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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
(AMENDMENT NO. 3)
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)
April 21, 2000
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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
[ ].
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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 --------------- -------------------------------------
OWNED BY EACH REPORTING 8 SHARED VOTING POWER - 27,450
PERSON WITH --------------- -------------------------------------
9 SOLE DISPOSITIVE POWER - 477,442
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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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This Amendment No. 3 (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 December 29, 1999, the Reporting Person entered into an Agreement
and Plan of Merger (the "Merger Agreement") among the Issuer, the Reporting
Person and MJC Acquisition Corporation, a North Carolina corporation (the
"Acquisition Corporation"), a newly formed corporation owned by the Reporting
Person. The Merger Agreement provides for the merger (the "Merger") of the
Acquisition Corporation into the Issuer, and as a result, all shares of Common
Stock other than shares held by the Acquisition Corporation will be converted
into the right to receive $11.15 in cash. The Merger Agreement has been approved
by the Board of Directors of the Issuer, which has also voted to recommend that
the shareholders of the Issuer approve the Merger. The Reporting Person
contemplates that he will contribute the shares of Common Stock owned by him to
the Acquisition Corporation prior to the effective time of the Merger. A copy of
the Merger Agreement is filed as Exhibit 1 hereto and is incorporated by
reference herein.
The Merger is subject to the approval of the holders of 66 2/3 percent
of the outstanding shares of Common Stock. The Merger Agreement requires the
Issuer to take all actions reasonably necessary to convene a meeting of its
shareholders as soon as reasonably practicable for the purpose of considering
and approving the Merger.
The Merger Agreement provides that upon completion of the Merger, the
directors of the Acquisition Corporation and the officers of the Issuer will
become, respectively, the directors and officers of the surviving corporation of
the Merger.
On April 21, 2000, the Reporting Person accepted on behalf of the
Acquisition Corporation a commitment letter (the "Commitment Letter") from Banc
of America Commercial Finance Corporation (the "Bank") to provide up to
$21,000,000 in debt financing to fund the Merger, including related expenses,
and to provide the Issuer a working capital line of credit following the Merger.
A copy of the Commitment Letter is filed as Exhibit 1 hereto and is incorporated
by reference herein.
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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 Commitment Letter is filed as Exhibit 1 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: April 21, 2000
/s/ Michael J. Collins
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Michael J. Collins
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EXHIBIT INDEX
Exhibit Document
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1 Commitment Letter of Banc of America Commercial Finance
Corporation dated April 20, 2000 and accepted by Michael J.
Collins on April 21, 2000
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[Letterhead of Banc of America Commercial Finance Corporation]
April 20, 2000
Dr. 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 commitment to finance the proposed purchase of all of the outstanding
shares of CEM Corporation ("CEM") by Dr. Michael J. Collins, as described below
(the "Transaction"). BACF proposes to provide credit available in an amount
totaling up to $21.00 million in the form of a $3.00 million Revolving Credit
Facility, a $12.00 million Term Loan A, and a $6.00 million Term Loan B
(collectively, the "Financing"). The Financing is based on $11.15 p/share being
tendered for the approximately 3 million shares outstanding of CEM. It is
anticipated that the uses will be as follows ($000):
<TABLE>
<CAPTION>
<S> <C>
Purchase Stock 34,534
Fees & Expenses 1,706
Unused Revolver 2,400
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Total Uses 38,640
======
</TABLE>
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<TABLE>
<CAPTION>
REVOLVING CREDIT FACILITY
<S> <C>
Borrower: A newly formed operating company, whose sole
purpose is to own the assets of 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 Estimated to be $200,000 at closing.
at Closing:
Letter of Credit sub- $750,000
facility Amount:
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.
</TABLE>
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<TABLE>
<CAPTION>
TERM LOAN A
<S> <C>
Borrower: Same as Revolver
Guarantor: Same as Revolver
Amount: $12,000,000
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 1,000
Yr2 1,500
Yr3 2,000
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, 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.
</TABLE>
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<TABLE>
<CAPTION>
TERM LOAN B
<S> <C>
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.
Collateral: Same as the Revolver and Term Loan A.
</TABLE>
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,
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(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
Closing Date: Not later than June 30, 2000.
Capital/Cash Contribution: On the Closing Date, Dr. Collins shall
contribute all of his common stock and
options (approximately 480,000 shares) into
the transaction, on terms acceptable to
BACF. Dr. Collins shall also invest up to
$1.0 million of subordinated debt (interest
only at 8% p.a., with a bullet maturity of 8
years) at closing, on terms acceptable to
BACF. In addition, cash of $11.05 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: Dr. 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
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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 Dr. 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"). Dr. 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.
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")
was paid upon acceptance of a proposal
letter, and is non-refundable. The Deposit
will be credited against the Commitment
Fees due at closing 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: Dr. 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: Dr. 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
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its counsel. BACF's counsel shall prepare
drafts of transaction documents for the
Financing.
Conditions to
Closing: The closing is subject to the satisfaction,
in BACF's discretion, of certain conditions
including but not limited to:
(i) satisfactory review of the fiscal
year 2000 year-to-date internal
financial statements of the
Company;
(ii) satisfactory review of the scope of
the Environmental Review and
results of the Environmental
Report;
(iii) absence of material adverse change
in the financial condition,
operations or business prospects of
CEM or the Company;
(iv) payment of any fees or other
consideration that may be agreed
upon in connection with the
Financing,
(v) satisfactory review of projected
federal and state tax calculations,
and insurance policies;
(vi) satisfaction by BACF with all terms
of the Transaction, including,
without limitation, any tender
documents or merger agreement in
connection therewith; and
(vii) satisfactory review of the
purchase agreements and equity
documents (including charter,
shareholder and other documents)
with terms and conditions
acceptable to BACF.
This Commitment 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, Dr.
Collins, and attorneys who have a need to know as a result of their being
specifically involved in the proposed transaction.
This Commitment Letter
(i) 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
(ii) 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 Commitment Letter are acceptable to you, please sign below
on the enclosed copy of this letter. This Commitment letter will become
effective upon your delivery to us of executed counterparts of this Commitment
Letter and the Fee Letter, and you agree upon acceptance of this Commitment
Letter to pay the fees set forth in the Commitment Letter and Fee Letters
(including out-of-pocket expenses). This Commitment Letter expires if not
accepted by 5:00 p.m. on April 21, 2000.
Very truly yours,
Banc of America Commercial Finance Corporation
By: /s/ Joseph P. Longosz
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Joseph P. Longosz
Senior Vice President
Agreed and accepted:
/s/ Michael J. Collins
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Michael J. Collins
Dated: April 21, 2000
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