<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
COMPLETE BUSINESS SOLUTIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S><C>
MICHIGAN 7371 38-2606945
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
32605 WEST TWELVE MILE ROAD
SUITE 250
FARMINGTON HILLS, MICHIGAN 48334
(810) 488-2088
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Executive Offices)
------------------------------
RAJENDRA B. VATTIKUTI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMPLETE BUSINESS SOLUTIONS, INC.
32605 WEST TWELVE MILE ROAD
SUITE 250
FARMINGTON HILLS, MICHIGAN 48334
(810) 488-2088
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
With Copies to:
DANIEL I. DE WOLF, ESQ. DOUGLAS R. NEWKIRK, ESQ.
WILLIE E. DENNIS, ESQ. J. TODD ARKEBAUER, ESQ.
Camhy Karlinsky & Stein LLP Sachnoff & Weaver, Ltd.
1740 Broadway 30 South Wacker Drive, 29th Floor
New York, New York 10019 Chicago, Illinois 60606
(212) 977-6600 (312) 207-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value..................... $ $63,825,000 $ 19,341
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</TABLE>
(1) Includes shares which are subject to an over-allotment option granted to
the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
PROSPECTUS
, 1997
SHARES
[CBSI LOGO]
COMMON STOCK
Of the shares of Common Stock offered hereby, shares
are being sold by Complete Business Solutions, Inc. ("CBSI" or the "Company")
and shares are being sold by the Selling Shareholders. See "Principal
and Selling Shareholders." The Company will not receive any part of the proceeds
from the sale of shares by the Selling Shareholders.
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting"
for information relating to the factors to be considered in determining the
initial public offering price.
Application has been made for the Common Stock to be approved for quotation
on the Nasdaq National Market under the symbol "CBSL."
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses, estimated at $750,000, which will be paid by the
Company.
(3) The Selling Shareholders have granted to the Underwriters a 30-day option
to purchase up to additional shares of Common Stock at the Price
to the Public, less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions, Proceeds to
the Company and Proceeds to the Selling Shareholders will be $ ,
$ , $ and $ , respectively. The Company will not receive
any of the proceeds from the sale of shares of Common Stock by the Selling
Shareholders pursuant to the Underwriters' over-allotment, if exercised.
See "Principal and Selling Shareholders" and "Underwriting."
The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of the share certificates will be made in New
York, New York, on or about , 1997.
DONALDSON, LUFKIN & JENRETTE FERRIS, BAKER WATTS
SECURITIES CORPORATION INCORPORATED
<PAGE> 3
[GRAPHICS]
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect" and similar expressions as they
relate to the Company or its management are intended to identify such
forward-looking statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed in "Risk Factors."
------------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------------
APECS(R) is a registered trademark of the Company. COSMO(SM) and The Time
Machine 2000(SM) are service marks of the Company. All trademarks, service marks
and trade names referred to in this Prospectus are the property of their
respective owners.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Consolidated Financial Statements and related Notes thereto appearing elsewhere
in this Prospectus. Unless otherwise indicated, all information contained in
this Prospectus assumes that the Underwriters' over-allotment option is not
exercised. All share and per share data in this Prospectus have been adjusted to
give retroactive effect to: (i) the conversion by JF Electra (Mauritius) Limited
("JF Electra") of its shares of stock in CBS Complete Business Solutions
(Mauritius) Limited ("CBS Mauritius") into shares of common stock of the
Company, no par value (the "Common Stock"); and (ii) a 1 for reverse
stock split to be completed prior to the date of this Prospectus. Unless
otherwise indicated, the terms "Company" and "CBSI" refer collectively to
Complete Business Solutions, Inc. and its subsidiaries.
THE COMPANY
CBSI is a worldwide provider of information technology ("IT") services to
large and mid-size organizations. The Company offers its clients a broad range
of IT services, from advising clients on strategic technology plans to
developing and implementing appropriate IT solutions. CBSI offers
custom-tailored solutions based on an assessment of each client's needs. The
Company's services include: (i) large systems applications development and
maintenance; (ii) reengineering legacy applications to client/server technology;
(iii) client/server applications development; (iv) Year 2000 conversion
services; (v) IT consulting services; (vi) packaged software implementation; and
(vii) contract programming services.
