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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(AMENDMENT NO. 2)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CEM CORPORATION
---------------
(Name of Issuer)
Common Stock, $.05 par value
----------------------------
(Title of Class of Securities)
125165 10 0
-----------
(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)
December 29, 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
[ ] .
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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. 2 (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 December 28, 1999, 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 and $400,000 in equity 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 2 hereto and is incorporated by reference herein.
On December 29, 1999, the Issuer and the Reporting Person issued a
press release (the "Press Release") announcing the signing of the Merger
Agreement. A copy of the Press Release is filed as Exhibit 3 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 Merger Agreement is filed as Exhibit 1 to this Amendment. The
Commitment Letter is filed as Exhibit 2 to this Amendment. The Press Release is
filed as Exhibit 3 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: December 30, 1999
/s/ Michael J. Collins
--------------------------------
Michael J. Collins
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EXHIBIT INDEX
Exhibit Document
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1 Agreement and Plan of Merger dated December 29, 1999 among
Michael J. Collins, MJC Acquisition Corporation and CEM
Corporation
2 Commitment Letter of Banc of America Commercial Finance
Corporation dated December 28, 1999 and accepted by Michael J.
Collins on December 28, 1999
3 Press release dated December 29, 1999 issued by CEM
Corporation and Michael J. Collins
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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
Dated as of December 29, 1999
by and among
CEM CORPORATION,
MJC ACQUISITION CORPORATION
AND
MICHAEL J. COLLINS
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TABLE OF CONTENTS
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TABLE OF CONTENTS
ARTICLE I
MERGER AND ORGANIZATION
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Section 1.1 The Merger............................................................................. 1
Section 1.2 Effective Time......................................................................... 1
Section 1.3 Effect of Merger....................................................................... 2
ARTICLE II
CONVERSION OF SECURITIES AT THE EFFECTIVE TIME
Section 2.1 Conversion of Securities of CEM and Acquiror........................................... 3
Section 2.2 Payment of Cash for CEM Common Stock................................................... 3
Section 2.3 Exchange of Acquiror Common Stock Certificate.......................................... 5
ARTICLE III
ADDITIONAL AGREEMENTS IN CONNECTION WITH THE MERGER
Section 3.1 Shareholders' Approval................................................................. 5
Section 3.2 Proxy Materials and Schedule 13E-3..................................................... 6
Section 3.3 Termination of CEM Stock Option Plans.................................................. 6
Section 3.4 Reasonable Best Efforts; Consents; Other Filings....................................... 7
Section 3.5 Financing.............................................................................. 7
Section 3.6 Conduct of Business by CEM Pending the Merger.......................................... 7
Section 3.7 Notification of Certain Matters........................................................ 10
Section 3.8 Access to CEM's Books and Records...................................................... 11
Section 3.9 Acquisition Proposals.................................................................. 11
Section 3.10 Director and Officer Protection........................................................ 12
Section 3.11 Actions of Collins Pending the Closing................................................. 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CEM
Section 4.1 Organization and Good Standing......................................................... 13
Section 4.2 Authorization; Binding Agreement....................................................... 13
Section 4.3 Capitalization......................................................................... 14
Section 4.4 Financial Statements................................................................... 14
Section 4.5 Absence of Certain Changes or Events................................................... 15
Section 4.6 SEC Reports and Other Documents........................................................ 15
Section 4.7 Governmental and Other Consents and Approvals.......................................... 15
Section 4.8 No Violation........................................................................... 16
Section 4.9 Litigation............................................................................. 16
Section 4.10 Governmental Approvals; Compliance with Law............................................ 17
Section 4.11 Brokers and Finders.................................................................... 17
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<TABLE>
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Section 4.12 Fairness Opinions and Approval by Committee............................................ 17
Section 4.13 Taxes.................................................................................. 17
Section 4.14 Employee Benefits...................................................................... 19
Section 4.15 Environmental Matters.................................................................. 20
Section 4.16 Board Recommendation................................................................... 21
Section 4.17 Required Company Vote.................................................................. 22
Section 4.18 State Takeover Statutes................................................................ 22
Section 4.19 Material Contract Defaults............................................................. 22
Section 4.20 Information in Proxy Statement......................................................... 22
Section 4.21 Properties............................................................................. 23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND COLLINS
Section 5.1 Organization and Good Standing......................................................... 23
Section 5.2 Authorization; Binding Agreement....................................................... 23
Section 5.3 No Violation........................................................................... 24
Section 5.4 Governmental and Other Consents and Approvals.......................................... 24
Section 5.5 Proxy and Schedule 13E-3 Information................................................... 25
Section 5.6 Financing.............................................................................. 25
Section 5.7 Brokers and Finders.................................................................... 25
Section 5.8 No Prior Activities.................................................................... 26
Section 5.9 Litigation............................................................................. 26
Section 5.10 Surviving Corporation Not Rendered Insolvent........................................... 25
Section 5.11 No Conflicting Knowledge............................................................... 25
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger............................. 26
Section 6.2 Conditions to Obligation of CEM to Effect the Merger................................... 27
Section 6.3 Conditions to Obligations of Acquiror to Effect the Merger............................. 27
ARTICLE VII
TERMINATION; NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; WAIVER AND AMENDMENT
Section 7.1 Termination............................................................................ 28
Section 7.2 Non-Survival of Representations, Warranties and Covenants.............................. 30
Section 7.3 Amendment.............................................................................. 30
Section 7.4 Waiver................................................................................. 30
Section 7.5 Effect of Termination.................................................................. 30
Section 7.6 Certain Payments....................................................................... 31
ARTICLE VIII
GENERAL AGREEMENTS
Section 8.1 Notice................................................................................. 32
Section 8.2 Entire Agreement....................................................................... 33
Section 8.3 Parties in Interest.................................................................... 33
Section 8.4 Publicity.............................................................................. 33
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<TABLE>
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Section 8.5 Headings............................................................................... 33
Section 8.6 Interpretation......................................................................... 34
Section 8.7 Subsidiaries........................................................................... 34
Section 8.8 Successors and Assigns................................................................. 34
Section 8.9 Governing Law.......................................................................... 34
Section 8.10 Costs and Expenses..................................................................... 34
Section 8.11 Counterparts........................................................................... 34
Section 8.12 Specific Performance................................................................... 34
Section 8.13 Conciliation and Arbitration........................................................... 35
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INDEX OF DEFINED TERMS
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AAA........................................................................................................... 8.13
Acquiror Common Stock......................................................................................... 2.1(b)
Acquiror...................................................................................... Introductory Paragraph
Acquisition Proposal............................................................................................. 3.9
Advisor......................................................................................................... 4.11
Agreement..................................................................................... Introductory Paragraph
Articles of Merger.......................................................................................... Recitals
Cash Merger Consideration..................................................................................... 2.1(a)
CEM .......................................................................................... Introductory Paragraph
CEM Common Stock.............................................................................................. 2.1(a)
CEM Share..................................................................................................... 2.1(a)
CEM Shares.................................................................................................... 2.1(a)
Closing.......................................................................................................... 1.2
Code............................................................................................................ 4.13
Committee........................................................................................................ 3.1
Company Benefit Plans........................................................................................ 4.14(a)
Company ERISA Affiliate...................................................................................... 4.14(c)
Definitive Proxy Statement.................................................................................... 3.2(a)
Disbursing Agent.............................................................................................. 2.2(a)
Disclosure Schedules.................................................................................... Section 3.12
Dispute......................................................................................................... 8.13
Effective Time................................................................................................... 1.2
Environmental Claim..................................................................................... Section 4.15
Environmental Laws...................................................................................... Section 4.15
Environmental Permits................................................................................... Section 4.15
ERISA........................................................................................................ 4.14(a)
Exchange Act..................................................................................................... 4.4
Expenses...................................................................................................... 7.6(c)
Fee........................................................................................................... 7.6(a)
Financing Letters................................................................................................ 5.6
Financing........................................................................................................ 5.6
Government Approvals............................................................................................ 4.10
Hazardous Materials..................................................................................... Section 4.15
Interim Financial Statements............................................................................. Section 4.4
Indemnified Party............................................................................................... 3.10
Knowledge........................................................................................................ 8.6
Material Adverse Change.......................................................................................... 4.1
Material Adverse Effect.......................................................................................... 4.1
Merger...................................................................................................... Recitals
North Carolina Act.......................................................................................... Recitals
Permitted Investments......................................................................................... 2.2(a)
Person........................................................................................................ 2.2(b)
Plan of Merger.............................................................................................. Recitals
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<TABLE>
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Preferred Stock.................................................................................................. 4.3
Preliminary Proxy Statement................................................................................... 3.2(a)
Returns...................................................................................................... 4.13(a)
Rules........................................................................................................... 8.13
Schedule 13E-3................................................................................................ 3.2(b)
SEC........................................................................................................... 3.2(a)
Special Meeting.................................................................................................. 3.1
Stock Options.................................................................................................... 3.3
Subsidiaries..................................................................................................... 8.7
Superior Proposal..................................................................................... Section 7.6(a)
Surviving Corporation............................................................................................ 1.1
Tax Affiliate................................................................................................ 4.13(a)
Tax.......................................................................................................... 4.13(a)
Taxes........................................................................................................ 4.13(a)
WARN.......................................................................................................... 3.6(s)
Year-End Financial Statements.................................................................................... 4.4
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This AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of
December 29, 1999 and is by and among CEM CORPORATION, a North Carolina
corporation ("CEM"), MJC ACQUISITION CORPORATION, a North Carolina corporation
("Acquiror"), and MICHAEL J. COLLINS, an individual residing in North Carolina
("Collins").
RECITALS
The boards of directors of CEM and Acquiror deem it advisable for the
mutual benefit of CEM and Acquiror and their respective shareholders,
respectively, that Acquiror be merged with and into CEM (the "Merger") upon the
terms and subject to the conditions set forth in the Plan of Merger (the "Plan
of Merger"), which is set forth in the Articles of Merger in substantially the
form attached hereto as EXHIBIT A (the "Articles of Merger"), and in accordance
with the North Carolina Business Corporation Act (the "North Carolina Act").
The board of directors of Acquiror have approved and adopted this
Agreement. The board of directors and Special Committee of CEM have adopted
this Agreement and have resolved, subject to the terms of this Agreement, to
recommend to the shareholders of CEM to vote to approve this Agreement in
conjunction with their approval of the Plan of Merger.
In consideration of the mutual covenants, agreements, representations
and warranties contained herein, and for the purpose of setting forth certain
terms and conditions of the Merger, and the mode of carrying the same into
effect, CEM, Acquiror and Collins hereby agree as follows:
ARTICLE I
MERGER AND ORGANIZATION
1.1 The Merger. Acquiror shall be merged with and into CEM at the
Effective Time (as defined below), upon the terms and subject to the conditions
hereinafter set forth, as permitted by and in accordance with the North
Carolina Act. CEM, as the surviving corporation following the effectiveness of
the Merger, is sometimes referred to herein as the "Surviving Corporation."
CEM, Acquiror and Collins agree that upon written notice of Acquiror to CEM
delivered at least 20 business days prior to the date of the Special Meeting,
Acquiror, CEM and Collins shall amend this Agreement to provide that the merger
contemplated hereby shall be the merger of CEM into Acquiror with Acquior being
the surviving corporation of such merger and to make other necessary changes to
so conform the Plan of Merger and Articles of Merger (as such terms are defined
herein).
1.2 Effective Time. If this Agreement is not terminated pursuant to
ARTICLE VII hereof, as soon as practicable after all conditions to the Merger
set forth in ARTICLE VI hereof shall have been satisfied or waived, CEM and
Acquiror shall cause the Articles of Merger to be executed, acknowledged and
filed with the Secretary of State of the State of North Carolina as provided in
the North Carolina Act. The Merger shall be consummated and the closing of the
transactions contemplated by this Agreement (the "Closing") shall occur
immediately upon the filing of the Articles of Merger with the Secretary of
State of the State of North Carolina (the date and time of
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such filing and Closing being referred to herein as the "Effective Time"). The
Closing shall take place at the offices of Robinson, Bradshaw & Hinson, P.A.,
101 North Tryon Street, Suite 1900, Charlotte, North Carolina 28246, or at such
other place as the parties may mutually agree.
1.3 Effect of Merger. The parties agree to the following provisions
with respect to the Merger:
(a) The name of the Surviving Corporation shall from and
after the Effective Time shall become and continue to be "CEM
Corporation" until changed in accordance with applicable law.
(b) The articles of incorporation of CEM shall be amended and
restated to conform to the articles of incorporation of Acquiror as in
effect immediately prior to the Effective Time; provided, however,
that, at the Effective Time, Article 1 of the articles of
incorporation of the Surviving Corporation shall be amended to read as
follows: "The name of the corporation is CEM Corporation" and Article
2 shall be amended to provide that the number of authorized shares of
common stock of the corporation shall be 100.
(c) The bylaws of Acquiror, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter amended in accordance with law, the articles of
incorporation of the Surviving Corporation and such bylaws.
(d) At the Effective Time, the separate corporate existence
of Acquiror shall cease, and CEM as the Surviving Corporation and
successor shall succeed to Acquiror as set forth in Section 55-11-06
of the North Carolina Act.
(e) The directors of Acquiror immediately prior to the
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of CEM immediately prior to the
Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected and
qualified.
