as Annex C. In connection with the Merger, any holder of shares of KEMET common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner will result in the loss of appraisal rights under the DGCL. In addition, the Court of Chancery will dismiss appraisal proceedings as to all KEMET stockholders who assert appraisal rights unless (i) the total number of shares of KEMET common stock for which appraisal rights have been pursued and perfected exceeds one percent (1%) of the outstanding shares of KEMET common stock measured in accordance with subsection (g) of Section 262 of the DGCL or (ii) the value of the aggregate Merger Consideration in respect of the shares of KEMET common stock for which appraisal rights have been pursued and perfected exceeds $1 million. Because of the complexity of the procedures for exercising the right to seek appraisal of shares of KEMET common stock, KEMET believes that if a KEMET stockholder is considering exercising appraisal rights, that stockholder should seek the advice of legal counsel. A stockholder who loses his, her, or its appraisal rights will be entitled to receive the Merger Consideration as described in the Merger Agreement upon surrender of the certificates that formerly represented such shares of KEMET common stock.

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Stockholders wishing to exercise the right to seek an appraisal of their shares of KEMET common stock must fully comply with Section 262, which means doing, among other things, ALL of the following:

the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;
 
the stockholder must deliver to KEMET a written demand for appraisal before the vote on proposal to adopt the Merger Agreement at the Special Meeting;
 
the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and
 
the stockholder or the Surviving Corporation must file a petition in the Court of Chancery requesting a determination of the fair value of the shares within one hundred twenty (120) days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of proposal to adopt the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights should not return a blank proxy, but rather must vote against the proposal to adopt the Merger Agreement, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of KEMET common stock wishing to exercise appraisal rights must deliver to KEMET, before the vote on the proposal to adopt the Merger Agreement at the Special Meeting, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the proposal to adopt the Merger Agreement either in person or by proxy. A holder of shares of KEMET common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the Merger Agreement, and it will cause a stockholder to lose the stockholder’s right to appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the proposal to adopt the Merger Agreement or abstain from voting on the proposal to adopt the Merger Agreement. However, neither voting against the proposal to adopt the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the proposal to adopt the Merger Agreement. A proxy or vote against the proposal to adopt the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the proposal to adopt the Merger Agreement at the Special Meeting will cause the stockholder to lose its appraisal rights in connection with the Merger.

Only a holder of record of shares of KEMET common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of KEMET common stock should be executed by or on behalf of the holder of record and must reasonably inform KEMET of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, such as in a joint tenancy or a tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS, AND WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR BROKERS, BANKS AND OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BROKER, BANK OR OTHER NOMINEE HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF

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RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, BANK OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

KEMET Corporation
KEMET Tower
One East Broward Boulevard, 2nd Floor
Fort Lauderdale, Florida 33301

Any holder of shares of KEMET common stock may withdraw his, her or its demand for appraisal and accept the Merger Consideration by delivering to KEMET a written withdrawal of the demand for appraisal within sixty (60) days after the Effective Time. However, any such attempt to withdraw the demand made more than sixty (60) days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Court of Chancery will be dismissed without the approval of such court and such approval may be conditioned upon such terms as the Court of Chancery deems just.

Notice by the Surviving Corporation

If the Merger is consummated, within ten (10) days after the Effective Time, the Surviving Corporation will notify each holder of shares of KEMET common stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the proposal to adopt the Merger Agreement as of the date that the Merger has become effective.

Filing a Petition for Appraisal

Within one hundred twenty (120) days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of KEMET common stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The Surviving Corporation is under no obligation, and has no present intention, to file such a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair values of shares of KEMET common stock. Accordingly, any holders of KEMET common stock who desire to have their shares appraised by the Court of Chancery should assume that they will be responsible for filing a petition for appraisal with the Court of Chancery in the manner prescribed in Section 262. The failure of a holder of KEMET common stock to file such a petition for appraisal within the period specified in Section 262 will nullify the stockholder’s previous written demand for appraisal.

Within one hundred twenty (120) days after the Effective Time, any holder of shares of KEMET common stock who has complied with the requirements for the exercise of appraisal rights, or a beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person, will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the Merger proposal and with respect to which KEMET received demands for appraisal, and the aggregate number of holders of such common stock. The Surviving Corporation must mail this statement to the requesting stockholder within ten (10) days after receipt of the written request for such a statement or within ten (10) days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is duly filed by a holder of shares of KEMET common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded

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appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss that stockholder from the proceedings.

Determination of Fair Value

After determining the holders of KEMET common stock entitled to appraisal, the Court of Chancery will appraise the “fair value” of the shares of KEMET common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Court of Chancery of will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Supreme Court of Delaware stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262 of the DGCL. Although KEMET believes that the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Merger Consideration. Neither KEMET nor Yageo anticipates offering more than the $27.20 per share Merger Consideration to any KEMET stockholder exercising appraisal rights. Each of KEMET and Yageo reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of KEMET common stock is less than the $27.20 per share Merger Consideration.

Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment; provided that if at any time before the Court of Chancery enters judgment in the appraisal proceeding, the Surviving Corporation pays to each stockholder entitled to appraisal an amount in cash, interest will accrue after the time of such payment only on the amount that equals the sum of (i) the difference, if any, between the amount so paid and the “fair value” of the shares as determined by the Court of Chancery and (ii) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised.

If any