CBSI provides services in a wide variety of computing environments and uses
leading technologies, including client/server architectures, object-oriented
programming languages and tools, distributed database management systems and the
latest network and communications technologies. The Company believes that the
breadth of its service offerings fosters long-term client relationships, affords
cross-selling opportunities, minimizes dependence on any single technology or
client and enables the Company to serve as a single source provider for its
clients' IT applications solutions. This single or preferred provider approach
is consistent with CBSI's full life-cycle, client-oriented approach to IT
solutions.
CBSI provides IT services to clients in a diverse range of industries. Its
clients include American President Lines, Chrysler Corporation, Ford Motor
Company, IBM, ISSC/Foremost Insurance, the State of Indiana, the State of
Nevada, S.W.I.F.T., Spartan Stores and UNUM Ltd. During 1996, the Company
provided services to over 220 clients in the U.S., Europe and Asia. The
Company's strategy is to maximize its client retention rate and secure
additional engagements by providing both quality services and client
responsiveness. For each of the years 1994 and 1995 and for the nine month
period ended September 30, 1996, existing clients from the previous fiscal year
generated at least 80% of the Company's revenues. These recurring revenues have
contributed significantly to the Company's 30% compound annual revenue growth
rate over the past five years.
Since 1992, CBSI has developed an extensive offshore infrastructure in
India, including two modern software development centers in Bangalore and Madras
and a training center in Hyderabad. The Company believes this established
offshore infrastructure is one of the largest in the industry and differentiates
it from those competitors who either have no offshore capability or depend on
subcontractor relationships to offer such services. With its offsite and
offshore development options, the Company can quickly provide clients with IT
solutions on a cost-effective basis.
The Company's goal is to become the preferred provider of IT services to an
expanding base of clients. The Company's strategy to achieve this goal is to:
(i) cross-sell services to existing clients; (ii) increase and build upon Year
2000 engagements; (iii) capitalize on significant investments in infrastructure
and capabilities; (iv) develop new and expand recently added service offerings
such as Enterprise Resource Planning software package installation,
Internet/intranet applications and Electronic Data Interchange applications; (v)
increase its international presence; and (vi) pursue targeted acquisitions.
3
<PAGE> 5
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................. shares
Common Stock offered by the Selling Shareholders.... shares
Common Stock to be outstanding after the offering... shares(1)
Use of proceeds..................................... Repayment of existing debt; payment of
undistributed S corporation earnings;
expansion of existing operations,
including the Company's offshore
software development operations,
development of new service lines and
possible acquisitions of related
businesses; and general corporate
purposes, including working capital.
Proposed Nasdaq National Market symbol.............. CBSL
</TABLE>
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(1) Excludes: (i) options outstanding on the date hereof to purchase
shares at an average exercise price of $ per share; and (ii)
additional shares reserved for issuance upon exercise of options that may be
granted in the future under the Company's 1996 Stock Option Plan. See
"Management -- Employee Benefit Plans."
4
<PAGE> 6
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ------------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME
DATA:
Revenues....................... $23,241 $32,382 $43,795 $56,358 $67,399 $50,496 $61,499
Gross profit................... 5,236 7,159 10,290 13,522 13,790 10,623 14,960
Income from operations......... 597 1,409 1,936 2,635 1,966 1,545 3,874
Interest expense............... 90 184 196 345 692 537 446
Provision for income taxes..... -- -- -- -- -- -- 127
Minority interest.............. -- 36 127 176 252 120 180
Net income..................... $ 507 $ 1,189 $ 1,613 $ 2,114 $ 1,022 $ 888 $ 3,121
PRO FORMA STATEMENT OF INCOME DATA:
Revenues.................................................................. $67,399 $50,496 $61,499
Gross profit.............................................................. 13,790 10,623 14,960
Income from operations(1)................................................. 1,796 1,417 3,746
Interest income(2)........................................................ 32 24 27
Provision for income taxes(3)............................................. 368 291 1,444
Net income(4)............................................................. $ 1,460 $ 1,150 $ 2,329
Net income per common share............................................... $ $ $
Weighted average shares outstanding(5)....................................
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
AS
ACTUAL ADJUSTED(6)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 3,461 $
Working capital...................................................................... 9,646
Total assets......................................................................... 31,938
Revolving credit facility and long-term debt......................................... 7,016
Minority interest.................................................................... 1,524
Total shareholders' equity........................................................... 13,365
</TABLE>
- ------------------------------
(1) Reflects the amortization of goodwill over a period of 25 years as a
result of the Company's purchase of the 28% minority interest in CBS
Mauritius.