(f) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of
CEM acquired or to be acquired as a result of the Merger, or (ii)
otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees
shall be authorized to execute and deliver, in the name and on behalf
of the CEM, all such deeds, bills of sale, assignments and assurances
and do, in the name and on behalf of CEM, all other acts and things
necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, properties or
assets of CEM acquired or to be acquired as a result of the Merger and
otherwise to carry out the purposes of this Agreement.
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ARTICLE II
CONVERSION OF SECURITIES AT THE EFFECTIVE TIME
2.1 Conversion of Securities of CEM and Acquiror. At the Effective
Time, pursuant to this Agreement and by virtue of the Merger and without any
action on the part of CEM, Acquiror or the holders of any of the following
securities:
(a) Each share of common stock, par value $.05 per share, of
CEM ("CEM Common Stock") (shares of CEM Common Stock being hereinafter
collectively referred to as "CEM Shares" and individually as a "CEM
Share") issued and outstanding immediately prior to the Effective Time
(other than any CEM Shares to be cancelled pursuant to SECTION 2.1(B))
shall be cancelled, extinguished and shall be converted automatically
into the right to receive an amount equal to $11.15 in cash, without
interest (the "Cash Merger Consideration"), payable to the holder
thereof, as provided in SECTION 2.2, upon surrender of the certificate
formerly representing the CEM Shares being converted into the right to
receive the Cash Merger Consideration, less any required withholding
taxes;
(b) Each CEM Share held in the treasury of CEM and each CEM
Share owned by Acquiror (including CEM Shares contributed to Acquiror
by agreement with Acquiror), if any, immediately prior to the
Effective Time shall be cancelled without any conversion thereof and
no payment or distribution shall be made with respect thereto; and
(c) Each share of Acquiror's common stock, $.01 par value
("Acquiror Common Stock"), that is issued and outstanding immediately
prior to the Effective Time shall be converted into one newly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
2.2 Payment of Cash for CEM Common Stock.
(a) At the Effective Time, Collins shall cause Acquiror to,
and Acquiror shall, irrevocably deposit or cause to be deposited with
a bank or trust company to be designated by Acquiror and reasonably
satisfactory to CEM that is organized and doing business under the
laws of the United States or any state thereof and has a combined
capital and surplus of at least $100,000,000 (the "Disbursing Agent"),
as agent for the holders of shares of CEM Common Stock, cash in the
aggregate amount required to effect conversion of shares of CEM Common
Stock into the Cash Merger Consideration at the Effective Time
pursuant to SECTION 2.1(A) hereof. Pending distribution pursuant to
SECTION 2.2(B) hereof of the cash deposited with the Disbursing Agent,
such cash shall be held in trust for the benefit of the holders of CEM
Common Stock and the fund shall not be used for any other purposes,
and Acquiror and Surviving Corporation may direct the Disbursing Agent
to invest such cash, provided that such investments (i) shall be
obligations of or guaranteed by the United States of America,
commercial paper obligations receiving the highest rating from either
Moody's Investors Services, Inc. or Standard & Poor's Corporation, or
certificates of deposit, bank repurchase agreements or bankers
acceptances of domestic commercial banks with capital exceeding
$250,000,000
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(collectively "Permitted Investments") or money market funds that are
invested solely in Permitted Investments and (ii) shall have
maturities that will not prevent or delay payments to be made pursuant
to SECTION 2.2(B) hereof. Each holder of a certificate or certificates
representing shares of CEM Common Stock cancelled at the Effective
Time pursuant to SECTION 2.1(A) hereof may thereafter surrender such
certificate or certificates to the Disbursing Agent, as agent for such
holder of shares of CEM Common Stock, which shall effect the exchange
of such certificate or certificates on such holder's behalf for a
period ending six months after the Effective Time. Any interest and
other income resulting from such investments shall be paid to
Acquiror.
(b) After surrender to the Disbursing Agent of any
certificate that prior to the Effective Time shall have represented
any shares of CEM Common Stock, the Disbursing Agent shall promptly
distribute to the individual, corporation, partnership, joint venture,
association, joint stock company, trust, fund, unincorporated
association, organization or other entity (each, a "Person") in whose
name such certificate shall have been registered a check representing
the amount of Cash Merger ------ Consideration into which such shares
of CEM Common Stock shall have been converted at the Effective Time
pursuant to SECTION 2.1(A) hereof. Until so surrendered and exchanged,
each such certificate shall, after the Effective Time, be deemed to
represent only the right to receive such Cash Merger Consideration,
and until such surrender and exchange, none of the Cash Merger
Consideration shall be paid to the holder of such outstanding
certificate in respect thereof. The Surviving Corporation shall
promptly after the Effective Time cause to be distributed to such
holders appropriate materials to facilitate such surrender.
(c) If any cash deposited with the Disbursing Agent for
purposes of payment in exchange for shares of CEM Common Stock remains
unclaimed following the expiration of six months after the Effective
Time, such cash shall be delivered to the Surviving Corporation by the
Disbursing Agent, and thereafter the Disbursing Agent shall not be
liable to any Persons claiming any amount of such cash, and the
surrender and exchange shall be effected directly with the Surviving
Corporation (subject to applicable abandoned property, escheat and
similar laws). No interest shall accrue or be payable with respect to
any amounts that any such holder shall be so entitled to receive. The
Surviving Corporation or the Disbursing Agent shall be authorized to
pay the cash attributable to any certificate theretofore issued that
has been lost or destroyed, upon receipt of satisfactory evidence of
ownership of the shares of CEM Common Stock represented thereby and of
appropriate indemnification.
(d) None of Acquiror, Collins, the Surviving Corporation or
the Disbursing Agent shall be liable to any Person in respect of any
shares of retained CEM Common Stock (or dividends or distributions
with respect thereto) or cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
certificates representing shares of CEM Common Stock shall not have
been surrendered prior to two years after the Effective Time (or
immediately prior to such earlier date on which any cash, if any, in
lieu of fractional shares of retained CEM Common Stock or any
dividends or distributions with respect to retained CEM Common Stock
in respect of such certificate would otherwise escheat to or become
the property of any governmental entity), any such cash, dividends or
distributions in respect of such certificate shall, to the
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extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.
(e) If payment is to be made to a Person other than the
Person in whose name a surrendered certificate, which prior to the
Effective Time shall have represented any shares of CEM Common Stock,
is registered, it shall be a condition to such payment that the
certificate so surrendered shall be endorsed or shall otherwise be in
proper form for transfer, and that the Person requesting such payment
shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction
of the Surviving Corporation or the Disbursing Agent that such tax
either has been paid or is not payable.
(f) From and after the Effective Time, the holders of shares
of CEM Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of CEM
Common Stock except as otherwise provided herein or by law.
(g) From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of
any shares of CEM Common Stock that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates for
shares of CEM Common Stock are presented to the Surviving Corporation,
they shall be cancelled and promptly exchanged for Cash Merger
Consideration except as provided in SECTION 2.2(B) and (D).
2.3 Exchange of Acquiror Common Stock Certificate. Immediately after
the Effective Time, upon surrender by the record holder of the certificate,
duly endorsed in blank, representing the shares of Acquiror Common Stock
outstanding immediately prior to the Effective Time, the Surviving Corporation
shall deliver to such record holder a share certificate, registered in such
holder's name, representing the number of shares of common stock of the
Surviving Corporation to which such record holder is so entitled by virtue OF
SECTION 2.1(B). Such certificate will bear a legend restricting the
transferability of such shares of the Surviving Corporation except in
accordance with applicable federal and state securities laws.
ARTICLE III
ADDITIONAL AGREEMENTS IN CONNECTION WITH THE MERGER
3.1 Shareholders' Approval. CEM shall take all actions reasonably
necessary in accordance with applicable law and its articles of incorporation
and bylaws to convene a meeting of its shareholders as soon as reasonably
practicable for the purpose of considering and approving this Agreement and the
Merger (the "Special Meeting"). In connection with the Special Meeting, the
board of directors of CEM shall recommend that the shareholders of CEM vote to
approve this Agreement and the Merger unless the Special Committee of such
board of directors (the "Committee") has determined at any time prior to the
Special Meeting in good faith, after consultation with and based upon the
reasonably concluded advice of counsel to the
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Committee, that making such recommendation would violate the fiduciary duties
of the board of directors under applicable law.
3.2 Proxy Materials and Schedule 13E-3.
(a) In connection with the Special Meeting, CEM shall prepare
and file a preliminary proxy statement relating to the transactions
contemplated by this Agreement and the Merger (the "Preliminary Proxy
Statement") with the United States Securities and Exchange Commission
(the "SEC") and shall use its reasonable best efforts to respond to
the comments of the SEC and to cause a definitive proxy statement to
be mailed to CEM's shareholders (the "Definitive Proxy Statement") all
as soon as reasonably practicable; provided, that prior to the filing
of each of the Preliminary Proxy Statement and the Definitive Proxy
Statement, CEM shall consult with Acquiror and Collins with respect to
such filings and shall afford Acquiror and Collins reasonable
opportunity to comment thereon. Acquiror and Collins shall provide CEM
with any information for inclusion in the Preliminary Proxy Statement
and the Definitive Proxy Statement that may be required under
applicable law and is reasonably requested by CEM.
(b) CEM, Acquiror and Collins shall, and shall cause any
other Person that may be deemed to be an affiliate of CEM to, prepare
and file concurrently with the filing of the Preliminary Proxy
Statement a Statement on Schedule 13E-3 ("Schedule 13E-3") with the
SEC. If at any time prior to the Special Meeting any event should
occur that is required by applicable law to be set forth in an
amendment of, or supplement to, the Schedule 13E-3, CEM, Acquiror and
Collins shall, and shall cause such Person to, file such amendments or
supplements.
3.3 Termination of CEM Stock Option Plans. Except as disclosed in
ITEM 3.3 of the Disclosure Schedules, as defined in SECTION 3.12 of this
Agreement, all outstanding stock options issued by CEM (collectively, the
"Stock Options"), including without limitation those issued under the CEM
Corporation 1986 Nonqualified Stock Option Plan, the 1987 Stock Option Plan,
the 1993 Management Equity Plan and the 1993 Nonqualified Stock Option Plan,
shall terminate upon the Merger. With respect to each Stock Option not
otherwise terminated by its terms upon the effectiveness of the Merger, CEM
shall obtain at the earliest practicable date and prior to the Effective Time
the written consent of each holder to the cancellation of such holders' Stock
Options (irrespective of their exercise price and whether or not then currently
exercisable) to take effect on the Effective Time or shall take appropriate
action to amend the relevant plans to provide for such cancellation. At the
Effective Time, the Surviving Corporation shall pay each holder of Stock
Options, to the extent such Stock Options have not been previously exercised or
cancelled, (x) cash in an amount equal to the product of (i) the difference
between $11.15 and the exercise price of such Stock Options (but in no event
less than $0.00), multiplied by (ii) the number of shares of CEM Common Stock
subject to such Stock Options, less (y) the amount of all applicable
withholding taxes.
3.4 Reasonable Best Efforts; Consents; Other Filings. Upon the terms
and subject to the conditions herein provided, and subject to the duties of the
board of directors of CEM under applicable law, as it or the Committee may be
advised by counsel, each party hereto shall use its reasonable best efforts to
take, or cause to be taken, all reasonable action and to do, or cause to
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be done and to assist and cooperate with the other parties hereto in doing, all
things necessary, proper or advisable under applicable laws and regulations and
their respective articles of incorporation and bylaws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated by
this Agreement, subject, however, to the requisite vote of shareholders of CEM.
Such actions shall include, without limitation, using reasonable best efforts
to (i) defend any lawsuits or other legal proceedings, whether judicial or
administrative and whether brought derivatively or on behalf of third parties
(including governmental agencies or officials), challenging this Agreement or
the consummation of the transactions contemplated thereby or hereby, and (ii)
effect all necessary registrations, filings and submissions of information
requested by governmental authorities. Upon the terms and subject to the
conditions hereof, and subject to the duties of the board of directors of CEM
under applicable law, as it, or the Committee, may be advised by counsel, each
of the parties hereto shall use its reasonable best efforts to take, or cause
to be taken, all reasonable actions and to do, or cause to be done, all things
necessary to satisfy the other conditions of Closing set forth herein and to
cooperate with all reasonable requests made by the other party. Without
limiting the generality of the foregoing, and notwithstanding anything in this
Agreement to the contrary, CEM shall use reasonable efforts to obtain all
consents, amendments to or waivers from other parties under the terms of all
leases and other agreements between CEM and such parties required as a result
of the transactions contemplated by this Agreement the failure of which to
obtain would have a Material Adverse Effect (as defined in SECTION 4.1) and
shall use reasonable efforts to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal or state law or
regulation.
3.5 Financing. Each of Acquiror and Collins shall use its reasonable
best efforts to arrange the Financing (as defined in SECTION 5.6) and to
satisfy any and all conditions set forth in the Financing Letters. Acquiror and
Collins shall keep CEM informed of the status of the Financing, including
providing written notice to CEM promptly (and in any event within two business
days) of any material adverse developments relating to the Financing. CEM shall
use its reasonable best efforts to cooperate and assist Acquiror with respect
to the Financing, the expense of which shall be borne by Acquiror, and upon
consummation of the Merger, the Surviving Corporation; provided, that CEM shall
not be obligated to obtain any extraordinary consents, waivers or approvals to
loan agreements, leases or other contracts, to agree to a material adverse
modification of the terms of such documents or to prepay or incur additional
obligations to other parties.
