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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(AMENDMENT NO. 1)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CEM CORPORATION
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(Name of Issuer)
Common Stock, $.05 par value
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(Title of Class of Securities)
125165 10 0
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(CUSIP Number)
Michael J. Collins, 3100 Smith Farm Road, Matthews, NC 28105 (704) 821-7015
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 9, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[X].
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SCHEDULE 13D
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CUSIP NO. 125165 10 0 PAGE 2
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MICHAEL J. COLLINS
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
PF, BK
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER - 477,442
SHARES --------------- -------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER - 27,450
OWNED BY EACH --------------- -------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER - 477,442
PERSON WITH --------------- -------------------------------------
10 SHARED DISPOSITIVE POWER - 27,450
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
504,892
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.5%
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14 TYPE OF REPORTING PERSON
IN
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Page 3
Preliminary Statement
This Amendment No. 1 (this "Amendment") amends and supplements the
Statement on Schedule 13D (the "Statement") filed on October 19, 1999 by Michael
J. Collins (the "Reporting Person") with respect to the shares of Common Stock,
$.05 par value per share (the "Common Stock"), of CEM Corporation, a North
Carolina corporation (the "Issuer").
Item 3. Source and Amount of Funds or Other Consideration.
All shares of Common Stock currently beneficially owned by the
Reporting Person were acquired with personal funds. Information set forth in
Item 4 of this Amendment is incorporated herein by reference.
Item 4. Purpose of Transaction.
On November 9, 1999, the Reporting Person delivered a letter (the
"Revised Proposal") to the members of the special committee of the Board of
Directors of the Issuer setting forth his proposal to acquire all of the
outstanding shares of Common Stock not beneficially owned by the Reporting
Person in a negotiated merger transaction at a cash price of $9.25 per share of
Common Stock. The Revised Proposal is filed as Exhibit 1 to this Amendment and
is incorporated herein by reference.
On November 9, 1999, the Reporting Person accepted a term sheet (the
"Revised Term Sheet") of Banc of America Commercial Finance Corporation to
provide debt financing of up to an aggregate of $20 million to fund the proposed
merger transaction. A copy of the Revised Term Sheet is filed as Exhibit 2 to
this Amendment and is incorporated herein by reference.
The Reporting Person may vary the terms of his proposal based on
negotiations with the Issuer or otherwise and may withdraw his proposal at any
time prior to its being accepted.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
The information set forth in Item 4 of this Amendment is incorporated
herein by reference.
Item 7. Material to be Filed as Exhibits.
The Revised Proposal is filed as Exhibit 1 to this Amendment. The
Revised Term Sheet is filed as Exhibit 2 to this Amendment.
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Signature.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment is true, complete and
correct.
Dated: November 10, 1999
/s/ Michael J. Collins
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Michael J. Collins
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EXHIBIT INDEX
Sequentially
Exhibit Document Numbered Page
- ------- -------- -------------
1 Proposal letter dated November 9, 1999 from 6
Michael J. Collins to John L. Chanon and
Ronald A. Norelli, Special Committee of the
Board of Directors of CEM Corporation
2 Term sheet of Banc of America Commercial 7
Finance Corporation dated November 9, 1999
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EXHIBIT 1
[letterhead of Michael J. Collins]
November 9, 1999
Messrs. John L. Chanon and Ronald A. Norelli
Special Committee of the Board of Directors
CEM Corporation
Dear John and Ron:
In the light of our discussions, I am writing to offer a revised
proposal to acquire CEM in a cash merger transaction at a price of $9.25 per
share. Outstanding stock options under the company's plans with an exercise
price of less than $9.25 would be exchanged for cash equal to the excess of
$9.25 over the exercise price. The other terms of my proposal remain the same,
including that our definitive merger agreement would not contain a financing
condition. I am enclosing a term sheet that I have accepted from Banc of America
Commercial Finance Corporation to provide the necessary financing.
At $9.25, our shareholders would receive a 61% premium to the closing
price on the day I made my first proposal. In fact, my proposal represents a 21%
premium over yesterday's closing price. I want to reiterate my strong belief
that my proposal is in the best interests of the company's shareholders,
employees, customers and suppliers.
As required by law, I will file an amendment to my Schedule 13D with
the Securities and Exchange Commission to report my proposal made by this
letter. A copy of this letter will be attached as an exhibit.
I look forward to hearing from you.