(2) Reflects the elimination of interest expense to give effect to the
repayment of the Company's revolving credit facility and long-term debt.
See "Use of Proceeds."
(3) Reflects provision for Federal and state income taxes at the effective
income tax rate as if the Company had been taxed as a C corporation and
no foreign tax holidays had been granted during the periods presented.
The effective tax rate was 20.2%, 20.2% and 38.3% for the year ended
December 31, 1995 and the nine months ended September 30, 1995 and 1996,
respectively.
(4) Reflects the elimination of minority interest due to the issuance of
shares of Common Stock in exchange for the minority interest in
CBS Mauritius.
(5) Reflects pro forma weighted average shares of Common Stock, plus the
portion of the Common Stock offered hereby needed to generate proceeds
sufficient to repay the Company's revolving credit facility and
long-term debt at the end of each period. See "Use of Proceeds" and
"Capitalization."
(6) Adjusted to give effect to: (i) the recording of a $2.2 million deferred
tax liability upon termination of the Company's S corporation status;
(ii) the issuance of shares of Common Stock in connection with
the conversion of JF Electra's minority interest in CBS Mauritius,
including the elimination of the minority interest; (iii) the exercise
of certain stock options in exchange for promissory notes; and (iv) the
sale of shares of Common Stock by the Company (at an assumed
initial public offering price of $ per share) and the
application of the estimated net proceeds therefrom as described in "Use
of Proceeds." See "Certain Transactions."
5
<PAGE> 7
RISK FACTORS
RECRUITMENT AND RETENTION OF IT PROFESSIONALS
The Company's business involves delivering IT services and is
labor-intensive. The Company's success depends upon its ability to attract,
develop, motivate and retain highly-skilled IT professionals and project
managers, who possess the technical skills and experience necessary to deliver
the Company's services. Qualified IT professionals are in great demand worldwide
and are likely to remain a limited resource for the foreseeable future. There
can be no assurance that qualified IT professionals will continue to be
available to the Company in sufficient numbers, or that the Company will be
successful in retaining current or future employees. Failure to attract or
retain qualified IT professionals in sufficient numbers could have a material
adverse effect on the Company's business, operating results and financial
condition. Historically, the Company has accomplished a significant portion of
its recruiting outside of the countries where the client work was performed.
Accordingly, any perception among the Company's IT professionals, whether or not
well founded, that the Company's ability to assist them in obtaining H-1B
temporary work permits and permanent residency status has diminished could lead
to significant employee attrition which could result in the Company incurring
increased costs for IT professionals. See "Business -- Human Resources,"
"Business -- Competition" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
GOVERNMENT REGULATION OF IMMIGRATION
The Company recruits its IT professionals on a global basis to create a
workforce that it can deploy wherever required and, therefore, must comply with
the immigration laws in the countries in which it operates, particularly the
United States. As of September 30, 1996, approximately 45% of CBSI's worldwide
workforce was working under H-1B temporary work permits in the United States.
There is a limit on the number of new H-1B permits that may be approved in a
fiscal year. In years in which this limit is reached, the Company may be unable
to obtain enough H-1B permits to meet its requirements. If the Company were
unable to obtain H-1B permits for its employees in sufficient quantities or at a
sufficient rate, the Company's business, operating results and financial
condition could be materially and adversely affected. Furthermore, Congress and
administrative agencies with jurisdiction over immigration matters have
periodically expressed concerns over the levels of legal and illegal immigration
into the U.S. These concerns have often resulted in proposed legislation, rules
and regulations aimed at reducing the number of work permits that may be issued.
Any changes in such laws and regulations making it more difficult to hire
foreign nationals or limiting the ability of the Company to retain foreign
employees, could require the Company to incur additional unexpected labor costs
and other expenses. Any such restrictions or limitations on the Company's hiring
practices could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Human Resources."