3.6 Conduct of Business by CEM Pending the Merger. CEM covenants and
agrees that, prior to the Effective Time or earlier termination of this
Agreement as provided herein, unless Acquiror shall otherwise agree in writing
and except as contemplated by this Agreement:
(a) CEM shall, and shall cause each of its subsidiaries to,
act and carry on its respective business in the ordinary course of
business substantially consistent with past practice and use its
respective reasonable best efforts to preserve substantially intact
its current material business organizations, keep available the
services of its current officers and employees (except for
terminations of employees in the ordinary course of business) and
preserve its material relationships with others having significant
business dealings with it;
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(b) CEM shall not (i) amend its articles of incorporation or
bylaws, or (ii) declare, set aside or pay any dividend or other
distribution or payment in cash, stock or property in respect of any
of its shares of capital stock;
(c) Neither CEM nor any of its subsidiaries shall (i) except
as set forth in ITEM 3.6(C) of the Disclosure Schedules, issue, grant,
sell, pledge or transfer or agree or propose to issue, grant, sell,
pledge or transfer any shares of capital stock, stock options,
warrants, securities or rights of any kind or rights to acquire any
such shares, securities or rights of CEM, any of its subsidiaries or
any successor thereto, (ii) acquire directly or indirectly by
redemption or otherwise any shares of the capital stock of CEM of any
class or any options, warrants or other rights to purchase any such
shares except as otherwise provided in this Agreement, or (iii) enter
into or modify any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Except in the ordinary course of business consistent with
past practice or as disclosed in ITEM 3.6(D) of the Disclosure
Schedules, neither CEM nor any of its subsidiaries shall (i) incur any
indebtedness for borrowed money or guarantee any such indebtedness of
another Person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of CEM or any of its
subsidiaries, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, or (ii) make any
loans, advances or capital contributions to, or investments in, any
other Person, other than to CEM or any direct or indirect wholly owned
subsidiary of CEM;
(e) Each of CEM and its subsidiaries shall use its reasonable
best efforts to keep in place its current insurance policies that are
material (either individually or in the aggregate) to the conduct of
its business; and notwithstanding such efforts, if any such policy is
cancelled, CEM shall use its reasonable best efforts to replace such
policy or policies;
(f) Neither CEM nor any of its subsidiaries shall make any
material tax election, file any amended tax returns or settle or
compromise any material federal, state, local or foreign income tax
liability;
(g) Neither CEM nor any of its subsidiaries shall make any
material change in its accounting principles or methods except insofar
as may be required by a change in generally accepted accounting
principles;
(h) Neither CEM nor any of its subsidiaries shall split,
combine or reclassify any capital stock of CEM or any subsidiary or
issue or authorize the issuance of any other securities in respect of,
in lieu of or substitution for shares of capital stock of CEM or any
subsidiary;
(i) Except as disclosed in ITEM 3.6(K) of the Disclosure
Schedules, neither CEM nor any of its subsidiaries shall acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other
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manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(j) Neither CEM nor any of its subsidiaries shall sell,
lease, license, mortgage or otherwise encumber or subject to any lien
or otherwise dispose of any of its properties or assets, except in the
ordinary course of business consistent with past practice;
(k) Except as disclosed in ITEM 3.6(K) of the Disclosure
Schedules, neither CEM nor any of its subsidiaries shall acquire or
agree to acquire any assets, other than in the ordinary course of
business consistent with past practice or make or agree to make any
capital expenditures except capital expenditures contemplated by the
current capital expenditure budget;
(l) Neither CEM nor any of its subsidiaries shall (x) pay,
discharge or satisfy any material claims (including claims of
shareholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment,
discharge or satisfaction of (i) liabilities or obligations in the
ordinary course of business consistent with past practice or in
accordance with their terms as in effect on the date hereof, including
without limitation all liabilities disclosed in ITEM 3.6(D) of the
Disclosure Schedules or (ii) claims settled or compromised to the
extent permitted by SECTION 3.6(O), or (y) waive, release, grant, or
transfer any rights of material value or modify or change in any
material respect any existing material license, lease, contract or
other document, other than in the ordinary course of business
consistent with past practice or except where such actions would not,
individually or in the aggregate, have a Material Adverse Effect;
(m) Neither CEM nor any of its subsidiaries shall adopt a
plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(n) Neither CEM nor any of its subsidiaries shall enter into
any collective bargaining agreement;
(o) Neither CEM nor any of its subsidiaries shall settle or
compromise any litigation (whether or not commenced prior to the date
of this Agreement) other than settlements or compromises of litigation
where the settlement is limited solely to monetary payment and the
release of claims and the amount paid (after giving effect to
insurance proceeds actually received) in settlement or compromise does
not exceed $10,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such litigation
matters shall not exceed $50,000;
(p) Neither CEM nor any of its subsidiaries shall engage in
any transaction with, or enter into any agreement, arrangement, or
understanding with, directly or indirectly, any of CEM's affiliates,
including without limitation any transactions, agreements,
arrangements or understandings with any affiliate or other Person
covered under Item 404 of SEC Regulation S-K that would be required to
be disclosed under such Item 404, other
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than such transactions of the same general nature, scope and magnitude
as are disclosed in documents filed by CEM with the SEC as described
in SECTION 4.6;
(q) Neither CEM nor any of its subsidiaries shall adopt or
amend (except as may be required by law) any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any
employee, officer or director, or former employee, officer or
director, or, other than increases for individuals and arrangements
for new employees (other than, in each case, officers and directors)
in the ordinary course of business consistent with past practice,
increase the compensation or fringe benefits of or loan or advance
money or other property to any employee, officer or director, or
former employee, officer or director, or pay any benefit not required
by any existing plan, arrangement or agreement;
(r) Neither CEM nor any of its subsidiaries shall grant to
employees any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or
termination pay policies in effect on the date hereof;
(s) Neither CEM nor any of its subsidiaries shall effectuate
a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 ("WARN"),
affecting in whole or in part any site of employment, facility,
operating unit or employee of CEM or any subsidiary, without notifying
Acquiror or its affiliates in advance and without complying with the
notice requirements and other provisions of WARN; and
(t) Neither CEM nor any of its subsidiaries shall authorize
any, or commit or agree to do any of the things described in clauses
(a) through (s) or anything that would make any representation or
warranty of CEM in this Agreement untrue or incorrect in any material
respect as of the date hereof or as of the Effective Time, as if made
on such date, except to the extent such representations and warranties
expressly relate to a specific date (in which case such
representations and warranties shall be true and correct as of such
date).
3.7 Notification of Certain Matters. Each of the parties hereto
shall, promptly upon obtaining knowledge of any of the following occurring
subsequent to the date of this Agreement and prior to the Effective Time,
notify all other parties to this Agreement of: (a) any material claims,
actions, proceedings, tax audits or investigations commenced or, to its
knowledge, threatened in writing, involving or affecting such party or any of
its subsidiaries or any of their properties or assets, that if adversely
resolved could have a Material Adverse Effect on such party or could prevent,
hinder or materially delay the ability of such party to consummate the Merger
or the transactions contemplated by this Agreement, (b) any notice of, or other
communication relating to, a default or event that, with notice or lapse of
time or both, would become a default, received by such party or any of its
subsidiaries, under any agreement, lease, indenture or instrument to which such
party or any of its subsidiaries is a party or is subject where such a default
could have a Material Adverse Effect on such party, or (c) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement. As used in this
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SECTION 3.7, with respect to CEM, the term "Material Adverse Effect" shall have
the meaning given to it in SECTION 4.1 and, with respect to Acquiror or
Collins, the term "Material Adverse Effect" shall mean any effect that is
materially adverse to the business, assets, prospects, operations, properties,
financial condition or results of operations of Acquiror and its subsidiaries
taken as a whole.
3.8 Access to CEM's Books and Records. Upon reasonable notice, CEM
shall afford Acquiror and its representatives and representatives of all
prospective sources of Financing reasonable access during normal business hours
to the properties, books, records and personnel of CEM and its subsidiaries and
such additional information concerning the business and properties of CEM and
its subsidiaries as Acquiror and its representatives may reasonably request.
3.9 Acquisition Proposals. Any offer or proposal by any Person or
group concerning any tender or exchange offer, proposal for a merger, share
exchange, recapitalization, consolidation or other business combination
involving CEM or any of its subsidiaries or divisions, or any proposal or offer
to acquire in any manner, directly or indirectly, a significant equity interest
in, or a substantial portion of the assets of, CEM or any of its subsidiaries,
other than pursuant to the transactions contemplated by this Agreement, is
hereby defined as an "Acquisition Proposal". CEM shall not, nor shall it permit
any of its officers, directors, affiliates, representatives or agents to,
directly or indirectly, (a) take any action to solicit, initiate or encourage
any Acquisition Proposal, or (b) participate in any discussions or negotiations
with or encourage any effort or attempt by any other Person or take any other
action to facilitate an Acquisition Proposal. From and after the date hereof,
CEM, its subsidiaries and all officers, directors, employees of, and all
investment bankers, attorneys and other advisors and representatives of, CEM
and its subsidiaries shall cease doing any of the foregoing. Notwithstanding
the foregoing, CEM or any such Persons may, directly or indirectly, subject to
a confidentiality agreement containing customary terms, furnish to any party
information and access in response to a request for information or access made
incident to an Acquisition Proposal made after the date hereof and may
participate in discussions and negotiate with such party concerning any written
Acquisition Proposal made after the date hereof (provided that neither CEM nor
any such Person, after the date hereof, solicited, initiated or encouraged such
Acquisition Proposal), if the Committee shall have determined in good faith
based upon the reasonably concluded advice of outside counsel that failing to
take such action would violate CEM's board of directors' fiduciary duties under
applicable law. During the term of this Agreement, the board of directors of
CEM shall notify Acquiror immediately if any Acquisition Proposal is made and
shall in such notice indicate in reasonable detail the identity of the offeror
and the terms and conditions of such Acquisition Proposal and shall keep
Acquiror promptly advised of all material developments that could culminate in
the board of directors withdrawing, modifying or amending its recommendation of
the Merger and the other transactions contemplated by this Agreement. During
the term of this Agreement, CEM shall not waive or modify any provisions
contained in any confidentiality agreement entered into relating to a possible
acquisition (whether by merger, stock purchase, asset purchase or otherwise) or
recapitalization of CEM unless the Committee shall have determined in good
faith based on reasonably concluded advice of outside counsel that failing to
take such action would violate CEM's board of directors' fiduciary duties under
applicable law.
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3.10 Director and Officer Protection. CEM shall indemnify, defend and
hold harmless, and from and after the Effective Time the Surviving Corporation
shall indemnify, defend and hold harmless the present and former directors,
officers, fiduciaries, employees and agents of CEM and its subsidiaries (each
an "Indemnified Party") against all costs and expenses (including reasonable
attorney's fees), judgments, fines, losses, claims, damages, liabilities and
settlement amounts relating to or in connection with any threatened or actual
claim, action, suit or proceeding or investigation (whether asserted before or
after the Effective Time) based in whole or in part on facts arising out of the
Indemnified Party being a director, officer, fiduciary, employee or agent of
CEM at or prior to the Effective Time (including the transactions contemplated
by this Agreement) to the fullest extent permitted under applicable law,
whether or not CEM or the Surviving Corporation is insured against any such
matter. In the event of any such threatened or actual claim, action, suit,
proceeding or investigation, (A) CEM and (after the Effective Time) the
Surviving Corporation shall pay any expenses in advance of the final
disposition of such matter to each Indemnified Party as such expenses are
incurred to the fullest extent permitted under applicable law, provided CEM or
the Surviving Party, as the case may be, receives from the Indemnified Party to
whom expenses are advanced an undertaking to repay such advances as required
under applicable law , (B) the Indemnified Parties may retain one counsel
satisfactory to them and reasonably satisfactory to CEM or the Surviving
Corporation (provided, however, that if it is inappropriate due to actual or
potential differing interests between such Indemnified Parties, each group of
Indemnified Parties may retain their own separate counsel), and CEM and the
Surviving Corporation shall pay all fees and expenses of such counsel within 30
days after statements therefor are received and (C) CEM and the Surviving
Corporation shall use their respective reasonable best efforts to assist in the
vigorous defense of any such matter. Without limiting the foregoing, in any
case in which approval by the Surviving Corporation is required to effectuate
any indemnification, the Surviving Corporation shall direct, at the election of
the Indemnified Party, that the determination of any such approval shall be
made by independent counsel mutually agreed to by the Surviving Corporation and
the Indemnified Party. The Surviving Corporation shall maintain in effect for a
period of six years after the Effective Time directors' and officers' liability
insurance with respect to matters occurring prior to the Effective Time, which
insurance shall contain terms and conditions no less advantageous than are
contained in CEM's current directors' and officers' liability insurance policy;
provided, the Surviving Corporation shall not be required to pay an annual
premium for such insurance in excess of one and one-half times the current
annual premium. This SECTION 3.10 is intended for the irrevocable benefit of
and to grant third party rights to, the Indemnified Parties and shall be
binding on all successors and assigns of Collins, Acquiror, CEM and the
Surviving Corporation. Each of the Indemnified Parties shall be entitled to
enforce the covenants contained in this SECTION 3.10. In the event the
Surviving Corporation or any of its respective successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each case, the Surviving Corporation shall take such
actions so that there is a reasonable expectation that successors and assigns
of the Surviving Corporation shall assume the obligations of the Surviving
Corporation set forth in this SECTION 3.10.
