Exhibit 10.7


 


PLEDGE AND SECURITY
AGREEMENT


 


PLEDGE AND SECURITY AGREEMENT, dated as of September 15,
2008 (as amended, supplemented or modified from time to time, this “Agreement”),
made by KEMET Electronics Corporation (the “Grantor”) in favor of Vishay
Intertechnology, Inc. (“Secured Party”).


RECITALS


 


Pursuant to the Loan Agreement dated as of the date
hereof (as amended, supplemented or modified from time to time, the “Loan
Agreement”; capitalized terms used but not defined herein shall have the
meanings given such terms in the Loan Agreement) by and among Kemet Electronics
Corporation, as Borrower, and Secured Party, Secured Party has agreed to make a
Loan to Borrower.  In order to induce
Secured Party to make the Loan, Grantor has agreed to grant a continuing Lien
on the Collateral to secure the Obligations (as hereinafter defined).  Accordingly, Grantor hereby agrees as
follows:


 


1.             Security Interest.


 


(a)           Collateral. 
For purposes of this Agreement, all of the following property now owned
or at any time hereafter acquired by Grantor or in which Grantor now has or at
any time in the future may acquire any right, title or interest is collectively
referred to as “Collateral”: (i)  US Pledged Accounts, (ii) all
books and records relating to the US Pledged Accounts, (ii) all Supporting
Obligations (as defined in the UCC) relating to the US Pledged Accounts, (iii) the
Collateral Account and all deposits therein, and (vi) to the extent not
otherwise included, all Proceeds (as defined in the UCC).


 


(b)           Grant of Security. 
As security for the Obligations (as hereinafter defined), Grantor hereby
delivers, assigns, pledges, sets over and grants to Secured Party a first
priority security interest in, all of its right, title and interest, whether
now existing or hereafter arising or acquired, in and to the Collateral,
together with all substitutions and replacements thereof and any products and
proceeds thereof.


 


(c)           Security for Obligations.  This Agreement secures the payment of all now
existing or hereafter arising obligations of Grantor to Secured Party, whether
primary or secondary, direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not, liquidated or unliquidated, arising
by operation of law or otherwise under the Loan Agreement or any other Credit
Document but only to the extent required under the Loan Agreement or any other
Credit Document, whether for principal, interest, fees, expenses or otherwise,
together with all costs of collection or enforcement, including, without
limitation, reasonable attorneys’ fees incurred in any collection efforts or in
any action or proceeding (all such obligations being the “Obligations”).


 


(d)           Grantor Remains Liable.  This Agreement shall not affect Grantor’s
liability to perform all of its duties and obligations under the transactions
giving rise to the Obligations.  The
exercise by Secured Party of any of the rights hereunder shall not release
Grantor from any of its duties or obligations under the transactions giving
rise to the Obligations, which shall remain unchanged as if this Agreement had
not been executed.  Secured Party shall
not have any obligation or liability under the transactions giving rise to the
Obligations by reason of this Agreement, nor shall Secured Party be obligated
to perform any of the obligations or duties of any Grantor thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.


 


(e)           Continuing Agreement.  This Agreement shall create a continuing
security interest in the Collateral and shall remain in full force and effect
until payment in full of the Obligations 


 

















 


(other than unasserted contingent indemnification
obligations, including those in Section 2.6 of the Loan Agreement).


 


2.                                       Representations
and Warranties.  To induce
Secured Party to enter into the Loan Agreement, Grantor represents and warrants
each of the following to Secured Party


 


(a)                                  Title; Liens and Encumbrances. 
Grantor is (or to the extent that this Agreement states that the
Collateral is to be acquired after the date hereof, will be) the record and
beneficial owner of, having (or to the extent that this Agreement states that
the Collateral is to be acquired after the date hereof, will have) good and
marketable title to, the Collateral pledged by it hereunder, free of any and
all Liens or options in favor of, or claims of, any other person, except the
Liens created by this Agreement and Grantor will promptly notify Secured Party
of any such other Lien or claim made or asserted against the Collateral and will
defend the Collateral against any such Lien or other claim.