INCREASING SIGNIFICANCE AND RISKS OF NON-U.S. OPERATIONS
The Company's international consulting and offshore software development
operations are important elements of its growth strategy. The Company opened
offices in the United Kingdom in 1990, in Madras, India in 1992, in Bangalore,
India in 1995 and in Hyderabad, India in 1996. The international operations of
the Company accounted for 2.9%, 4.7%, 6.8% and 6.8% of the Company's total
revenues in fiscal years 1993, 1994 and 1995 and the nine month period ended
September 30, 1996, respectively. These operations depend greatly upon business
and technology transfer laws in those countries, and upon the continued
development of technology infrastructure. There can be no assurance that the
Company's international operations will continue to be profitable or support the
Company's growth strategy. The risks inherent in the Company's international
business activities include unexpected changes in regulatory environments,
foreign currency fluctuations, tariffs and other trade barriers, difficulties in
managing international operations and potential foreign tax consequences,
including repatriation of earnings and the burden of complying with a wide
variety of foreign laws and regulations. The Company's failure to manage growth,
attract and retain personnel, manage major development efforts, or profitably
deliver services or a significant interruption in the Company's ability to
transmit data via satellite, could have a material adverse impact on the
Company's ability to maintain and
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develop successfully its international operations and could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- CBSI Growth Strategies."
The Company's international operations are subject to a number of special
risks, including currency exchange rate fluctuations, trade barriers, exchange
controls, political risks and risk of increases in duties, taxes and
governmental royalties, as well as changes in laws and policies governing
operations of foreign-based companies.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's revenues and operating results are subject to significant
variation from quarter to quarter depending on a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, the number of working days in a quarter, employee hiring, attrition and
utilization rates and progress on fixed-price projects during the quarter.
Because a high percentage of the Company's expenses, in particular personnel and
facilities costs, are relatively fixed, a variation in revenues may cause
significant variations in operating results. Additionally, the Company
periodically incurs cost increases due to both the hiring of new employees and
strategic investments in its infrastructure in anticipation of future
opportunities for revenue growth. No assurances can be given that quarterly
results will not fluctuate, causing a material adverse effect on the Company's
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quarterly Results."
EXPOSURE TO REGULATORY AND GENERAL ECONOMIC CONDITIONS IN INDIA
A significant element of the Company's business strategy is to continue to
develop its offshore software development centers in Bangalore and Madras,
India. As of September 30, 1996, the Company had approximately 26% of its
workforce in India. The Indian government exerts significant influence over its
economy. In the recent past, the Indian government has provided significant tax
incentives and relaxed certain regulatory restrictions in order to encourage
foreign investment in certain sectors of the economy, including the technology
industry. Certain of these benefits that directly affect the Company include,
among others, tax holidays, liberalized import and export duties and
preferential rules on foreign investment and repatriation. Changes in the
business or regulatory climate of India could have a material adverse effect on
the Company's business, operating results and financial condition.
Although wage costs in India are significantly lower than in the U.S. and
elsewhere for comparably skilled IT professionals, wages in India are increasing
at a faster rate than in the U.S. In the past, India has experienced significant
inflation and shortages of foreign exchange, and has been subject to civil
unrest and acts of terrorism. Changes in inflation, interest rates, taxation or
other social, political, economic or diplomatic developments affecting India in
the future could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- The CBSI Solution."
FIXED-PRICE PROJECTS
The Company undertakes certain projects on a fixed-price basis, as
distinguished from billing on a time-and-materials basis. Significant cost
overruns on fixed-price projects could have a material adverse effect on the
Company's business, operating results and financial condition. These risks may
be heightened if the Company acts as a subcontractor on a fixed-price project
because of its limited ability to control project variables and to negotiate
directly with the ultimate client. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
within a variety of market segments, including "Big Six" accounting firms,
implementation firms, software applications firms, service groups of computer
equipment companies, general management consulting firms, programming companies
and temporary staffing firms. Many of these competitors have substantially
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<PAGE> 9
greater financial, technical and marketing resources and greater name
recognition than the Company. In addition, there are relatively few barriers to
entry into the Company's markets and the Company has faced, and expects to
continue to face, additional competition from new entrants into its markets.
Moreover, there is a risk that clients may elect to increase their internal IT
resources to satisfy their applications solutions needs. Further, the IT
services industry is undergoing consolidation which may result in increasing
pressure on margins. These factors may limit the Company's ability to increase
prices commensurate with increases in compensation. There can be no assurance
that the Company will compete successfully with existing or new competitors. See
"Business -- Competition."
CONCENTRATION OF REVENUES; RISK OF TERMINATION
The Company's ten largest clients accounted for approximately 59% and 48%
of revenues in fiscal year 1995 and the nine months ended September 30, 1996,
respectively. International Business Machines and its affiliates accounted for
approximately 19% and 12% of the Company's revenues in fiscal year 1995 and the
nine months ended September 30, 1996, respectively. Revenues from this client
are generated by multiple projects for various end users. Most of the Company's
projects are terminable by the client without penalty. An unanticipated
termination of a major project could result in the loss of revenues and could
require the Company to maintain or terminate a number of unassigned IT
professionals. The loss of any significant client or project could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Clients."