3.11 Actions of Collins Pending the Closing. Collins covenants and
agrees that, prior to the Effective Time, he will not do or fail to do or cause
any Person to do or fail to do any act that will cause CEM to breach any of its
representations and warranties set forth in Article IV hereof
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or fail to fulfill any of its covenants and agreements hereunder; provided that
any action or failure to act by CEM shall not be attributed to or deemed to be
caused by Collins solely by reason of his service as a director, officer or
employee thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CEM
CEM represents and warrants to Acquiror and Collins as follows:
4.1 Organization and Good Standing. Each of CEM and its subsidiaries
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its incorporation with all requisite power and
authority (corporate and other) to own, lease and operate its properties and
conduct its business and is duly qualified and in good standing as a foreign
corporation authorized to do business in each of the jurisdictions in which the
character of the properties owned or held under lease by it or the nature of
the business transacted by it makes such qualification necessary, except where
the failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect on CEM and its subsidiaries, taken as a whole.
CEM has heretofore delivered to Acquiror accurate and complete copies of its
and its subsidiaries' certificates or articles of incorporation and bylaws, as
currently in effect. For the purposes of this Agreement "Material Adverse
Change" or "Material Adverse Effect" means any change or effect that is
materially adverse to the business, assets, prospects, operations, properties,
financial condition or results of operations of CEM and its subsidiaries taken
as a whole.
4.2 Authorization; Binding Agreement. CEM has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by CEM's board of directors and, except
for the approval of this Agreement and the Merger by the shareholders of CEM in
accordance with the North Carolina Act and the articles of incorporation and
bylaws of CEM, no other corporate proceedings on the part of CEM are necessary
to authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by CEM, and subject
to the requisite approval of the shareholders of CEM, constitutes the legal,
valid and binding agreement of CEM, enforceable against CEM in accordance with
its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other laws, now or hereafter in
effect, relating to or limiting creditors' rights generally, and (b) general
principles of equity (whether considered in an action in equity or at law)
which provide, among other things, that the remedies of specific performance
and injunctive and other forms of equitable relief are subject to equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
4.3 Capitalization. The authorized capital stock of CEM consists of
10,000,000 shares of CEM Common Stock and 1,000,000 shares of preferred stock,
$5.00 par value per share (the "Preferred Stock"). As of the close of business
on the business day immediately preceding the
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date hereof, 3,043,443 shares of CEM Common Stock were outstanding and no
shares of Preferred Stock were outstanding. As of the date hereof, 432,179
shares of CEM Common Stock were reserved for issuance upon exercise of
outstanding Stock Options. All of the outstanding shares of capital stock of
CEM and the subsidiaries of CEM have been duly authorized and validly issued
and are fully paid and nonassessable. All issued and outstanding shares of
capital stock of the subsidiaries of CEM are owned by CEM or a subsidiary of
CEM free and clear of all liens, charges, encumbrances, claims and options of
any nature. Except for the Stock Options, neither CEM nor any subsidiary of CEM
has or as of the Effective Time will have granted any outstanding security,
call, option, warrant, subscription or other right, or entered into any
agreement or commitment that either (a) obligates CEM or any of its
subsidiaries to issue, sell or transfer or cause to be issued, delivered or
sold any shares of the capital stock of CEM or any subsidiary of CEM, or (b)
restricts the transfer of, or otherwise encumbers, shares of CEM Common Stock.
4.4 Financial Statements. All consolidated financial statements of
CEM and its subsidiaries (including the notes to such financial statements)
included in CEM's Annual Report on Form 10-K for the fiscal year ended June 30,
1999 (the "Year-End Financial Statements") or in CEM's Quarterly Report on Form
10-Q for the period ending September 30, 1999 (the "Interim Financial
Statements"), in each case filed pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (a) are in accordance with the books and
records of CEM and its subsidiaries in all material respects, (b) present
fairly in all material respects the consolidated financial position, results of
operations, changes in shareholders' equity and cash flow of CEM and its
subsidiaries as of the respective dates and for the respective periods
indicated and (c) have been prepared in conformity with generally accepted
accounting principles applied in all material respects on a consistent basis
through all the periods involved, subject in the case of the Interim Financial
Statements to normal year-end adjustments and the absence of certain notes
thereto. CEM has no liabilities that are required by generally accepted
accounting principles to be disclosed on a balance sheet other than (i) those
disclosed in the Interim Financial Statements, (ii) those arising in the
ordinary course of business since September 30, 1999 or as disclosed in ITEMS
3.6(C) and (D) of the Disclosure Schedules, and (iii) liabilities that would
not, individually or in the aggregate, have a Material Adverse Effect.
4.5 Absence of Certain Changes or Events. Since June 30, 1999, (a)
there has not been any Material Adverse Change, (b) there has not been any
damage, destruction or loss, whether covered by insurance or not, having or
that, individually or in the aggregate, could have a Material Adverse Effect,
(c) there has not been any condition, event or occurrence that, individually or
in the aggregate, has had or is reasonably likely to have a Material Adverse
Effect or is reasonably likely to give rise to a Material Adverse Change, (d)
CEM and its subsidiaries have conducted their respective businesses only in the
ordinary course consistent with past practices, (e) CEM has not changed its
accounting principles or methods in any material respect except insofar as may
be required by a change in generally accepted accounting principles, (f) there
has not been any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of CEM or any of its subsidiaries, other than dividends paid by
wholly owned subsidiaries, and (g) CEM and its subsidiaries have not (i)
increased the compensation or fringe benefits of any present or former
director, officer or employee of CEM or its subsidiaries (except for increases
in salary or wages in the ordinary course of business consistent with past
practice), (ii) granted any severance or
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termination pay to any present or former director or officer of CEM or its
subsidiaries or, other than in the ordinary course of business, to any other
employee of CEM or its subsidiaries; (iii) loaned or advanced money or other
property by CEM or its subsidiaries to any of their present or former
directors, officers or employees, or (iv) established, adopted, entered into,
amended or terminated any Company Benefit Plan (as defined in SECTION 4.14).
4.6 SEC Reports and Other Documents. Since June 30, 1996, CEM has
filed all reports required to be filed by it with the SEC and all such reports
complied as to form in all material respects with applicable requirements of
law. Each report required to be filed by CEM with the SEC since June 30, 1996
did not on the date of filing of such reports and, except to the extent revised
or superseded by a subsequent filing with the SEC prior to the date hereof does
not, contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.7 Governmental and Other Consents and Approvals. No consent,
waiver, approval, license or authorization of or designation, declaration or
filing with any governmental agency or authority or other public Persons in the
United States is required in connection with the execution or delivery by CEM
of this Agreement or the consummation by CEM of the transactions contemplated
hereby, other than (a) the approval of this Agreement and the Merger by the
shareholders of CEM, (b) filing in the State of North Carolina articles of
merger in accordance with the North Carolina Act, (c) filings required under
the Exchange Act, and (d) such other consents, waivers, approvals, licenses or
authorizations, the failure of which to be obtained will not have a Material
Adverse Effect or will not, individually or in the aggregate, materially and
adversely affect the ability of CEM to consummate the transactions contemplated
hereby.
4.8 No Violation. Except as set forth in ITEM 4.8 of the Disclosure
Schedules, the execution and delivery of this Agreement, the filing by CEM of
articles of merger in connection with the Merger in the State of North Carolina
in accordance with the North Carolina Act, the consummation by CEM of the
transactions contemplated hereby, or compliance by CEM with any of the
provisions hereof, will not:
(a) violate any provision of the articles of incorporation or
bylaws of CEM or any comparable charter or organizational documents of
its subsidiaries;
(b) cause CEM or any of its subsidiaries to violate in any
material respect (i) any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority
applicable to CEM or any of its subsidiaries or any of their
respective properties, or (ii) the award of any arbitrator or panel of
arbitrators that in either case, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect;
(c) cause the acceleration of the maturity of any debt or
obligation of CEM and its subsidiaries that individually or in the
aggregate would be reasonably likely to have a Material Adverse
Effect; or
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(d) with or without notice or lapse of time, or both,
violate, or be in conflict with, or constitute a default under, or
permit the termination of, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a benefit under, or, except as expressly
contemplated by this Agreement, require the consent of any Person
under, or result in the creation of any lien upon any property of CEM
or any of its subsidiaries under, any agreement, indenture, lease,
instrument, permit, concession, franchise, or license applicable to
CEM or any of its subsidiaries or to which CEM or any of its
subsidiaries is a party or by which CEM or any of its subsidiaries (or
their respective properties) may be bound that individually or in the
aggregate would be reasonably likely to have a Material Adverse
Effect.
4.9 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of CEM, threatened against or affecting CEM, any of its subsidiaries
or any of their respective properties, assets, business, franchises or
governmental approvals before any court or governmental department, commission,
board, bureau, agency, instrumentality or arbitrator, that, individually or in
the aggregate, would be reasonably likely to have a Material Adverse Effect or
would be reasonably likely to materially and adversely affect the ability of
CEM to carry out, or prevent or make unduly burdensome, the Merger or the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any governmental entity or arbitrator outstanding
against CEM or any of its subsidiaries having, or that in the future would be
reasonably likely to have, any such effect.
4.10 Governmental Approvals; Compliance with Law. CEM and its
subsidiaries possess from the appropriate agency, commission, board or
governmental authority, whether federal, state or local, all licenses, permits,
authorizations, approvals, franchises and rights ("Government Approvals") that
are necessary for CEM and its subsidiaries to engage in the business currently
conducted by each of them, except in those instances in which failure to
possess Government Approvals, individually or in the aggregate, could not have
a Material Adverse Effect. Each of CEM and its subsidiaries has been, is and as
of the Effective Time will be in compliance with all applicable federal, state
and local laws, statutes, ordinances, rules and regulations except where the
failure to so comply, individually or in the aggregate, would be reasonably
likely to not have a Material Adverse Effect.
4.11 Brokers and Finders. Except for Brookwood Associates,
Inc. ("Advisor"), which has been engaged, pursuant to an engagement letter dated
September 14, 1999, a true and complete copy of which has been delivered to
Acquiror, to provide financial advisory services to the Committee of CEM and,
as requested by the Committee, to provide advice to the board of directors of
CEM with respect to whether the consideration to be received by the holders of
CEM Common Stock is fair to them from a financial point of view, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or in connection with any
transaction involving CEM based upon arrangements made by or on behalf of CEM.
4.12 Fairness Opinions and Approval by Committee. On or prior to the
date hereof, the Committee unanimously approved the terms of this Agreement and
received an opinion from Advisor as of such date, which opinion shall be
confirmed in writing substantially to the effect
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that, from a financial point of view, the consideration to be received by the
holders of CEM Common Stock pursuant to the Merger is fair to them (which
opinion, to the extent required or requested by the SEC, shall be updated in
writing to the date of the Definitive Proxy Statement), a true and complete
copy of which written opinion has been or will promptly be delivered to
Acquiror following its receipt by the Committee.
4.13 Taxes. Except as would not be reasonably likely to have a
Material Adverse Effect, individually or in the aggregate:
(a) All Returns (as defined below) required to be filed by or
with respect to CEM and Tax Affiliates (as defined below) have been
filed on a timely basis; all such Returns are correct and complete in
all material respects; there are no deficiencies for Taxes that have
been proposed, asserted or assessed against CEM or Tax Affiliates that
remain unpaid; and CEM and its Tax Affiliates have paid or made
adequate provision in all material respects in the Year-End Financial
Statements (other than reserves for deferred income Taxes established
to reflect differences between book basis and Tax basis of assets and
liabilities) for the payment of all Taxes, whether or not shown on any
Return. As used in this SECTION 4.13, the term "Tax" or "Taxes" means
all federal, state, local, foreign and other net income, gross income,
gross receipts, franchise, sales, use, withholding, employment,
property alternative or add-on minimum, environmental (including Taxes
under Section 59A of the Internal Revenue Code of 1986, as amended
(the "Code")) or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to
tax or additional amounts with respect thereto; the term "Returns"
means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes, including any
schedule or attachment thereto, and including any amendment thereof;
and the term "Tax Affiliate" means any subsidiaries of CEM and any
individual or entity for whose Taxes CEM or any of its subsidiaries is
or could be held liable, whether by reason of being a member of an
affiliated, consolidated, combined, unitary, or other similar group
for Tax purposes, by reason of being a successor, member or general
partner, by agreement, or otherwise (but only with respect to the
Taxes and taxable periods(s) or portions thereof with respect to which
CEM or such subsidiaries is or could be held liable for such Taxes).
(b) ITEM 4.13 of the Disclosure Schedules lists all Returns
in respect of federal or North Carolina income taxes that have been
audited, and indicates such Returns that are currently the subject of
audit; neither CEM nor any Tax Affiliate has granted any extension or
waiver of the statute of limitations period on the assessment of any
material Taxes, which period (after giving effect to such extension or
waiver) has not expired; neither CEM nor any Tax Affiliate has granted
a power of attorney with respect to any matter relating to any
material Tax; and no claim has been made by an authority in a
jurisdiction where CEM or any Tax Affiliate does not file Returns that
it is or may be subject to Tax in that jurisdiction.
(c) CEM and each Tax Affiliate has withheld and or will
withhold and pay all Taxes required to have been paid in connection
with amounts paid or owing to any employee, independent contractor,
shareholder, partner, or other third party at or prior to the
Effective Time.
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(d) Neither CEM nor any Tax Affiliate is a party to any Tax
allocation, sharing, or similar agreement, or has been a member of an
affiliated group filing a consolidated federal income tax Return
(other than a group the common parent of which is CEM).