Very truly yours,
/s/ Michael J. Collins
Michael J. Collins
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EXHIBIT 2
[letterhead of Banc of America Commercial Finance Corporation]
November 9, 1999
Mr. Michael J. Collins
c/o Wachovia Securities, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, NC 28202
Dear Mike:
Banc of America Commercial Finance Corporation ("BACF") is pleased to present
its proposal to finance the proposed purchase of all of the outstanding shares
of CEM Corporation ("CEM") by Mr. Michael J. Collins, as described below (the
"Transaction"). BACF proposes to provide credit available in an amount totaling
up to $20.00 million in the form of a $3.00 million Revolving Credit Facility, a
$11.00 million Term Loan A, and a $6.00 million Term Loan B (collectively, the
"Financing"). The Financing is based on a maximum of $9.25 p/share being
tendered for the approximately 3 million shares outstanding of CEM. It is
anticipated that the uses will be as follows ($000):
Purchase Stock 28,152
Fees & Expenses 1,305
Refinance Existing Debt 1,239
Unused Revolver 3,000
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Total Uses 33,696
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REVOLVING CREDIT FACILITY
Borrower: A newly formed company, whose sole purpose
is to merge into CEM ("Newco" or "Company").
Guarantor: A newly formed holding company, whose sole
purpose is to own the stock of Newco
("Holdings").
Revolver Amount: Up to $3,000,000.
Interest Rate: Floating at the 30 day LIBOR rate plus 375
basis points, payable monthly in arrears.
Revolver Term: Coterminous with Term Loan B.
Availability: Subject to an advance rate against eligible
accounts receivable of up to 85.0%, and an
advance rate against eligible inventory of
50%.
Collateral: A first lien on all of the Company's assets,
including cash, cash equivalents, inventory,
accounts receivable, property, plant and
equipment, intangibles, insurance policies,
contract rights and other agreements,
together with a pledge of the stock of the
Borrower and any subsidiaries, and a first
security interest in all of the purchaser's
rights under the Purchase Agreement and any
escrows established pursuant thereto.
Purpose: For working capital.
Draws: Minimum draw of $100,000.
Revolver Amount Drawn
at Closing: Estimated to be zero at closing.
Letter of Credit
sub-facility Amount: $500,000
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Letter of Credit Fees: 3.75% of the amount of the letters of credit
outstanding, payable quarterly in arrears.
In addition, the Borrower shall pay whatever
fees the issuing bank requires for the
standby or documentary L/C's.
Ranking: The Revolver shall rank pari passu with all
other portions of the Financing.
Facility Fee: 37.5 basis points of the average undrawn
amount of the Revolving Credit Facility,
payable quarterly.
Optional Prepayment: A prepayment penalty shall be payable on the
revolver equal to that under the Term Loans.
TERM LOAN A
Borrower: Same as Revolver
Guarantor: Same as Revolver
Amount: $11,000,000
Interest Rate: Floating at the 30 day LIBOR rate plus 450
basis points, payable monthly in arrears.
Term: 6 years.
Mandatory Repayment:
- Scheduled: To be paid in equal quarterly installments
based on the following annual schedule:
Yr1 750
Yr2 1,000
Yr3 1,750
Yr4 2,250
Yr5 2,500
Yr6 2,750
- Cash Sweep: 50% of Excess Cash Flow shall be paid
annually as additional principal payments,
applied in inverse order of maturity. Excess
Cash Flow shall mean EBITDA less capital
expenditures, less cash taxes,
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less scheduled debt service.
- Asset Sales: 100% of net proceeds of asset sales shall be
applied to installments due in inverse order
of maturity.
- Equity Proceeds: 100% of net equity offering proceeds shall
be applied to installments due in inverse
order of maturity.
Collateral: Same as the Revolving Credit Facility.
Ranking: Ranks pari passu with Revolver & Term Loan
A.
TERM LOAN B
Borrower: Same as Revolver & Term Loan A.
Guarantor: Same as Revolver & Term Loan A.
Amount: $6,000,000
Interest Rate: Floating at the 30 day LIBOR rate plus 600
basis points, payable monthly in arrears.
Term: 7 years.
Mandatory Repayment:
- Scheduled: Four equal quarterly payments beginning with
the earlier of the first quarter after
repayment in full of the Term Loan A or year
seven.
- Cash Sweep: After repayment in full of Term Loan A, 50%
of Excess Cash Flow shall be paid annually
as additional principal payments, applied in
inverse order of maturity.
- Other: After repayment in full of Term Loan A, 100%
of net proceeds of asset sales, equity
offerings and insurance proceeds shall be
applied to in inverse order of maturity.