MANAGEMENT OF GROWTH; CHANGING NATURE OF BUSINESS
The Company has experienced rapid growth that has placed significant
demands on the Company's managerial, administrative and operational resources.
Revenues have grown from $32.4 million in 1992 to $67.4 million in 1995, and the
number of employees has grown from 368 as of December 31, 1992 to 1,465 as of
November 30, 1996. The Company's continued growth depends on its ability to add
managers, to increase its international operations, to add service lines and to
expand further its offshore facilities. None of the Company's senior management
has managed a public company. Effective management of growth initiatives will
require the Company to continue to improve its operational, financial and other
management processes and systems. Failure to manage growth effectively could
have a material adverse effect on the Company's business, operating results and
financial condition. See "Business -- CBSI Growth Strategies."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW SOLUTIONS
The IT industry is characterized by rapid technological change, evolving
industry standards, changing client preferences and new product introductions.
The Company's success will depend in part on its ability to develop IT solutions
that keep pace with changes in the IT industry. There can be no assurance that
the Company will be successful in addressing these developments on a timely
basis or that, if these developments are addressed, the Company will be
successful in the marketplace. In addition, there can be no assurance that
products or technologies developed by others will not render the Company's
services noncompetitive or obsolete. The Company's failure to address these
developments could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- The IT Services
Industry."
DEPENDENCE ON PRINCIPALS
The success of the Company is highly dependent on the efforts and abilities
of Rajendra B. Vattikuti and Timothy S. Manney, the Company's Chief Executive
Officer and President, and Executive Vice President of Finance and
Administration, respectively. Although Messrs. Vattikuti and Manney have entered
into employment agreements containing noncompetition covenants that extend for a
period of one year following termination of employment and nondisclosure
covenants, such agreements do not guarantee that Messrs. Vattikuti and Manney
will continue their employment with the Company nor that such covenants will be
enforceable. The loss of the services of either of these key executives for any
reason could have a material adverse effect on the Company's business, operating
results and financial condition. The Company maintains
8
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key man life insurance on Mr. Vattikuti in the amount of $2,000,000. In the
event of Mr. Vattikuti's death, that sum would be paid to the Company to offset
the financial effect of his death. No assurance can be given, however, that such
amount of insurance would be adequate for that purpose. See "Management --
Executive Officers and Directors."
RISKS RELATED TO POSSIBLE ACQUISITIONS
The Company may expand its operations through the acquisition of additional
businesses. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate any
acquired businesses into the Company without substantial expenses, delays or
other operational or financial problems. Further, acquisitions may involve a
number of special risks, including diversion of management's attention, failure
to retain key acquired personnel, unanticipated events or circumstances, legal
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on the Company's business, operating
results and financial condition. Client satisfaction or performance problems
within an acquired firm could have a material adverse impact on the reputation
of the Company as a whole. In addition, there can be no assurance that acquired
businesses, if any, will achieve anticipated revenues and earnings. The failure
of the Company to manage its acquisition strategy successfully could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- CBSI Growth Strategies."
INTELLECTUAL PROPERTY RIGHTS
The Company's success depends in part upon certain methodologies it
utilizes in designing, developing and implementing applications systems and
other proprietary intellectual property rights. The Company relies upon a
combination of nondisclosure and other contractual arrangements and trade
secret, copyright and trademark laws to protect its proprietary rights and the
proprietary rights of third parties from whom the Company licenses intellectual
property. The Company enters into confidentiality agreements with its employees
and limits distribution of proprietary information. There can be no assurance
that the steps taken by the Company in this regard will be adequate to deter
misappropriation of proprietary information or that the Company will be able to
detect unauthorized use of and take appropriate steps to enforce its
intellectual property rights. Although the Company does not believe that its
products infringe on the rights of third parties, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future, or that such assertions will not result in costly litigation or require
the Company to obtain a license for the intellectual property rights of third
parties. There can be no assurance that such licenses will be available on
reasonable terms or at all. See "Business -- Intellectual Property Rights."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock of the Company. The initial public offering price per share of the Common
Stock will be determined by negotiations among management of the Company, the
Selling Shareholders and the Underwriters. There can be no assurance that an
active public market in the Common Stock will develop or be sustained. The
Nasdaq National Market has from time to time experienced extreme price and
volume fluctuations that have often been unrelated to the operating performance
of particular companies. In addition, factors such as announcements of
technological innovations, new products or services or new client engagements by
the Company or its competitors or third parties, as well as market conditions in
the IT industry, may have a significant impact on the market price of the Common
Stock. See "Underwriting."