(e) Neither CEM nor any Tax Affiliate has made any payments,
is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments
that will not be deductible under Code Section 280G or would
constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code.
(f) No consent under Section 341(f) of the Code has been
filed with respect to CEM or any Tax Affiliates.
(g) Neither CEM nor any Tax Affiliate has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(h) No material claim for unpaid Taxes has become a lien or
encumbrance of any kind against the property of CEM or any Tax
Affiliates.
4.14 Employee Benefits.
(a) A list of all employee benefit plans, programs,
arrangements, funds, policies, practices, or contracts and samples of
representative employment agreements with respect to which, through
which, or under which the CEM or any of CEM's subsidiaries has any
liability to provide benefits or compensation to or on behalf of
employees, former employees, or independent contractors of CEM or any
of CEM's subsidiaries, whether formal or informal, whether or not
written, including but not limited to any employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any multiemployer plan
(as defined in Section 3(37) and Section 4001(a)(3) of ERISA), stock
purchase, stock option, severance, employment, change in control,
fringe benefit, collective bargaining, bonus, incentive, and deferred
compensation arrangement (collectively, the "Company Benefit Plans"),
have been disclosed in writing to Acquiror. CEM has made available to
Acquiror a true and complete copy of the following documents, if
applicable, with respect to each Company Benefit Plan: (i) all
documents setting forth the terms of the Company Benefit Plan, or if
there are no such documents evidencing the Company Benefit Plan, a
full description of the Company Benefit Plan, (ii) the ERISA summary
plan description and any other written summary of plan provisions
provided to participants or beneficiaries for each such Company
Benefit Plan, (iii) the annual report (Form 5500 series), required
under ERISA or the Code, filed for the most recent plan year and most
recent financial statements or periodic accounting of related plan
assets with respect to each Company Benefit Plan, and (iv) the most
recent favorable determination letter, opinion, or ruling from the
Internal Revenue Service for each Company Benefit Plan, the assets of
which are held in trust, to the effect that such trust is exempt from
federal income tax.
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(b) Except as would not be reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect: each Company
Benefit Plan has at all times been maintained, by its terms and in
operation, in accordance with the Code, ERISA, and other applicable
laws; each Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code, and related trust that is intended to be
tax-exempt under Section 501(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service to the effect
that such plan is qualified under the Code and such trust is
tax-exempt, and any such determination letter remains in effect and
has not been revoked; all contributions required to be made prior
Closing under the terms of each Company Benefit Plan, the Code, ERISA,
or other applicable law have been or will be timely made, and adequate
reserves have been provided for by CEM with respect to all accrued
benefits attributable to service on or prior to the Closing; and other
than the acceleration of the vesting of stock options granted under
the Company's 1993 Management Equity Plan, no Company Benefit Plan
provides for an increase in benefits on or after the Closing.
(c) Except as would not be reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect: each Company
Benefit Plan may be amended or terminated at any time without any
obligation or liability other than for benefits accrued prior to such
amendment or termination, or as required to be vested pursuant to
applicable law as a result of such amendment or termination; there are
no actions, audits, suits, or claims that are pending or, to the
knowledge of CEM, threatened against any Company Benefit Plan, except
claims for benefits made in the ordinary course of the operation of
such plans; neither CEM nor any of its subsidiaries is subject to any
material liability, tax, or penalty whatsoever to any Person
whomsoever as a result of CEM or any of its subsidiaries engaging in a
prohibited transaction under ERISA or the Code; and no event has
occurred and no condition exists that would subject CEM (either
directly or by reason of its affiliation with any trade or business
(whether or not incorporated) that together with the Company is
treated as a single employer under Section 414(b), (c), (m), or (o) of
the Code ("Company ERISA Affiliate")) to any material liability, tax,
or penalty imposed by ERISA, the Code, or other applicable law.
(d) Neither CEM nor any Company ERISA Affiliate maintains,
nor has at any time established or maintained, nor has at any time
been obligated to make, or made, contributions to or under any plan
subject to Title IV of ERISA.
4.15 Environmental Matters. Except as would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect:
(a)(i) CEM and its subsidiaries, taken as a whole, hold and
are in compliance with all Environmental Permits, and CEM and its
subsidiaries are otherwise in compliance with all applicable
Environmental Laws, (ii) there are no instances of such noncompliance
in the past that remain unresolved and (iii) there are no
circumstances that are reasonably expected to prevent or interfere
with such compliance in the future;
(b) None of CEM or its subsidiaries has received any
Environmental Claim, and none of CEM or its subsidiaries is aware
after reasonably inquiry of any threatened
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Environmental Claim or of any circumstances, conditions or events that
could reasonably be expected to give rise to an Environmental Claim;
(c) None of CEM or its subsidiaries has entered into or
agreed to any consent decree, order or agreement under any
Environmental Law, and none of CEM or its subsidiaries is subject to
any judgment, decree or order relating to compliance with any Law or
to investigation, cleanup, remediation or removal of any Hazardous
Material;
(d) There are no underground storage tanks, surface
impoundments, landfills or disposal areas present at any facility
currently or formerly owned, leased, operated or otherwise used by CEM
or any of its subsidiaries in violation of any applicable
Environmental Law or that is reasonably expected to lead to any
Environmental Claim or liability to CEM or any of its subsidiaries;
and
(e) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated by
CEM or any of its subsidiaries) or present actions, activities,
events, conditions or circumstances, with respect to or against CEM or
its subsidiaries, including without limitation the release, threatened
release, emission, discharge, generation, treatment, storage,
transport or disposal of Hazardous Materials, that violates any
Environmental Laws, constitutes a breach of CEM's obligations under
any contract or agreement, or is reasonably expected to give rise to
any Environmental Claim.
For purposes of this Agreement, the following terms shall have the following
meanings:
"Environmental Claim" means any written notice, claim, demand, action,
suit, complaint or proceeding by any Person alleging liability or potential
liability (including without limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (i) the presence, storage,
transport, discharge, emission, release or threatened release of any Hazardous
Materials at, in, under, about, to or from any location, whether owned, leased
or operated by CEM or any of its subsidiaries, used by any such parties as a
disposal site or facility or otherwise, or (ii) circumstances forming the basis
of any violation or alleged violation of any Environmental Law or Environmental
Permit or (iii) otherwise relating to obligations or liabilities under any
Environmental Laws.
"Environmental Laws" means all applicable federal, state and local
statutes, rules, regulations, ordinances, orders, decrees and common law
relating in any manner to contamination, pollution or protection of human
health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste
Disposal Act, the Clean Air Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, and the Safe Drinking Water Act, all as amended,
and similar state laws.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for CEM and the operations of CEM
and its subsidiaries' facilities and otherwise to conduct its business under
Environmental Laws.
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"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials,
polychlorinate biphenyls, pollutants, contaminants and all other materials and
substances regulated pursuant to, or that form the basis of liability under,
any Environmental Law.
4.16 Board Recommendation. The board of directors of CEM, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office other than Collins who
recused himself from such vote because of his interest in Acquiror and in the
transactions contemplated by this Agreement) (i) determined that this Agreement
and the transactions contemplated hereby are fair to and in the best interests
of the shareholders of CEM and (ii) resolved to recommend that the holders of
the shares of CEM Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger.
4.17 Required Company Vote. The affirmative vote of at least 66 2/3%
of the outstanding shares of CEM Common Stock is the only vote of the holders
of any class or series of CEM's securities necessary to approve this Agreement
and the Merger under the North Carolina Act or CEM's articles of incorporation.
4.18 State Takeover Statutes. No state takeover statute or similar
statute or regulation of the State of North Carolina applies or purports to
apply to this Agreement, the Merger, or any of the other transactions
contemplated hereby. No provision of the articles of incorporation, bylaws or
other governing instruments of CEM or any of its subsidiaries would, directly
or indirectly, restrict or impair the ability of Acquiror or its affiliates to
vote, or otherwise to exercise the rights of a shareholder with respect to,
securities of CEM and its subsidiaries that may be acquired or controlled by
Acquiror or its affiliates or permit any shareholder to acquire securities of
CEM on a basis not available to Acquiror in the event that Acquiror were to
acquire securities of CEM, and neither CEM nor any of its subsidiaries has any
rights plan, preferred stock or similar arrangement that have any of the
aforementioned consequences. The board of directors of CEM has duly and validly
approved and taken all corporate action required to be taken by the board of
directors for the consummation of the transactions contemplated by this
Agreement.
4.19 Material Contract Defaults. Neither CEM nor any of its
subsidiaries is, or has received any notice or has any knowledge that any other
party is, in default in any respect under any material contract, agreement,
commitment, arrangement, lease, policy or other instrument to which it or any
of its subsidiaries is a party or by which it or any such subsidiary is bound,
except for those defaults that, individually or in the aggregate, could not
have a Material Adverse Effect; and there has not occurred any event that with
the lapse of time or the giving of notice or both would constitute such a
default.
4.20 Information in Proxy Statement. The Definitive Proxy Statement
(including any amendment thereof or supplement thereto), at the date mailed to
CEM shareholders and at the time of the Special Meeting, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, provided,
however, that no representation is made by CEM with respect to statements made
therein based
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on information supplied by Acquiror or Collins for inclusion in the Definitive
Proxy Statement. The Definitive Proxy Statement will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
4.21 Properties.
(a) CEM and its subsidiaries hold good and valid leasehold
title to leased real property they occupy, free of all liens except
for liens that, individually or in the aggregate, would be reasonably
likely to not have a Material Adverse Effect or liens securing
indebtedness described on ITEM 3.6(D) of the Disclosure Schedules or
reflected in the Interim Financial Statements of CEM. Except as would
not be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect: all real property leases are in full force
and effect and grant in all respects the leasehold estates or rights
of occupancy or use they purport to grant; there are no existing
defaults (either on the part of CEM or any of its subsidiaries or any
other party thereto) under any real property lease and no event has
occurred that, with notice or the lapse of time, or both, would
constitute a default (either on the part of CEM or any of its
subsidiaries or any other party thereto) under any of the real
property leases; and the consummation of the Merger will not result in
the occurrence of a default under any of the real property leases
(whether pursuant to a "change in control" provision in the real
property leases or otherwise).
(b) Except with respect to liens securing indebtedness
described on ITEM 3.6(D) of the Disclosure Schedules or reflected in
the Interim Financial Statements of CEM, each of CEM and its
subsidiaries have good and sufficient, valid and marketable title to
all other real property used by it in its business, free and clear of
all liens and other encumbrances that, individually or in the
aggregate, would be reasonably likely to have a Material Adverse
Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND COLLINS
Acquiror hereby represents and warrants to CEM, and Collins (except
with respect to SECTION 5.10 hereof) hereby represents and warrants to CEM, as
follows:
5.1 Organization and Good Standing. Acquiror is a duly organized and
validly existing corporation in good standing under the laws of the state of
North Carolina. Acquiror has heretofore delivered to CEM accurate and complete
copies of its articles of incorporation and bylaws as currently in effect.
Acquiror has no subsidiary or owns or holds any capital stock, security or
investment in any other Person other than shares of CEM Common Stock and bank
accounts, certificates of deposit, money market or similar short-term
investments.
5.2 Authorization; Binding Agreement. Acquiror has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the Merger and the
transactions contemplated hereby have been duly and validly authorized by its
respective board of directors, and this Agreement has been adopted by
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the shareholders of Acquiror in accordance with the North Carolina Act and its
articles of incorporation and bylaws. No other corporate proceedings on the
part of Acquiror are necessary to authorize this Agreement, the Merger and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Acquiror and Collins and constitutes a legal, valid
and binding agreement of each of Acquiror and Collins, enforceable against
Acquiror and Collins in accordance with its terms except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, relating to or limiting
creditors, rights generally, and (b) general principles of equity (whether
considered in an action in equity or at law), which provide, among other
things, that the remedies of specific performance and injunctive and other
forms of equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
5.3 No Violation. Neither the execution and delivery of this
Agreement, the filing of the Articles of Merger nor the consummation by
Acquiror and Collins of the transactions contemplated hereby, nor compliance by
Acquiror and Collins with any of the provisions hereof, will:
(a) violate any provision of the articles of incorporation or
bylaws of Acquiror;
(b) cause Acquiror to violate in any material respect any
statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority applicable to Acquiror or any of
its properties or the award of any arbitrator or panel of arbitrators;
(c) cause the acceleration of the maturity of any debt or
obligation of Acquiror; or
(d) with or without notice or lapse of time, or both,
violate, or be in conflict with, or constitute a default under, or
permit the termination of, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a benefit under, or except as expressly
contemplated by this Agreement, require the consent of any Person
under, or result in the creation of any lien upon any property of
Acquiror under, any agreement, indenture, lease, instrument, permit,
concession, franchise, or license applicable to Acquiror or to which
Acquiror is a party or by which Acquiror (or its properties) may be
bound, that in the aggregate could have a material adverse effect on
Acquiror.
5.4 Governmental and Other Consents and Approvals. No consent,
waiver, approval, license or authorization of or designation, declaration or
filing with any governmental agency or authority or other public Persons in the
United States is required in connection with the execution or delivery by
Acquiror of this Agreement or the consummation by Acquiror of the Merger or the
transactions contemplated hereby, other than (a) filings in the State of North
Carolina in accordance with the North Carolina Act, (b) filings required under
the Exchange Act and (c) such other consents, waivers, approvals, licenses or
authorizations, the failure of which to be obtained will not have a material
adverse effect on Acquiror or on the ability of Acquiror to consummate the
transactions contemplated hereby.