 


(b)                                 State of Organization; Legal Name.


 


(i)            Grantor’s state of
incorporation or organization, chief executive office is set forth on Schedule
I.  Grantor shall promptly notify
Secured Party of any change in the foregoing representations.


 


(ii)           Grantor’s exact
legal name is as set forth on Schedule I.


 


(iii)          Grantor currently
uses, and during the last five years has used, no other names including
business or trade names, except as set forth on Schedule I.  Grantor shall not change such name without
providing Secured Party 5 Business Days’ prior written notice.


 


(iv)          Grantor’s
organizational identification number is as set forth on Schedule I.  Grantor shall not change such organizational
identification number without providing Secured Party 5 Business Days’ prior
written notice.


 


(c)                                  Perfection of Security Interest.


 


(i)            The grant of the
security interest in the Collateral, combined with the filing of financing
statements, the execution of the Control Agreement, and/or possession of the
Collateral, each as appropriate, is effective to vest in Secured Party a valid
and perfected first priority security interest, superior to the rights of any
person in and to the Collateral as set forth herein.


 


(ii)           Grantor authorizes
Secured Party to file all such financing statements and amendments thereto
pursuant to the UCC or other notices appropriate under applicable law, as
Secured Party may require, each in form satisfactory to Secured Party.  Such financing statements and amendments may
contain a description of the Collateral as set forth herein or in any generic
manner.


 


(iii)          Upon delivery by
Secured Party of an invoice therefor, Grantor shall pay fifty percent (50%) of
all filing or recording costs with respect thereto in all public offices where
filing or recording is deemed by Secured Party to be reasonably necessary.


 


(iv)          Grantor authorizes
Secured Party to take all other action which Secured Party may deem reasonably
necessary to perfect or otherwise protect the Liens created hereunder and to
obtain the benefits of this Agreement.


 

















 


3.                                       Covenants.  Grantor covenants and agrees with Secured
Party that, from and after the date of this Agreement until the Obligations
(other than unasserted contingent indemnification obligations, including those
under Section 2.6 of the Loan Agreement) shall have been paid in full:


 


(a)                                  Instruments and Chattel Paper.  No
amount payable under or in connection with any Collateral shall be or become
evidenced by any Instrument or Chattel Paper.


 


(b)                                 Maintenance of Perfected Security Interest.


 


(i)            Grantor shall (A) maintain
the security interest created by this Agreement as a perfected security
interest having at least the priority described in Section 2(c) and (B) defend
such security interest against the claims and demands of all Persons.


 


(ii)           At any time and
from time to time, upon the written request of Secured Party, Grantor shall
promptly and duly execute and deliver, and have recorded, such further
instruments and documents (subject to Section 5.10 of the Loan Agreement)
and take such further action as Secured Party may reasonably request for the
purpose of obtaining or preserving the full benefits of this Agreement and of
the rights and powers herein granted, including the filing of any financing or
continuation statement required under the UCC (or other similar laws).


 


(c)                                  Change of Name or Location. 
Except upon 5 Business Days’ prior written notice to Secured Party and
delivery to Secured Party of all additional financing statements and other
documents necessary for Secured Party to maintain the validity, perfection and
priority of the security interests provided for herein, Grantor shall not (i) change
its jurisdiction of organization or the location of its chief executive, in
each case from that referred to in Section 2(c) and (ii) change
its name, identity or corporate structure to such an extent that any financing
statement filed in connection with this Agreement would become misleading.


 


(d)                                 Collateral Account.  On
or prior to the Closing Date, and at all times thereafter, Borrower shall
direct each of its Account Debtors with respect to each US Pledged Account to
make any and all payments on such US Pledged Account directly to the Collateral
Account.


 


4.                                       Events of Default.  The occurrence of any one or more Events of
Default under the Loan Agreement shall constitute an event of default (“Event
of Default”) under this Agreement.