Optional Prepayment: After repayment in full of Term Loan A, with
the same prepayment premiums as Term Loan A.
Collateral: Same as the Revolving Credit Facility and
Term Loan A.
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GENERAL TERMS AND CONDITIONS
The general terms and conditions set forth below shall apply to the Financing:
Financial Covenants
Financial covenants shall include but not be limited to:
(i) debt coverage ratios,
(ii) capital expenditure & research and development limitations,
and
(iii) minimum EBITDA levels.
Other Covenants
Other covenants shall include but not be limited to:
(i) financial reporting (including review of operating and capital
expenditure budgets),
(ii) restriction on additional indebtedness, stock issuance,
investments, management compensation or liens,
(iii) prohibition on disposition of material assets,
(iv) limitations on leasing,
(v) prohibitions of dividends and repurchase of common stock,
(vi) restriction on related party transactions,
(vii) change of control provisions (including equity holders,
management, and Board of Directors),
(viii) merger and consolidation provisions and
(ix) limitations on change in management contracts and replacement
of key members of management..
Events of Default/Remedies
The transaction documents shall contain events of default and remedies customary
for transactions of this type.
MISCELLANEOUS
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Closing Date: To be mutually agreed upon.
Capital/Cash Contribution: On the Closing Date, Mr.
Collins shall contribute all of his common
stock and options (approximately 480,000
shares) into the transaction, on terms
acceptable to BACF. In addition, cash of
$9.3 million at CEM will be used to fund
part of the Transaction.
Environmental: You shall arrange for an environmental
consulting firm acceptable to BACF to
conduct an environmental and occupational
safety and health review (the "Environmental
Review") of the Borrower's properties and
business practices. The scope of the
Environmental Review, the report prepared by
the consulting firm (the "Environmental
Report") and the consulting firm must be
satisfactory to BACF. BACF reserves the
right to have the Environmental Report
reviewed by its environmental consultants.
Environmental representations, warranties,
covenants, notices of default and
indemnities related to compliance with
environmental laws and regulations, and the
maintenance of the Borrower's properties
free of hazardous material and/or waste, as
are deemed appropriate by BACF and its
counsel in their sole discretion, will be
required.
Employment Contracts: BACF may require employment and non-compete
contracts between the Company and certain
members of senior management acceptable to
BACF.
Limited Recourse: Mr. Collins shall be liable for any harm,
loss, expense or damage (which may include
lost principal or interest and legal fees)
suffered or incurred by BACF as a result of
fraud, waste, misapplication of funds
(including, nonpayment of taxes or insurance
premiums resulting therefrom and failure to
account properly for any security deposit or
other deposit), and any direct or indirect
transfer of any collateral or the existence
of liens on the collateral in violation of
the Loan Documents (collectively, the
"Recourse Obligations"). In addition, the
Financing shall become recourse to Mr.
Collins in the event of the voluntary
bankruptcy of Holdings or the Company, or
any involuntary bankruptcy filed against
Holdings or the Company by any affiliate
(the "Bankruptcy Obligations"). Mr. Collins'
obligations for the Recourse Obligation and
the Bankruptcy Obligations shall be
evidenced by a Limited Guaranty and
Indemnity Agreement in form and substance
satisfactory to BACF.
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Key-Man Life Insurance: BACF may require key-man life insurance on
certain members of senior management in
amounts acceptable to BACF.
Transaction Expenses: All of BACF 's out-of-pocket
expenses (including expenses of legal
counsel and outside consultants) will be for
your account and will be paid by you,
regardless of whether the transactions
contemplated hereby are consummated.
Good Faith Deposit: A $50,000 good faith deposit (the "Deposit")
is due and payable upon acceptance of a
proposal letter. The Deposit will be
refunded, less any out-of-pocket expense
incurred, only in the event that BACF does
not approve this transaction and deliver a
commitment letter on substantially the terms
outlined herein. If CEM is purchased by
someone other than Mr. Collins prior to the
delivery of a commitment letter, the Deposit
shall be non-refundable. At closing, the
Deposit will be credited against the
Commitment Fees due as outlined in a
separate fee letter.
Interest Rate Protection: BACF may require that the Company obtain
interest rate protection with respect to its
floating rate obligations under the
Financing.
Broker: Mr. Collins agrees to indemnify and hold
BACF harmless from any claim for any
commission, fee or compensation from any
broker resulting from this transaction. BACF
represents that it has not retained any
broker or third party in connection with the
proposed transaction that it has not
arranged to compensate separately. No broker
or any other third party has any authority
to act or bind BACF
Assignment: BACF's interest in the Financing may be
assigned, sold, participated or otherwise
transferred, in whole or in part
Indemnity: Mr. Collins agrees to indemnify and hold
BACF harmless from any claim for damage,
loss or expense arising out of, or in
connection with, or any action contemplated
in connection herewith, if this transaction
is not consummated.