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5.5 Proxy and Schedule 13E-3 Information. The information furnished
to CEM by Acquiror and/or Collins specifically for inclusion in the Definitive
Proxy Statement and the Schedule 13E-3, or any amendment or supplement thereto,
or specifically for inclusion in any other documents filed with the SEC by CEM
in connection with the Merger, shall, with respect to the Definitive Proxy
Statement at the time the Definitive Proxy Statement is mailed and at the time
of the Special Meeting, and, with respect to the Schedule 13E-3 and such other
documents, at the time of filing with the SEC and at the time of such Special
Meeting, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.6 Financing.
(a) Collins, on behalf of Acquiror, has accepted a commitment
for financing necessary or appropriate to consummate the Merger in an
amount up to $21,000,000 in debt financing and an additional $400,000
in equity financing (the "Financing"). Such amount, plus cash of CEM
at the Closing and additional funds to be contributed by Collins
through Acquiror, is sufficient to fund the consummation of the
transactions contemplated hereby, including, without limitation, (i)
to fund the payment of the Cash Merger Consideration plus the expenses
related to the Merger and obtaining the Financing, (ii) refinance
CEM's outstanding indebtedness and (iii) provide for the working
capital needs of the Surviving Corporation. Neither Collins nor
Acquiror has any reason to believe that any condition to the Financing
cannot or will not be waived or satisfied prior to the Effective Date.
True and correct copies of the letters or other documents evidencing
such commitment (the "Financing Letters") have been delivered to the
Committee.
(b) Collins has sufficient personal financial resources to
make capital contributions to Acquiror necessary to permit, with the
cash of CEM at the Closing and the proceeds of the Financing, Acquiror
to fund the consummation of the transactions contemplated hereby,
including, without limitation, (i) to fund the payment of the Cash
Merger Consideration plus the expenses related to the Merger and
obtaining the Financing, (ii) refinance CEM's outstanding indebtedness
and (iii) provide for the working capital needs of the Surviving
Corporation.
5.7 Brokers and Finders. Except for Wachovia Securities, Inc., the
fees and expenses of which shall be paid by Acquiror, neither Acquiror nor
Collins has engaged any broker, finder or investment banker which engagement
would require the payment of any brokerage, finder's or other fees by CEM in
connection with the transaction contemplated hereby.
5.8 No Prior Activities. Acquiror has not incurred, and will not as
of the Effective Time have incurred, directly or through any subsidiary, any
liabilities or obligations, except those incurred in connection with its
organization or with the negotiation of this Agreement and the Financing.
Except in connection with this Agreement and the Merger (including without
limitation the Financing Letters), Acquiror has not engaged in any business
activities of any type or kind whatsoever, or entered into any agreements or
arrangements with any Person or become subject to or bound by any obligation or
undertaking.
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5.9 Litigation. There is no legal action, suit, arbitration or other
legal, administrative or other governmental investigation, inquiry or
proceeding (whether federal, state, local or foreign) pending or, to the
knowledge of Acquiror or Collins, threatened against or affecting Acquiror,
Collins or any of their respective properties, assets, business, franchises or
governmental approvals before any court or governmental department, commission,
board, bureau, agency, instrumentality or arbitrator, that, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the business, assets, prospects, operations, properties, financial condition or
results of operations of Acquiror or could materially and adversely affect the
ability of Acquiror or Collins to carry out, or prevent or make unduly
burdensome, the Merger or the transactions contemplated by this Agreement.
5.10 Surviving Corporation Not Rendered Insolvent. Assuming that CEM
complies with its covenants and agreements hereunder and there is no Material
Adverse Change affecting CEM after the date hereof and prior to the Effective
Time, immediately after the Effective Time, after giving effect to the Merger,
the Financing, and any other transactions contemplated by this Agreement to
occur at or before the Effective Time, the Surviving Corporation will not (i)
be insolvent or (ii) have unreasonably small capital with which to engage in
its business.
5.11 No Conflicting Knowledge. Collins has reviewed the
representations and warranties of CEM set forth in Article IV hereof and to his
actual knowledge (a) such representations and warranties (to the extent
supplemented or modified by definitive Disclosure Schedules) are true and
correct in all material respects and (b) such representations and warranties
that are by their terms qualified as to materiality by the term "Material
Adverse Effect" or similar terms are true and correct.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions
unless waived in accordance with 7.4:
(a) This Agreement and the Merger shall have been approved at
or prior to the Effective Time by the holders of 66 2/3% of the
outstanding shares of CEM Common Stock entitled to vote thereon; and
(b) No action, suit or proceeding shall be pending before any
court or governmental body in which an unfavorable judgment or decree
could prevent or substantially delay the consummation of the Merger,
cause the Merger to be rescinded or, with respect to any litigation in
connection with the Merger, result in an award of damages that could
have a Material Adverse Effect; and
(c) CEM, Acquiror and Collins shall have been furnished with
evidence satisfactory to them of the timely consent or approval of, or
notice to, each governmental authority or other Person whose consent
or approval, or to whom notice, is required in connection with the
execution or delivery by CEM, Acquiror or Collins of this
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Agreement or consummation of the transactions contemplated hereby or
the absence of which would result in a Material Adverse Effect or
would materially and adversely affect the ability of CEM, Acquiror or
Collins to consummate the transactions contemplated hereby, other than
any such consent, approval, notice required solely as a result of an
amendment to the Agreement required by Acquiror pursuant to SECTION
1.1 hereof.
6.2 Conditions to Obligation of CEM to Effect the Merger. The
obligations of CEM to effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of the following additional conditions, unless
waived by CEM:
(a) The representations and warranties of Acquiror and
Collins set forth in ARTICLE V hereof shall be true and correct in all
material respects (except that any such representation and warranty
that is qualified as to materiality by reference to "Material Adverse
Effect" or any similar term shall be true and correct) as of the date
of this Agreement and as of the Effective Time as though made on and
as of the Effective Time, and CEM shall have received a certificate
from Acquiror signed by its President or Chief Executive Officer and
from Collins to that effect, provided that such signatory for Acquiror
shall not have any personal liability in connection therewith;
(b) Acquiror and Collins shall have performed in all material
respects all of its or his respective obligations required to be
performed under this Agreement prior to the Effective Time, and CEM
shall have received a certificate from Acquiror signed by its
President or Chief Executive Officer and from Collins to that effect,
provided that such signatory for Acquiror shall not have any personal
liability in connection therewith.
6.3 Conditions to Obligations of Acquiror to Effect the Merger. The
obligations of Acquiror and Collins to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived by Acquiror and Collins:
(a) The representations and warranties of CEM set forth in
ARTICLE IV hereof shall be true and correct in all material respects
(except that any such representation and warranty that is qualified as
to materiality by reference to "Material Adverse Effect" or any
similar term shall be true and correct) as of the date of this
Agreement and as of the Effective Time as though all of such
representations were made on and as of the Effective Time by CEM, and
Acquiror shall have received a certificate of CEM signed by the Chief
Financial Officer or a Vice President of CEM to that effect, provided
that such signatory or signatories shall not have any personal
liability in connection therewith, and provided, further, that
notwithstanding the foregoing Acquiror will remain obligated to effect
the Merger despite such breach by CEM to the extent that the
circumstances that resulted in such breach also resulted in a breach
by Collins of his representations and warranties set forth in SECTION
5.11 hereof or his covenant set forth in SECTION 3.11 hereof; and
(b) CEM shall have performed in all material respects all
obligations required to be performed by it under this Agreement prior
to the Effective Time and Acquiror shall have received a certificate
of CEM signed by the Chief Financial Officer or a Vice President of
CEM to that effect, provided that such signatory or signatories shall
not have any personal liability in connection therewith, and provided,
further, that notwithstanding
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the foregoing Acquiror will remain obligated to effect the Merger
despite such breach by CEM to the extent that the circumstances that
resulted in such breach also resulted in a breach by Collins of his
representations and warranties set forth in SECTION 5.11 hereof or his
covenant set forth in SECTION 3.11 hereof.
ARTICLE VII
TERMINATION; NON-SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; WAIVER AND AMENDMENT
7.1 Termination. This Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, by:
(a) mutual written consent of the boards of directors of CEM
and Acquiror;
(b) Acquiror, by written notice to CEM at any time prior to
the Effective Time, (i) in the event CEM has breached any
representation, warranty, or covenant contained in this Agreement in
any material respect, Acquiror has notified CEM of the breach and such
breach cannot be or has not been cured within 15 days after the giving
of such notice, or (ii) if the Closing shall not have occurred on or
before May 31, 2000 and any condition precedent in SECTION 6.1 or 6.3
hereof shall not have been met or fulfilled (unless the failure
results primarily from Acquiror breaching any representation,
warranty, or covenant contained in this Agreement);
(c) CEM, by written notice to Acquiror and Collins at any
time prior to the Effective Time, (i) in the event Acquiror or Collins
has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, CEM has notified Acquiror and
Collins of the breach and such breach cannot be or has not been cured
within 15 days after the giving of such notice, or (ii) if the Closing
shall not have occurred on or before May 31, 2000 and any condition
precedent in SECTION 6.1 or 6.2 hereof shall not have been met or
fulfilled (unless the failure results primarily from CEM breaching any
representation, warranty, or covenant contained in this Agreement);
(d) CEM, by written notice to Acquiror, if (i) the board of
directors of CEM or the Committee has withdrawn or modified its
approval or recommendation of this Agreement or the Merger in
accordance with SECTION 3.1; (ii) the board of directors of CEM or the
Committee has determined that CEM enter into a definitive agreement
with a Person with respect to a transaction the proposal of which
qualifies as an Acquisition Proposal; provided that the board of
directors of CEM or the Committee, as the case may be, has first
determined in good faith based upon the reasonably concluded advice of
outside counsel that failing to take such action would violate CEM's
board of directors' fiduciary duties under applicable law; or (iii)
(A) a third party commences a tender offer or exchange offer for 25%
or more of the outstanding shares of CEM Common Stock and that tender
offer or exchange offer is not solicited, initiated or encouraged
after the date hereof by CEM or any of its officers, directors,
affiliates, representatives or agents, and (B) the board of directors
of CEM has recommended that the shareholders of CEM tender
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<PAGE> 34
their shares in such tender of exchange offer; provided that the board
of directors of CEM or the Committee has first determined in good
faith upon the reasonably concluded advice of outside counsel that
failing to take such action would violate CEM's board of directors'
fiduciary duties under applicable law; and provided further, that
termination under this SECTION 7.1(D) shall be of no effect unless and
until CEM pays the Fee referred to in SECTION 7.6(A) and deposits
$800,000 with a mutually acceptable escrow agent for reimbursement to
Acquiror of Expenses (as defined in SECTION 7.6(C));
(e) Acquiror, by written notice to CEM, if (i) the board of
directors of CEM has withdrawn or modified its approval or
recommendation of this Agreement or the Merger; (ii) CEM enters into a
definitive agreement with a Person with respect to a transaction the
proposal of which qualifies as an Acquisition Proposal; or (iii) (A) a
third party commences a tender offer or exchange offer for 25% or more
of the outstanding shares of CEM Common Stock and (B) the board of
directors of CEM recommends that the shareholders of CEM tender their
shares in such tender or exchange offer;
(f) CEM or Acquiror, by written notice to the other, if upon
a vote at the Special Meeting, any approval of the shareholders of CEM
necessary to consummate the Merger and the transactions contemplated
hereby shall not have been obtained; or
(g) any of the parties, by written notice to the other, if
any court of competent jurisdiction or other governmental entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final
and nonappealable.
Any action to be taken to terminate this Agreement under this Section
must be taken by, or pursuant to authority granted by, the boards of directors
of CEM or Acquiror, as applicable. Any such action by CEM also must be
authorized by the Committee.
7.2 Non-Survival of Representations, Warranties and Covenants. The
respective representations and warranties of CEM, Acquiror and Collins
contained herein or in any certificate delivered pursuant hereto shall expire
with, and be terminated and extinguished upon, consummation of the Merger, and
thereafter neither Surviving Corporation, CEM, Acquiror nor any officer,
director or principal thereof nor Collins shall be under any liability
whatsoever with respect to any such representation or warranty. This SECTION
7.2 shall have no effect upon any other covenant or agreement of the parties
hereto, whether to be performed before or after the consummation of the Merger.
7.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after approval of this Agreement by the shareholders of CEM, no
amendment may be made that reduces the amount or changes the form of
consideration to be received in the Merger or otherwise changes or effects any
change that would adversely affect the holders of CEM Common Stock without the
further approval of the shareholders of CEM in accordance with SECTION 6.1(A).
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7.4 Waiver. At any time prior to the Effective Time, whether before
or after the Special Meeting, any party hereto, by action taken by its board of
directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
proviso contained in SECTION 7.3, waive compliance with any of the agreements
of any other party or with any conditions (other than the condition in SECTION
6.1(A)) to its own obligations. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party by a duly authorized officer, and, in
the case of CEM, authorized by the Committee.
7.5 Effect of Termination. In the event of the termination of this
Agreement under SECTION 7.1, this Agreement shall thereafter become void and
have no effect and no party hereto shall have any liability to any other party
hereto or its shareholders or directors or officers in respect thereof, except
that (i) the provisions of SECTION 7.6 and ARTICLE VIII shall survive any such
termination if such obligations arose at or before the time of such termination
and (ii) in the event of a termination pursuant to SECTIONS 7.1 (B) or (C),
nothing contained in this SECTION 7.5 shall relieve any party from liability
for any breach of this Agreement.