CONTROL BY PRINCIPAL SHAREHOLDER
Upon completion of this offering, Mr. Vattikuti will beneficially own
approximately % of the outstanding shares of Common Stock. As a result, Mr.
Vattikuti will be able to elect the entire Board of
9
<PAGE> 11
Directors, and will retain the voting power to control all matters requiring
shareholder approval, including approval of significant corporate transactions.
Such a concentration of ownership may have the effect of delaying or preventing
a change in control of the Company, and may also impede or preclude transactions
in which shareholders might otherwise receive a premium for their shares over
then current market prices. See "The Company," "Management -- Executive Officers
and Directors" and "Principal and Selling Shareholders."
LIMITATIONS ON DIRECTORS' LIABILITIES
The Company's Restated Articles of Incorporation provide that, to the full
extent permitted by law, a director of the Company will not be personally liable
to the Company or its shareholders for damages for breach of fiduciary duty as a
director. This provision would ordinarily eliminate the liability of directors
for monetary damages to the Company and its shareholders even in instances in
which the directors had been negligent or grossly negligent. Under the Michigan
Business Corporation Act ("MBCA"), a director's liability may not be limited:
(i) for any breach of the director's duty of loyalty to the Company or its
shareholders; (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (iii) for a violation of
Section 551(1) of the MBCA; (iv) for any transaction from which the director
derived any improper personal benefit; or (v) for any act or omission occurring
prior to the date when the provision becomes effective.
ANTI-TAKEOVER PROVISIONS
The Company's Restated Articles of Incorporation (the "Articles") and
Bylaws and the MBCA include provisions that may be deemed to have anti-takeover
effects and may delay, defer or prevent a takeover attempt that shareholders
might consider in their best interests. Directors of the Company are divided
into three classes and are elected to serve staggered three-year terms. The
Articles provide for 1,000,000 authorized shares of Preferred Stock, the rights,
preferences, qualifications, limitations and restrictions of which may be fixed
by the Board of Directors without any vote or action by the shareholders, which
could have the effect of diluting the Common Stock or reducing working capital
that would otherwise be available to the Company. Chapter 7A of the MBCA
provides, with certain exceptions, that business combinations between a Michigan
corporation and an "interested shareholder" generally require the approval of
90% of the votes of each class of stock entitled to be cast by the shareholders
of the corporation, and not less than 2/3 of the votes of each class of stock
entitled to be cast by the shareholders of the corporation other than voting
shares owned by such interested shareholder. An "interested shareholder" is a
person directly or indirectly owning 10% or more of a corporation's outstanding
voting power, or an affiliate of a corporation who at any time within two years
prior to the date in question directly or indirectly owned 10% or more of such
voting power. These provisions may have the effect of delaying or preventing a
change in control of the Company without action by the shareholders, may
discourage bids for the Common Stock at a premium over the market price and may
deter efforts to obtain control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after completion of this offering, the Company will have
shares of Common Stock outstanding, of which the shares sold
pursuant to this offering will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except those shares acquired by affiliates of the Company.
The remaining shares will be "restricted securities" within the meaning of Rule
144 under the Securities Act. The Company and all of its current shareholders
have agreed not to offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, until 180 days after the date of
this Prospectus, without the prior consent of Donaldson, Lufkin & Jenrette
Securities Corporation, on behalf of the Underwriters. Following the 180 day
period, of the restricted securities will become immediately eligible for
sale, subject to the manner of sale, volume, notice and information requirements
of Rule 144, and shares will become eligible for sale on
, subject to the manner of sale, volume, notice and
information requirements of Rule 144. Sales of substantial amounts of such
shares in the
10
<PAGE> 12
public market or the availability of such shares for future sale could adversely
affect the market price of the shares of Common Stock and the Company's ability
to raise additional capital at a price favorable to the Company. See "Shares
Eligible for Future Sale" and "Underwriting."