Documentation: Negotiation of transaction agreements,
perfection of liens, and satisfaction of
other customary closing conditions
(including opinions) must be satisfactory in
form and substance to BACF and its counsel.
BACF's counsel shall prepare drafts of
transaction documents for the Financing.
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Conditions to
Commitment: If a commitment letter is issued it shall be
subject to the satisfaction, in BACF's
discretion, of certain conditions including
but not limited to:
(i) satisfactory review of the fiscal
year 1999 audited internal financial
statements of the Company and the
2000 year-to-date internal financial
statements of the Company;
(ii) satisfactory review of accounting,
financial, operational and MIS
systems and controls of the Company;
and employment contracts with senior
management;
(iii) satisfactory review of the scope of
the Environmental Review and results
of the Environmental Report;
(iv) satisfactory review of the
historical financial performance of
the Company, as well as, internal
controls and procedures done by an
accounting firm acceptable to BACF;
(v) absence of material adverse change
in the financial condition,
operations or business prospects of
CEM or the Company;
(vi) satisfactory review of contingent
liabilities;
(vii) satisfactory review of projected
federal and state tax calculations,
and insurance policies;
(viii) satisfaction by BACF with all terms
of the Transaction, including,
without limitation, any tender
documents or merger agreement in
connection therewith; and
(ix) and satisfactory review of the
purchase agreements and equity
documents (including charter,
shareholder and other documents)
with terms and conditions
acceptable to BACF.
THIS IS NOT A COMMITMENT. THIS LETTER IS BEING SENT AT A TIME WHEN WE HAVE NOT
YET UNDERTAKEN A FULL BUSINESS, CREDIT AND LEGAL ANALYSIS OF THE COMPANY AND THE
PROPOSED TRANSACTION. AS A RESULT OF FURTHER INVESTIGATION AND ANALYSIS BY US
AND OUR LEGAL COUNSEL OR BY REASON OF INFORMATION OF WHICH WE ARE NOT NOW AWARE,
IMPEDIMENTS TO ISSUING A COMMITMENT LETTER OR CLOSING MAY BE DISCOVERED.
ACCORDINGLY, WE MAY REQUIRE THAT THE PROPOSED TRANSACTION BE RESTRUCTURED OR
OTHERWISE MODIFIED TO MAKE ALLOWANCE FOR SUCH IMPEDIMENTS. AS THE LENDER, WE ARE
THE SOLE
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JUDGE OF WHAT IS AN IMPEDIMENT AND WHETHER THE IMPEDIMENT IS SO SERIOUS AS TO
IMPEDE OR PREVENT THE ISSUANCE OF A COMMITMENT LETTER OR THE CLOSING OF THE
PROPOSED TRANSACTION.
This Proposal Letter is being provided to you on the condition that neither it
nor its substance will be disclosed or distributed without the prior written
consent of BACF except to the Company, your and their agents, advisors, Mr.
Collins, and attorneys who have a need to know as a result of their being
specifically involved in the proposed transaction. This letter is not a
Commitment Letter.
This Proposal Letter
(i) shall set forth the entire understanding to date between the
parties and supersedes all prior agreements and
understandings, both written and oral, with respect to the
subject matter covered in this letter,
(ii) may not be amended, modified or supplemented in any respect
except as expressly set forth in writing signed by an
authorized representative of BACF, and
(iii) shall be governed by and construed in accordance with the
internal laws of the State of New York.
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If the terms of the Proposal Letter are acceptable to you, please sign below on
the enclosed copy of this letter. This Proposal Letter will become effective
upon your delivery to us of executed counterparts of this Proposal Letter and
the Fee Letter, and you agree upon acceptance of this Proposal Letter to pay the
fees set forth in the Proposal and Fee Letters (including the Deposit and
out-of-pocket expenses). This Proposal Letter expires if not accepted by 5:00
p.m. on November 12, 1999.
Very truly yours,
Banc of America Commercial Finance Corporation
By: /s/ Joseph P. Longosz
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Joseph P. Longosz
Senior Vice President
By: /s/ Karl F. Jaeger
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Karl F. Jaeger
Vice President
Agreed and accepted:
/s/ Michael J. Collins
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Michael J. Collins
Dated: 11/9/99
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