 


5.                                       Rights and
Remedies.


 


(a)           Upon the occurrence and during the continuance of an Event
of Default:  (i) Secured Party may exercise exclusive control
over the Collateral; (ii) Secured Party shall have the right, with or
without (to the extent permitted by applicable law) notice to Grantor, as to
any or all of the Collateral, by any available judicial procedure or without
judicial process, to take possession of the Collateral and without liability
for trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral, and generally to
exercise any and all rights afforded to a secured party under the UCC or other
applicable law; (iii) Secured Party shall have the right to sell, lease,
or otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, either at public or
private sale or at any broker’s board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such terms and
conditions, all as Secured Party in its sole discretion may deem advisable; (iv) at
Secured Party’s request, Grantor shall assemble the Collateral and make it
available to Secured Party at places which Secured Party shall select, whether
at Grantor’s premises or elsewhere, and make available to Secured Party,
without rent, all of Grantor’s premises and facilities for the purpose of
Secured Party’s 


 

















 


taking possession of, removing or putting the
Collateral in saleable or disposable form; (v) Secured Party shall have
the right to receive any and all cash interest, dividends, distributions,
payments or other proceeds paid in respect of the Collateral and made
application thereof to the Obligations in such order as Secured Party may
determine; and (vi) any or all of the Collateral may be registered in the
name of Secured Party or its nominee and they may thereafter exercise (x) all
voting, corporate and other rights pertaining to such Collateral and (y) any
and all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all securities or securities entitlements upon any merger,
consolidation, reorganization, recapitalization or other fundamental change, or
upon the exercise of Grantor or Secured Party of any right, privilege or option
pertaining to such securities or securities entitlements, and in connection
therewith, the right to deposit and deliver any and all of the securities or
securities entitlements with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as Secured
Party may determine), all without liability except to account for property
actually received by it, but Secured Party shall have no duty to Grantor to
exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.


 


(b)           Any such sale, lease or other disposition of Collateral
may be made without demand for performance or any notice of advertisement
whatsoever except that where an applicable statute requires reasonable notice
of sale or other disposition, Grantor agrees that the sending of five days
notice by ordinary mail, postage prepaid, to Grantor of the place and time of
any public sale or of the time at which any private sale or other intended
disposition is to be made, shall be deemed reasonable notice thereof.  Notwithstanding the foregoing, if any of the
Collateral may be materially diminished in value during such five-day period,
Secured Party shall provide Grantor with such shorter notice as it deems
reasonable under the circumstances.


 


(c)           The proceeds of any such sale, lease or other disposition
of the Collateral shall be applied first to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like, and to the
reasonable attorneys’ fees and legal expenses incurred by Secured Party, and
then to satisfaction of the Obligations (in any order as Secured Party may
decide in its sole discretion), and to the payment of any other amounts
required by applicable law.  If, upon the
sale, lease or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which Secured Party is legally entitled,
Borrower will be liable for the deficiency, together with interest thereon, at
the rate prescribed in the agreements giving rise to the Obligations, and the
reasonable fees of any attorneys employed by Secured Party to collect such deficiency.  To the extent permitted by applicable law,
Grantor waives all claims, damages and demands against Secured Party arising
out of the repossession, removal, retention or sale of the Collateral.


 


(d)           Upon request of Secured Party, at any time after the
occurrence of an Event of Default, Grantor shall notify obligors on the US
Pledged Accounts that the US Pledged Accounts have been assigned to Secured
Party and that payments in respect thereof shall be made directly to Secured
Party.