7.6 Certain Payments.
(a) Provided that neither Acquiror nor Collins is in material
breach of its or his respective obligations under this Agreement, in
the event that:
(1) this Agreement is terminated pursuant to SECTION
7.1(D) or 7.1(E); or
(2) (A) an Acquisition Proposal is commenced,
publicly proposed, publicly disclosed or communicated to CEM
at any time after the date of this Agreement and such
Acquisition Proposal would, if consummated, be superior (as
compared to the Merger) to CEM's shareholders from a
financial point of view (a "Superior Proposal") , (B) this
Agreement is terminated pursuant to SECTION 7.1(B), 7.1(F) or
7.1(G), and (C) CEM, either on or prior to the date that is
nine months after such termination of this Agreement,
consummates with any Person a transaction the proposal of
which would otherwise qualify as a Superior Proposal or
enters into a definitive agreement with a Person with respect
to a transaction the proposal of which would otherwise
qualify as a Superior Proposal;
then in any such event, CEM shall pay Acquiror $1,000,000 (the "Fee") in
immediately available funds, plus all Expenses (as defined below) up to
$800,000 in the aggregate. Expenses shall be payable to Acquiror in immediately
available funds within three business days after receipt by CEM of reasonable
documentation therefor.
(b) Provided that neither Acquiror nor Collins is in
material breach of its obligations under this Agreement, if
this Agreement is terminated by Acquiror pursuant to SECTION
7.1(B), then CEM shall promptly reimburse Acquiror for all
Expenses.
(c) "Expenses" means all out-of-pocket expenses and
fees (including without limitation fees and expenses payable
to all banks, investment banking firms, other financial
institutions and other persons and their respective agents
and counsel for
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arranging, committing to provide or providing any Financing
(including fees payable to such persons based on whether
Acquiror is entitled to receive the Fee) and all fees of
counsel, accountants, experts and consultants to Acquiror or
its affiliates, and all printing and advertising expenses)
actually incurred or accrued by Acquiror or its affiliates or
on their behalf in connection with this Agreement or the
transactions contemplated hereby (including without
limitation the financing thereof) and actually incurred or
accrued by banks, investment banking firms, other financial
institutions and other persons and assumed by Acquiror or its
affiliates in connection with the negotiation, preparation,
execution and performance of this Agreement, the structuring
and financing of the transactions contemplated hereby and any
financing commitments or agreements relating thereto.
(d) Except as set forth in this SECTION 7.6, all
costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such expenses, whether
or not the Merger is consummated; provided, however, that
upon consummation of the Merger, the Surviving Corporation
shall reimburse Acquiror and its Affiliates for all Expenses.
(e) In the event that CEM shall fail to pay the Fee
or any Expenses when due, the term "Expenses" shall be deemed
to include the costs and expenses actually incurred or
accrued by Acquiror (including without limitation fees and
expenses of counsel) in connection with the collection under
and enforcement of this SECTION 7.6, together with interest
on such unpaid Fee and Expenses, commencing on the date that
the Fee or Expenses became due, at a per annum rate equal to
the rate of interest publicly announced by Wachovia Bank,
National Association, from time to time, as such bank's prime
rate plus two percentage points.
ARTICLE VIII
GENERAL AGREEMENTS
8.1 Notice. All notices, requests and other communications to any
party shall be in writing and shall be given by hand delivery, telecopy or a
nationally recognized overnight courier,
(a) If to Acquiror or Collins:
MJC Acquisition Corporation
c/o Michael J. Collins
3100 Smith Farm Road
P.O. Box 200
Charlotte, North Carolina 28106
Facsimile No.: (704) 821-4362
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with copies to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Stephen M. Lynch
Facsimile No.: (704) 373-3955
(b) If to CEM or the Special Committee, to:
CEM Corporation
c/o Special Committee,
John L. Chanon
Tatum CFO Partners LLP
Suite 1590
129 West Trade Street
Charlotte, North Carolina 28202
Facsimile No.: (704) 376-6397
with copies to:
Parker, Poe, Adams & Bernstein, LLP
201 South College Street, Suite 2500
Charlotte, North Carolina 28244
Attention: Roy L. Smart, III
Facsimile No.: (704) 334-4706
or to such other address or telecopier number as such party may hereafter
specify for the purpose of notice to the other parties. Any such notice,
request or other communication shall be deemed to have been given and received
on the day on which it is delivered by hand or telecopied (or, if such day is
not a business day in North Carolina or if the notice or other communication is
not so delivered or telecopied during normal business hours, at the place of
receipt, on the next following business day) or on the next following business
day if delivered by overnight courier.
8.2 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitute the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
8.3 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except to the extent
expressly set forth in SECTION 3.10, nothing in this Agreement is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
8.4 Publicity. The written release to the public by any party of any
information relating to the Merger shall be approved in advance by the other
parties, which approval shall not be unreasonably withheld or delayed.
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8.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.6 Interpretation. As used herein, "knowledge" (or words to such
effect) of CEM shall mean actual knowledge of the officers of CEM after
reasonable inquiry.
8.7 Subsidiaries. When a reference is made in this Agreement to
subsidiaries of CEM, the word "subsidiaries", means any corporation at least
the majority of whose outstanding voting securities are directly or indirectly
owned by CEM
8.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
8.9 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the
State of North Carolina, without giving effect to the principles of conflict of
laws thereof, except the laws of the state of incorporation of a party shall
govern its internal corporate affairs.
8.10 Costs and Expenses. Except as provided in SECTION 7.6 and in
this SECTION 8.10, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses. All expenses incurred in the printing, filing with the
SEC (including filing fees required with respect to the Preliminary Proxy
Statement, Definitive Proxy Statement and Schedule 13E-3) and mailing to
shareholders of CEM of proxy statements, notices and other materials in
connection with the Special Meeting shall be borne by CEM.
8.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
8.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any provision of this Agreement was not
performed in accordance with the terms hereof and the parties shall be entitled
to the remedy of specific performance of the terms hereof, in addition to any
other remedy at law or equity.
8.13 Conciliation and Arbitration. If any dispute, claim or
difference arises out of or relates to this Agreement (a "Dispute"), such
Dispute shall be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA")
effective as of the commencement of the arbitration (the "Rules"), except as
such Rules may be modified as provided herein. The arbitration shall be held in
Charlotte, North Carolina, unless the parties mutually agree to have the
arbitration held elsewhere, and judgment upon the award made therein may be
entered by any court having jurisdiction thereof. The arbitral tribunal shall
be composed of three arbitrators, each of whom shall be experienced commercial
litigators admitted to practice law in the State of North Carolina. Acquiror
and the Company shall each appoint one arbitrator. If such parties fail to
nominate an arbitrator in accordance with the preceding sentence within thirty
days from the date when the notice of intention to arbitrate referred to in
Rule 6 of the Rules has been received by the Respondent (as defined in the
Rules) such appointment shall, upon written request by either party to the AAA,
be
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made in accordance with Rule 14 of the Rules. The two arbitrators thus
appointed shall attempt to agree upon the third arbitrator to act as
chairperson of the arbitration tribunal. If said two arbitrators fail to
appoint the chairperson within thirty days from the date of appointment of the
second arbitrator, upon written request of either party to the AAA, such
appointment shall be made in accordance with Rule 15 of the Rules. The
arbitrators shall have no power to waive, alter, amend, revoke or suspend any
of the provisions of this Agreement, provided, however, that the arbitrators
shall have the power to decide all questions with respect to the interpretation
and validity of this SECTION 8.13. The arbitration shall be conducted, and the
award shall be rendered, in the English language. An arbitrator may not act as
an advocate for the party nominating him, and all three arbitrators shall be
impartial and unbiased. A majority vote by the three arbitrators shall be
required on any decision made by them. The arbitrators shall permit such
discovery as they shall determine is appropriate in the circumstances, taking
into account the needs of the parties and the desirability of making discovery
expeditious and cost-effective. Any such discovery shall be limited to
information directly relevant to the controversy or claim in arbitration and
shall be concluded within thirty days after the appointment of the arbitration
panel. This agreement to arbitrate shall be binding upon the heirs, successors
and assigns and any trustee, receiver or executor of any party hereto. Except
to the extent required by law or court or administrative order, no party,
arbitrator, representative, counsel or witness shall disclose or confirm to any
Person not present at the arbitration hearings any information about the
arbitration proceeding or hearings, including the names of the parties and
arbitrators, the nature and amount of the claims, the financial condition of
any party, the expected date of hearing or the award made.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement
by their duly authorized officers as of the date first above written.
CEM CORPORATION, a North Carolina
corporation
By: /s/ Ronald A. Norelli
------------------------------------
Ronald A. Norelli
Chairman of the Board of Directors
MJC ACQUISITION CORPORATION, a North
Carolina corporation
By: /s/ Michael J. Collins
------------------------------------
Michael J. Collins
President
/s/ Michael J. Collins
-----------------------------------------
Michael J. Collins
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EXHIBIT A
ARTICLES OF MERGER
OF
MJC ACQUISITION CORPORATION
INTO
CEM CORPORATION
CEM Corporation ("CEM"), a corporation organized under the laws of
North Carolina, hereby submits these Articles of Merger for the purpose of
merging MJC Acquisition Corporation ("Acquiror"), a corporation organized under
the laws of North Carolina, into CEM (the "Merger"):
I. The following Plan of Merger was duly approved in the manner
prescribed by law by the board of directors and shareholders of each of the
corporations participating in the merger:
PLAN OF MERGER
ARTICLE 1
Merger and Organization
Section 1.1 The Merger.
Acquiror shall be merged with and into CEM at the Effective Time (as
defined below), upon the terms and subject to the conditions hereinafter set
forth, as permitted by and in accordance with the North Carolina Business
Corporation Act (the "North Carolina Law"). Acquiror and CEM are herein
sometimes referred to as the "Constituent Corporations", and CEM, which shall
be the surviving corporation following the effectiveness of the Merger, is
sometimes referred to herein as the "Surviving Corporation".
Section 1.2 Effective Time.
The Merger shall be consummated immediately upon the filing of the
Articles of Merger with the Secretary of State of the State of North Carolina
(the date and time of such filing being referred to herein as the "Effective
Time").
<PAGE> 42
Section 1.3 Effect of Merger.
(a) The name of the Surviving Corporation shall from and
after the Effective Time be and continue to be "CEM Corporation" until
changed in accordance with applicable law.
(b) The articles of incorporation of CEM, as in effect
immediately prior to the Effective Time, shall from and after the
Effective Time be the articles of incorporation of the Surviving
Corporation and shall be amended and restated to conform to the
articles of incorporation of Acquiror as in effect immediately prior
to the Effective Time; provided, however, that, at the Effective Time,
Article 1 of the articles of incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the
corporation is CEM Corporation" and Article 2 shall be amended to
provide that the number of authorized shares of common stock of the
corporation shall be 100. Accordingly, at the Effective Time, the
articles of incorporation of the Surviving Corporation shall be
amended and restated as set forth in Annex A attached hereto.
(c) The bylaws of Acquiror, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by law, the articles
of incorporation of the Surviving Corporation and such bylaws.
(d) At the Effective Time, the separate corporate
existence of Acquiror shall cease, and CEM as the surviving
corporation and successor and shall succeed to Acquiror as set forth
in Section 55-11-06 of the North Carolina Law.
(e) The directors of Acquiror immediately prior to the
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of CEM immediately prior to the
Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected and
qualified.
(f) If at any time after the Effective Time the Surviving
Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation its right, title or
interest in, to or under any of the right, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the
Merger, or (ii) otherwise to carry out the purposes of this Plan of
Merger, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of the Constituent Corporations,
all such deeds, bills of sale, assignments and assurances and do, in
the name and on behalf of the Constituent Corporations all other acts
and things necessary, desirable or proper to vest, perfect or confirm
its right, title or interest in, to or under any of the rights,
properties or assets of the Constituent Corporations acquired or to be
acquired as a result of the Merger and otherwise to carry out the
purposes of this Plan of Merger.
<PAGE> 43
ARTICLE 2
Conversion of Securities at the Effective Time
Section 2.1 Conversion of Securities of CEM and Acquiror.
At the Effective Time, pursuant to this Plan of Merger and by virtue
of the Merger and without any action on the part of CEM, Acquiror or the
holders of any of the following securities:
(a) Each share of common stock, par value $.05 per share, of
CEM ("CEM Common Stock") (shares of CEM Common Stock being hereinafter
collectively referred to as "CEM Shares" and individually as a "CEM
Share") issued and outstanding immediately prior to the Effective Time
(other than any CEM Shares to be cancelled pursuant to SECTION 2.1(B))
shall be cancelled, extinguished and shall be converted automatically
into the right to receive an amount equal to $11.15 in cash, without
interest (the "Cash Merger Consideration"), payable to the holder
thereof, as provided in SECTION 2.2, upon surrender of the certificate
formerly representing the CEM Shares being converted into the right to
receive the Cash Merger Consideration, less any required withholding
taxes;
(b) Each CEM Share held in the treasury of CEM and each CEM
Share owned by Acquiror (including CEM Shares contributed to Acquiror
by agreement with Acquiror), if any, immediately prior to the
Effective Time shall be cancelled without any conversion thereof and
no payment or distribution shall be made with respect thereto; and
(c) Each share of Acquiror's common stock, $.01 par value
("Acquiror Common Stock"), that is issued and outstanding immediately
prior to the Effective Time shall be converted into one newly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
Section 2.2 Payment of Cash for CEM Common Stock.