BENEFITS OF OFFERING TO SELLING SHAREHOLDERS
The Selling Shareholders will receive proceeds from this offering and
certain other material benefits in connection with this offering including
dedication of a portion of the proceeds to the payment of certain Federal taxes
resulting from the Company's conversion from an S corporation to a C corporation
and payment of undistributed S corporation earnings. This offering will
establish a public market for the Common Stock and provide significantly
increased liquidity to the Selling Shareholders for the shares of Common Stock
they will own after this offering. See "Use of Proceeds," "Dilution" and
"Principal and Selling Shareholders."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock is
substantially higher than the net tangible book value per share of the Common
Stock. At an assumed initial public offering price of $ per share,
purchasers of shares of Common Stock in this offering will experience immediate
and substantial dilution of $ in the pro forma net tangible book value per
share of Common Stock. See "Dilution."
POTENTIAL LIABILITY TO CLIENTS
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. The Company's failure or inability to meet a client's expectations
in the execution of its services could result in a material adverse change to
the client's operations and, therefore, could give rise to claims against the
Company or damage the Company's reputation, adversely affecting its business,
operating results and financial condition.
SIGNIFICANT UNALLOCATED NET PROCEEDS
A substantial portion of the anticipated net proceeds of this offering has
not been designated for specific uses. Therefore, the Board of Directors will
have broad discretion with respect to the use of the net proceeds of this
offering. See "Use of Proceeds."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any dividends on its Common Stock in
the foreseeable future. See "Dividend Policy."
THE COMPANY
Complete Business Solutions, Inc. was incorporated under the laws of the
State of Michigan in 1985. Immediately prior to the effective date of this
offering, upon the conversion by JF Electra of its shares in CBS Mauritius into
Common Stock, the Company will become the sole shareholder of CBS Mauritius,
which in turn owns all of the issued and outstanding shares of Complete Business
Solutions (India) Private Limited ("CBS India"), a corporation organized under
the laws of India. CBS India provides offshore software development services and
recruiting and training services for CBSI in India.
The Company maintains its principal executive offices at 32605 West Twelve
Mile Road, Suite 250, Farmington Hills, Michigan 48334. The Company's web site
is www.cbsinc.com. The Company's web site is not part of this Prospectus. The
Company's telephone number is (810) 488-2088.
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company (after deduction of estimated underwriting discounts and
commissions and offering expenses payable by the Company) are estimated to be
approximately $ million, assuming an initial public offering price of
$ per share. The Company expects to use the net proceeds from this
offering for: (i) repayment in full to NBD Bank (the "Bank") of existing debt,
bearing interest at floating rates based on such Bank's prime rate or a
Eurodollar rate, the majority of which matures on demand, estimated to be $7.0
million; (ii) payment of undistributed S corporation earnings, estimated to be
$6.9 million; (iii) expansion of existing operations, including the Company's
offshore software development operations, development of new service lines and
possible acquisitions of related businesses; and (iv) general corporate
purposes, including working capital. The Company has no present commitments or
agreements and is not currently conducting negotiations with respect to any
acquisitions. Pending their application as described above, such proceeds will
be invested in short-term, investment grade, interest-bearing securities. See "S
Corporation Distribution," "Business -- CBSI Growth Strategies" and Notes 6 and
7 of Notes to Consolidated Financial Statements. The principal purposes of this
offering are to obtain additional working capital, create a public market for
the Common Stock, provide liquidity to the Company's shareholders and facilitate
future access by the Company to public equity markets.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders. See "Principal and Selling Shareholders."
S CORPORATION DISTRIBUTION
Since February 1, 1988, the Company has been a corporation subject to
income taxation under Subchapter S of the Internal Revenue Code of 1986, as
amended. As a result, substantially all of the Company's net income has been
attributed, for income tax purposes, directly to the Company's shareholders
rather than to the Company. The Company's S corporation status will terminate in
connection with this offering and thereupon the Company will make a final
distribution (the "Distribution") to its existing shareholders in an aggregate
amount representing substantially all of the S corporation's undistributed
earnings taxed or taxable to its shareholders through the closing of this
offering. The Distribution is estimated to be approximately $6.9 million.
Purchasers of Common Stock in this offering will not receive any portion of the
Distribution.
Following termination of its S corporation status, the Company will be
subject to corporate income taxation on an accrual basis under Subchapter C of
the Internal Revenue Code of 1986, as amended. In connection with the
termination of its S corporation status, the Company estimates that it will
record, in the period in which this offering occurs, a deferred tax liability
and a corresponding income tax expense of approximately $2.2 million. The
majority of this deferred tax liability will be paid over four taxable years.