 


(e)           Notwithstanding anything herein to the contrary, Grantor
shall remain liable under each of the US Pledged Accounts to observe and
perform all conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto.  Secured Party shall not have
any obligation or any liability under any US Pledged Account (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by Secured Party of any payment relating thereto, nor shall Secured
Party be obligated in any manner to perform any of the obligations of Grantor
under or pursuant to any US Pledged Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or
sufficiency of the payment 


 

















 


received by it or as to the sufficiency of any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


 


(f)            Secured Party hereby authorizes Grantor to collect the US
Pledged Accounts, subject to Secured Party’s direction and control after the
occurrence of an Event of Default, and Secured Party may curtail or terminate
said authority at any time at any time after the occurrence of an Event of
Default.  Any payments on US Pledged
Accounts when collected by Grantor after the occurrence and during the
continuance of an Event of Default, (i) shall be forwith (and in any event
no later than 2 Business Days) deposited by Grantor in the exact form received,
duly endorsed by Grantor to Secured Party if required, in an account maintained
under the sole dominion and control of Secured Party and (ii) until so
turned over, shall be held by Grantor in trust for Secured Party, segregated
from other funds of Grantor.  Each such
deposit of Proceeds of US Pledged Accounts shall be accompanied by a report
indentifying in reasonable detail the nature and source of the payments
included in the deposit.


 


(g)           The parties hereto agree that, upon the occurrence and
during the continuance of an Event of Default, Secured Party shall appoint a
third party administrator (the “Administrator”) that will take any
remedial or enforcement action available to Secured Party pursuant to this
Agreement or under applicable law on Secured Party’s behalf and at Secured
Party’s sole direction.  For the
avoidance of doubt, the parties hereto agree that (i) AlixPartners or a
similar entity shall be deemed to be acceptable to each party to act as
Administrator, (ii) Borrower shall not be required to deliver any
information to Lender to the extent that Borrower reasonably believes that
disclosure of such information to Lender is not consistent with, or is likely
to violate, applicable competition laws and (iii) Borrower shall be
required to deliver such information to the Administrator to the extent such
information is reasonably necessary in connection with any remedial or
enforcement action taken on behalf of or at the direction of Secured Party by
Administrator; provided that Administrator shall not share such
information with Lender.


 


6.             Power of Attorney.  Subject to Section 5(g), Grantor
authorizes Secured Party and does hereby make, constitute and appoint Secured
Party and any officer or agent of Secured Party, with full power of
substitution, as Grantor’s true and lawful attorney-in-fact, with power, in its
own name or in the name of Grantor:  (i) to endorse any notes,
checks, drafts, money orders, or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of Secured Party; (ii) to pay
or discharge any taxes, liens, security interest or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iii) to demand,
collect, issue receipt for, compromise, settle and sue for monies due in
respect of the Collateral; (iv) to receive, open and dispose of all mail
addressed to Grantor and to notify the post office authorities to change the
address for delivery of mail addressed to Grantor to such address as Secured
Party may designate; (v) to exercise all membership rights, powers and
privileges in connection with the Collateral to the same extent as Grantor is
entitled to exercise such rights, powers and privileges; and (vi) generally
to do all acts and things which Secured Party deems necessary to protect,
preserve and realize upon the Collateral and Secured Party’s security interest
therein.  Grantor hereby approves and
ratifies all acts of said attorney or designee, who shall not be liable for any
acts of commission or omission, nor for any error or judgment or mistake of
fact or law except for its own gross negligence or willful misconduct.  This power of attorney shall be irrevocable
for the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.  Secured Party may
exercise this power of attorney only after the occurrence and during the
continuance of an Event of Default.


 


7.             Notices. 
Notices shall be given in the manner, to the addresses and with the
effect provided in Section 7.1 of the Loan Agreement.


 

















 


8.             No Waiver; Rights Cumulative.


 


(a)           No course of dealing between Grantor and Secured Party, or
Secured Party’s failure to exercise or delay in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.  Any single or partial exercise of any right,
power or privilege hereunder shall not preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.


 


(b)           All of Secured Party’s rights and remedies with respect to
the Collateral, whether established hereby or by any other agreements,
instruments or documents or by law, shall be cumulative and may be exercised
singly or concurrently.


 


9.             Limitation on Secured Party’s Duty in Respect of
Collateral.  Secured Party shall not
have any duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of it or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto, except that Secured Party shall use reasonable care with
respect to the Collateral in its possession or under its control.