(a) At the Effective Time, Acquiror shall irrevocably deposit
or cause to be deposited with a bank or trust company to be designated
by Acquiror and reasonably satisfactory to CEM that is organized and
doing business under the laws of the United States or any state
thereof and has a combined capital and surplus of at least
$100,000,000 (the "Disbursing Agent"), as agent for the holders of
shares of CEM Common Stock, cash in the aggregate amount required to
effect conversion of shares of CEM Common Stock into the Cash Merger
Consideration at the Effective Time pursuant to SECTION 2.1(A) hereof.
Pending distribution pursuant to SECTION 2.2(B) hereof of the cash
deposited with the Disbursing Agent, such cash shall be held in trust
for the benefit of the holders of CEM Common Stock and the fund shall
not be used for any other purposes, and Acquiror and Surviving
Corporation may direct the Disbursing Agent to invest such cash,
provided that such investments (i) shall be obligations of or
guaranteed by the United States of America, commercial paper
obligations receiving the highest
<PAGE> 44
rating from either Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or certificates of deposit, bank repurchase
agreements or bankers acceptances of domestic commercial banks with
capital exceeding $250,000,000 (collectively "Permitted Investments")
or money market funds that are invested solely in Permitted
Investments and (ii) shall have maturities that will not prevent or
delay payments to be made pursuant to SECTION 2.2(B) hereof. Each
holder of a certificate or certificates representing shares of CEM
Common Stock cancelled at the Effective Time pursuant to SECTION
2.1(A) hereof may thereafter surrender such certificate or
certificates to the Disbursing Agent, as agent for such holder of
shares of CEM Common Stock, which shall effect the exchange of such
certificate or certificates on such holder's behalf for a period
ending six months after the Effective Time. Any interest and other
income resulting from such investments shall be paid to Acquiror.
(b) After surrender to the Disbursing Agent of any
certificate that prior to the Effective Time shall have represented
any shares of CEM Common Stock, the Disbursing Agent shall promptly
distribute to the individual, corporation, partnership, joint venture,
association, joint stock company, trust, fund, unincorporated
association, organization or other entity (each, a "Person") in whose
name such certificate shall have been registered a check representing
the amount of Cash Merger Consideration into which such shares of CEM
Common Stock shall have been converted at the Effective Time pursuant
to 2.1(A) hereof. Until so surrendered and exchanged, each such
certificate shall, after the Effective Time, be deemed to represent
only the right to receive such Cash Merger Consideration, and until
such surrender and exchange, none of the Cash Merger Consideration
shall be paid to the holder of such outstanding certificate in respect
thereof. The Surviving Corporation shall promptly after the Effective
Time cause to be distributed to such holders appropriate materials to
facilitate such surrender.
(c) If any cash deposited with the Disbursing Agent for
purposes of payment in exchange for shares of CEM Common Stock remains
unclaimed following the expiration of six months after the Effective
Time, such cash shall be delivered to the Surviving Corporation by the
Disbursing Agent, and thereafter the Disbursing Agent shall not be
liable to any Persons claiming any amount of such cash, and the
surrender and exchange shall be effected directly with the Surviving
Corporation (subject to applicable abandoned property, escheat and
similar laws). No interest shall accrue or be payable with respect to
any amounts that any such holder shall be so entitled to receive. The
Surviving Corporation or the Disbursing Agent shall be authorized to
pay the cash attributable to any certificate theretofore issued that
has been lost or destroyed, upon receipt of satisfactory evidence of
ownership of the shares of CEM Common Stock represented thereby and of
appropriate indemnification.
(d) None of Acquiror, the Surviving Corporation or the
Disbursing Agent shall be liable to any Person in respect of any
shares of retained CEM Common Stock (or dividends or distributions
with respect thereto) or cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
certificates representing shares of CEM Common Stock shall not have
been surrendered prior to two years after the Effective Time (or
immediately prior to such earlier date on which any
<PAGE> 45
cash, if any, in lieu of fractional shares of retained CEM Common
Stock or any dividends or distributions with respect to retained CEM
Common Stock in respect of such certificate would otherwise escheat to
or become the property of any governmental entity), any such cash,
dividends or distributions in respect of such certificate shall, to
the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.
(e) If payment is to be made to a Person other than the
Person in whose name a surrendered certificate, which prior to the
Effective Time shall have represented any shares of CEM Common Stock,
is registered, it shall be a condition to such payment that the
certificate so surrendered shall be endorsed or shall otherwise be in
proper form for transfer, and that the Person requesting such payment
shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate surrendered or shall have established to the satisfaction
of the Surviving Corporation or the Disbursing Agent that such tax
either has been paid or is not payable.
(f) From and after the Effective Time, the holders of
shares of CEM Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such
shares of CEM Common Stock except as otherwise provided herein or by
law.
(g) From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of
any shares of CEM Common Stock that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, certificates for
shares of CEM Common Stock are presented to the Surviving Corporation,
they shall be cancelled and promptly exchanged for Cash Merger
Consideration except as provided in SECTION 2.2(B) and 2.2(D); and
Section 2.3 Exchange of Acquiror Common Stock Certificate.
Immediately after the Effective Time, upon surrender by the
record holder of the certificate, duly endorsed in blank, representing the
shares of Acquiror Common Stock outstanding immediately prior to the Effective
Time, the Surviving Corporation shall deliver to such record holder a share
certificate, registered in such holder's name, representing the number of
shares of common stock of the Surviving Corporation to which such record holder
is so entitled by virtue of SECTION 2.1(C).
II. These Articles of Merger shall become effective immediately upon
filing with the North Carolina Secretary of State.
<PAGE> 46
This the _____ day of ____________, 2000.
CEM CORPORATION
By:
-------------------------------------
Michael J. Collins, President
<PAGE> 47
ANNEX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CEM CORPORATION
These Amended and Restated Articles of Incorporation effect amendments
to the Articles of Incorporation of CEM Corporation, a North Carolina
corporation, as the surviving corporation of a merger pursuant to a Plan of
Merger between CEM Corporation and MJC Acquisition Corporation, a North
Carolina corporation, as set forth in the Articles of Merger to which these
Amended and Restated Articles of Incorporation are attached.
1. The name of the corporation is CEM Corporation.
2. The number of shares the corporation is authorized to issue is
One Hundred (100). There shall be only one class of stock, which shall be
common stock with a par value of $0.01 per share.
3. The address of the initial registered office of the corporation
in the State of North Carolina is 101 North Tryon Street, Suite 1900,
Charlotte, Mecklenburg County, North Carolina 28246; and the name of the
initial registered agent at such address is Stephen M. Lynch, Esq.
4. The name and address of the incorporator are Stephen M. Lynch,
Esq., Robinson, Bradshaw & Hinson, P.A., 101 North Tryon Street, Suite 1900,
Charlotte, Mecklenburg County, North Carolina 28246.
5. To the fullest extent permitted by the North Carolina Business
Corporation Act as it exists or may hereafter be amended, no person who is
serving or who has served as a director of the corporation shall be personally
liable to the corporation or any of its shareholders for monetary damages for
breach of duty as a director. No amendment or repeal of this article, nor
<PAGE> 48
the adoption of any provision to these Articles of Incorporation inconsistent
with this article, shall eliminate or reduce the protection granted herein with
respect to any matter that occurred prior to such amendment, repeal, or
adoption.
6. The provisions of the North Carolina Business Corporation Act
entitled "The North Carolina Shareholder Protection Act" and "The North
Carolina Control Share Acquisition Act" shall not be applicable to the
corporation.
<PAGE> 1
EXHIBIT 2
[Letterhead of Banc of America Commercial Finance Corporation]
December 28, 1999
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 a maximum of $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>
Sources ($000) Uses ($000)
- -------------- ------------
<S> <C> <C> <C>
BACF Revolver 3,000 Purchase Stock & Options 34,364
BACF Term Loan A 12,000 Fees & Expenses 1,635
BACF Term Loan B 6,000 Refinance Existing Debt 1,000
Cash on Balance Sheet 12,045 Unused Revolver 2,800
------
Rollover of Shares 5,354
Collins Cash Equity 1,000
BACF Cash Equity 400
------
Total 39,799 Total 39,799
====== ======
</TABLE>
<PAGE> 2
Dr. Michael J. Collins
December 28, 1999
Page 2
<TABLE>
<CAPTION>
REVOLVING CREDIT FACILITY
<S> <C>
Borrower: A newly formed company, whose sole purpose is to merge with 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 $200,000 at closing.
Letter of Credit sub-facility Amount: $750,000
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>
<PAGE> 3
Dr. Michael J. Collins
December 28, 1999
Page 3
<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 750
Yr2 1,250
Yr3 1,750
Yr4 2,250
Yr5 2,750
Yr6 3,250
- 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>
<PAGE> 4
Dr. Michael J. Collins
December 28, 1999
Page 4
<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 Revolving Credit Facility 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.
<PAGE> 5
Dr. Michael J. Collins
December 28, 1999
Page 5
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.
<PAGE> 6
Dr. Michael J. Collins
December 28, 1999
Page 6
MISCELLANEOUS
<TABLE>
<CAPTION>
<S> <C>
Closing Date: To be mutually agreed upon.
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 $1.0 million of new cash equity into the
transaction at closing, on terms acceptable to BACF. In addition, cash of $12.05
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 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
</TABLE>
<PAGE> 7
Dr. Michael J. Collins
December 28, 1999
Page 7
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
<PAGE> 8
Dr. Michael J. Collins
December 28, 1999
Page 8
<TABLE>
<CAPTION>
<S> <C>
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.
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) and satisfactory review of the purchase agreements and equity
documents (including charter, shareholder and other documents) with
terms and conditions acceptable to BACF.
</TABLE>
<PAGE> 9
Dr. Michael J. Collins
December 28, 1999
Page 9
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
(iii) shall be governed by and construed in accordance with the
internal laws of the State of New York.
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 December 31, 1999.
Very truly yours,
Banc of America Commercial Finance Corporation
By: /s/ Joseph P. Longosz
-------------------------------------------
Joseph P. Longosz
Senior Vice President
Agreed and accepted:
/s/ Michael J. Collins
- ---------------------------------
Michael J. Collins
Dated: December 28, 1999
<PAGE> 1
EXHIBIT 3
CEM AGREES TO BE ACQUIRED BY CEO
CHARLOTTE, NC (BUSINESS WIRE), December 29, 1999 - CEM Corporation
(NASDAQ/NM:CEMX) and Michael J. Collins, its President and Chief Executive
Officer, announced today that they had entered into a merger agreement pursuant
to which Mr. Collins would acquire all of the Company's outstanding shares not
owned by him at a price of $11.15 per share in cash. This price represents a 94%
premium to the closing price of CEM common stock on October 18, 1999, the day
the Company announced Mr. Collins' first acquisition proposal, and a 32% premium
to the CEM's closing stock price of $8.4375 on December 29, 1999. The $11.15
price is also 33% greater than the $8.40 per share price initially proposed by
Mr. Collins in October.
A Special Committee of the Board of Directors of CEM, which was
appointed to consider the transaction and assess other strategic alternatives,
has received the opinion of Brookwood Associates, Inc., its financial advisor,
that, subject to the assumptions and limitations set forth in its opinion, the
$11.15 per share cash consideration to be received by the shareholders of CEM
pursuant to the merger is fair from a financial point of view to such
shareholders.
The transaction is subject to approval by CEM's shareholders and to
certain other customary conditions. The Company currently believes that the
shareholder vote and the closing of the transaction (if approved by the
shareholders) could occur early in the Company's fourth fiscal quarter (the
second calendar quarter).
The transaction is not subject to any financing contingency. Mr.
Collins has accepted a commitment from Banc of America Commercial Finance
Corporation to provide the necessary financing, which commitment was arranged
for Mr. Collins by his financial advisor, Wachovia Securities, Inc.
Ronald A. Norelli, Chairman of CEM's Board of Directors and a member of
the Special Committee, stated that "with the help of Brookwood Associates, we
looked at a number of alternatives in considering Mike's transaction. His offer
was the best alternative, and it's clearly in the best interests of the
shareholders." Mr. Collins added that "I am pleased my offer was accepted by the
Board and will be recommended to the shareholders. I believe this is a win-win
situation for the shareholders and the Company. It will create substantial
shareholder value with a sizeable premium."
"Given CEM's size and today's dynamics in the public arena, it is
appropriate for CEM to once again be a private company. I continue to be excited
about the opportunities for CEM as a private company with our new financial
partner Bank of America. I look forward to the challenges ahead and am confident
CEM will remain a leading company in our industry," Collins continued.
<PAGE> 2
The affirmative vote of holders of 66 2/3% of CEM's outstanding common
stock is needed to approve the transaction. Mr. Collins beneficially owns in
excess of 15% of the outstanding common stock of CEM.
CEM manufactures microwave-based instrumentation for testing and
analysis. The Company's products are used worldwide in the general analytical
laboratory market, and in many manufacturing industries, including food and
chemical processing.
Contacts:
Michael J. Collins
President and Chief Executive Officer
CEM Corporation
(704) 821-7015
Ronald A. Norelli
Chairman of the Board of Directors and Member, Special Committee
CEM Corporation
(704) 376-5484
2
