Subsequent Events

TOKIN

As described in Note 5, “Investment in NEC TOKIN,” since 2013, KEMET, through its wholly-owned subsidiary, KEC, has held a 34% economic interest in TOKIN, which was operated as a joint venture with NEC Corporation. Subsequent to year-end, on April 19, 2017, KEC completed its acquisition of the remaining 66% economic interest in TOKIN it did not previously own. TOKIN is a manufacturer of tantalum capacitors, electro-magnetic and access devices and is headquartered in Tokyo, Japan. TOKIN has manufacturing locations in Japan, Thailand, Taiwan, Vietnam and China. Subsequent to closing, NEC TOKIN Corporation changed its name to TOKIN Corporation and became a 100% owned indirect subsidiary of KEMET. The acquisition was made possible in part by the sale of TOKIN's electro-mechanical devices (“EMD”) business as described below.

Under the terms of the Definitive TOKIN Stock Purchase Agreement (the “TOKIN Purchase Agreement”) between KEC and NEC, dated as of February 23, 2017. KEC paid NEC JPY 16.2 billion, or approximately $148.8 million (using the April 19, 2017 exchange rate of 108.751 Japanese Yen to 1.00 U.S. Dollar), for all of the outstanding shares of TOKIN it did not already own. The preliminary purchase price was comprised of JPY 6.0 billion, or approximately $55.2 million (using the April 19, 2017 exchange rate of 108.751 Japanese Yen to 1.00 U.S. Dollar) plus one-half of an amount determined to be the excess net cash proceeds (“Excess Cash” as defined in the Agreement) from the sale of TOKIN’s EMD business discussed below. The Excess Cash is subject to working capital adjustments pursuant to the Master Sale Agreement.

The acquisition of TOKIN will expand KEMET’s geographic presence, combining KEMET’s presence in the western hemisphere and TOKIN’s excellent position in Asia to enhance customer reach and create an entrance into Japan for KEMET. TOKIN’s product portfolio is a strong complement to KEMET’s existing product portfolio. We believe that the combination creates a leader in the combined polymer and tantalum Capacitors market. The acquisition also enhances KEMET’s product diversification with entry into EMC and sensors.

Due to the timing of the close of the TOKIN acquisition, the Company did not have sufficient time to complete the valuation of the acquired assets and assumed liabilities, and therefore, the purchase price allocation cannot be determined at this time.

Sale of EMD

On April 14, 2017, KEMET announced that TOKIN closed on the sale of its electro-mechanical devices (“EMD”) business to NTJ Holdings 1 Ltd. (“NTJ”), pursuant to a master sale and purchase agreement (the “Master Sale Agreement”). EMD manufactures signal and power relays and is primarily located in Calamba, Laguna, Philippines. The selling price was JPY 49.6 billion or approximately $442.7 million (using the April 14, 2017 exchange rate of 108.874 Japanese Yen to 1.00 U.S. Dollar) and is subject to certain working capital adjustments pursuant to the Master Sale Agreement. The Master Sale Agreement was amended on April 7, 2017 and April 14, 2017 to adjust the closing date and adjust the net proceeds by JPY 99 million.

In the first quarter of fiscal year 2018, TOKIN will recognize a gain on the sale of its EMD business. The following gain calculation is based upon preliminary estimates of the sales price (prior to working capital adjustments as outlined in the Master Sale Agreement), carrying amount of the EMD net assets, the tax impact of the transaction and transaction fees.

KEMET's proportionate share of TOKIN's gain on the sale of the EMD business is calculated as follows:



	Oku-Yen			$USD (in millions)*
Sales price	¥	495.8		$	443.4
Less:
Carrying amount of EMD net assets	77.1			69.0
Remove AOCI	5.2			4.6
Transaction related fees and taxes	6.8			6.1
Deferred tax asset	13.8			123.1
Gain on sale	392.9			240.6
KEMET's equity interest	34		%	34		%
KEMET's gain on sale (1)	¥	133.6		$	81.8

*Utilizing an exchange rate as of March 31, 2017 of 111.82 Japanese Yen to 1.00 U.S. Dollar.

Long-term debt

On April 28, 2017, KEMET entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, KEC (together with the Company, the “Borrowers”), Bank of America, N.A. as the Administrative Agent and Collateral Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and bookrunner and various other lenders thereto from time to time. The Term Loan Credit Agreement provides for a $345 million term loan facility. In addition, the Borrowers may request incremental term loan commitments in an aggregate amount not to exceed $50 million (together with the initial $345 million term loan, the “Term Loans”). The proceeds are being used, together with cash on hand, to fund the redemption of all of KEMET’s outstanding 10.5% Senior Notes, which were also called for redemption on April 28, 2017. The Term Loans were sold at 97 (with an original issue discount of 300 bps). At the Company’s election, the Term Loans may be made as either Base Rate Term Loans or LIBO Rate Term Loans (each as defined in the Term Loan Credit Agreement). The applicable margin for term loans is 5.0% for Base Rate Term Loans and 6.0% for LIBO Rate Term Loans. All LIBO Rate Term Loans are subject to a pre-margin floor of 1.00%. The Term Loan Credit Agreement contains customary covenants and events of default. The Company also entered into the Term Loan Security Agreement dated as of April 28, 2017 (the “Security Agreement”), among the Company, KEC and certain other subsidiaries of the Company, the other grantors party thereto, and Bank of America, N.A., as collateral agent, pursuant to which the Company’s obligations under the Term Loan Credit Agreement are secured by a pledge of 65% of the outstanding voting stock of certain first-tier subsidiaries organized in Italy, Japan, Mexico and Singapore, and a second lien pledge on the collateral securing KEMET’s revolving credit facility. The obligations of the Company under the Term Loan Credit Agreement are guaranteed by certain of its subsidiaries, including KRC Trade Corporation, KEMET Services Corporation, KEMET Blue Powder Corporation and The Forest Electric Company. The Term Loans mature April 28, 2024, and may be extended in accordance with the Term Loan Credit Agreement. The Company may prepay loans under the Term Loan Credit Agreement at any time, subject to certain notice requirements and certain prepayment premiums during the first two years. On a quarterly basis the Company must repay 1.25% of the aggregate principle amount of all initial term loans, or $4.3 million, beginning September 29, 2017.

In connection with the closing of the new Term Loan Credit Agreement, KEC also entered into Amendment No. 9 to Loan and Security Agreement, Waiver and Consent, dated as of April 28, 2017, by and among KEC, the other borrowers named therein, the financial institutions party thereto as lenders and Bank of America, N.A., as agent for the lenders (the “Loan Amendment”). The Loan Amendment increases the facility amount to $75 million and provides KEC with lower applicable interest rate margins and the ability to complete the refinancing. As part of the overall refinancing, KEC also repaid all amounts outstanding under the Loan Amendment.