 


10.           Amendments, Etc. 
No amendment or waiver of any provision of this Agreement nor consent to
any departure by Secured Party therefrom shall in any event be effective unless
the same shall be in writing, approved by Secured Party and signed by Secured
Party, and then any such waiver or consent shall only be effective in the
specific instance and for the specific purpose for which given.


 


11.           Successors and Assigns.  This Agreement and all obligations of Grantor
and Secured Party hereunder shall be binding upon the permitted successors and
assigns of Grantor and Secured Party, as applicable, and shall, together with
the rights and remedies of Secured Party hereunder, inure to the benefit of
Secured Party, Grantor and each of their respective successors and assigns.


 


12.           No Partnership. 
The relationship between Secured Party and Grantor shall be only of
creditor-debtor and no relationship of agency, partner or joint- or co-venturer
shall be created by or inferred from this Agreement or the other Credit
Documents.  Grantor shall indemnify,
defend, and save Secured Party harmless from any and all claims asserted
against Secured Party as being the agent, partner, or joint-venturer of
Grantor.


 


13.           Entire Agreement. 
This Agreement embodies the entire agreement and understanding between
Grantor and Secured Party with respect to its subject matter and supersedes all
prior conflicting or inconsistent agreements, consents and understandings
relating to such subject matter.  Grantor
acknowledges and agrees that there is no oral agreement between Grantor and
Secured Party which has not been incorporated in this Agreement.


 


14.           Counterparts. 
This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or electronic transmission
shall be effective as delivery of a manually executed counterpart of this
Agreement.


 


15.           Severability. 
Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without effecting the validity, legality and enforceability of the remaining
provisions thereof; and the invalidity of a particular provision in a
particular jurisdiction shall not invalidate such provision in any other
jurisdiction.


 

















 


16.           Governing Law; Jurisdiction; Consent to Service of
Process.


 


(a)           This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, except to the extent the UCC
provides for the application of the law of another state.


 


(b)           GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY FEDERAL OR STATE COURT IN THE STATE OF NEW YORK IN ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND CONSENTS TO THE
PLACING OF VENUE IN NEW YORK COUNTY OR OTHER COUNTY PERMITTED BY LAW.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
GRANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS AGREEMENT OR INSTRUMENT REFERRED
TO HEREIN MAY NOT BE LITIGATED IN OR BY SUCH COURTS.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
GRANTOR AGREES NOT TO SEEK AND HEREBY WAIVES THE RIGHT TO ANY REVIEW OF THE
JUDGMENT OF ANY SUCH COURT BY ANY COURT OF ANY OTHER NATION OR JURISDICTION
WHICH MAY BE CALLED UPON TO GRANT AN ENFORCEMENT OF SUCH JUDGMENT.  EXCEPT AS PROHIBITED BY LAW, GRANTOR HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT.


 


(c)           Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 7.1 of
the Loan Agreement.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.


 


17.           Headings.  Section headings used herein
are for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Agreement.


 


18.           Reinstatement. 
Grantor further agrees that, if any payment made by Grantor or other
Person and applied to the Obligations is at any time annulled, avoided, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of Collateral are
required to be returned by Secured Party to Grantor, its estate, trustee,
receiver or any other party, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, any Lien or other Collateral securing such liability shall be and
remain in full force and effect, as fully as if such payment had never been
made or, if prior thereto the Lien granted hereby or other Collateral securing
such liability hereunder shall have been released or terminated by virtue of
such cancellation or surrender), such Lien or other Collateral shall be
reinstated in full force and effect, and such prior cancellation or surrender
shall not diminish, release, discharge, impair or otherwise affect any Lien or
other Collateral securing the obligations of Grantor in respect of the amount
of such payment.


 


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IN
WITNESS WHEREOF, the undersigned party has executed this Agreement to be
effective for all purposes as of the date above first written.


 


	
   

  	
  KEMET ELECTRONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
     /s/ PER-OLOF LOOF

  
	
   

  	
   

  	
     Name: Per-Olof Loof

  
	
   

  	
   

  	
     Title:   CEO