The deferred tax liability will be recorded in accordance with Statement of
Financial Accounting Standards No. 109. See Note 1 of Notes to Consolidated
Financial Statements.
12
<PAGE> 14
DIVIDEND POLICY
The Company intends to retain all of its future earnings to fund growth and
the operation of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future. Future cash dividends, if any, will be at
the discretion of the Company's Board of Directors and will depend upon, among
other things, the Company's future operations and earnings, capital requirements
and surplus, general financial condition, contractual restrictions and such
other factors as the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of September 30, 1996, and as adjusted to give effect to: (i) the
recording of a $2.2 million deferred tax liability upon termination of the
Company's S corporation status (see "S Corporation Distribution"); (ii) the
issuance of shares of Common Stock in connection with the conversion of
JF Electra's minority interest in CBS Mauritius, including the elimination of
the minority interest; (iii) the exercise of certain stock options in exchange
for promissory notes; and (iv) the sale of shares of Common Stock by the
Company (at an assumed initial public offering price of $ per share)
and the application of the estimated net proceeds therefrom as described in "Use
of Proceeds." The following table should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto included elsewhere
in this Prospectus:
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Revolving credit facility........................................... $ 6,100 $
Note payable - shareholder.......................................... 608
Current portion of long-term debt................................... 528
-------- --------
Total short-term debt.......................................... 7,236
======== ========
Long-term debt, less current portion.................................. 388
Minority interest..................................................... 1,524
Shareholders' equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares outstanding............................................... --
Common stock, no par value; 30,000,000 shares authorized; 10,000,000
shares issued and outstanding; shares issued and
outstanding, as adjusted(1)...................................... --
Additional paid-in capital.......................................... 1,101
Retained earnings................................................... 12,467
Stock subscriptions receivable...................................... --
Cumulative translation adjustment................................... (203)
-------- --------
Total shareholders' equity..................................... 13,365
======== ========
Total capitalization...................................... $15,277 $
======== ========
</TABLE>
- -------------------------
(1) Excludes: (i) options outstanding on the date hereof to purchase
shares at an average exercise price of $ per share; and (ii)
additional shares reserved for issuance upon exercise of options that may be
granted in the future under the Company's 1996 Stock Option Plan. See
"Management -- Employee Benefit Plans."
13
<PAGE> 15
DILUTION
As of September 30, 1996, the Company's net tangible book value was
approximately $13.4 million or $ per share. Net tangible book value per
share represents the Company's total tangible assets less the Company's total
liabilities, divided by the aggregate number of shares of Common Stock
outstanding. After giving effect to: (i) the recording of a $2.2 million
deferred tax liability upon termination of the Company's S corporation status;
(ii) the issuance of shares of Common Stock in connection with the
conversion of JF Electra's minority interest in CBS Mauritius, including the
elimination of the minority interest; (iii) the exercise of certain stock
options in exchange for promissory notes; and (iv) the sale of shares of
Common Stock by the Company (at an assumed initial public offering price of
$ per share) and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds," the pro forma net tangible book value of the
Company at September 30, 1996 would have been $ million or $ per
share. This amount represents an immediate increase in net tangible book value
of $ per share to existing shareholders and an immediate dilution of
$ per share to purchasers of Common Stock in this offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common Stock............. $
Net tangible book value per share at September 30, 1996................... $
Increase in net tangible book value per share attributable to new
investors..............................................................
Pro forma net tangible book value per share after this offering.............
------
Dilution in net tangible book value per share to new investors.............. $
======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, the differences in the number of shares of capital stock purchased from
the Company, the total consideration paid and the average price paid per share
by existing shareholders and new investors at the assumed initial public
offering price of $ per share:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
----------------- ----------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)...................... % $ % $
New investors(1).............................. $
------ ------ ------ ------
Total.................................... 100.0% $ 100.0%
====== ====== ====== ======
</TABLE>
- -------------------------
(1) Sales by the Selling Shareholders in this offering will reduce the number of
shares held by existing shareholders of the Company to shares or % of
the total number of shares outstanding after this offering ( shares or
% if the Underwriters' over-allotment option is exercised in full) and
will increase the number of shares held by new investors to shares or
% of the total number of shares outstanding after this offering (
shares or % if the Underwriters' over-allotment option is exercised in
full). See "Principal and Selling Shareholders."
14
<PAGE> 16
SELECTED FINANCIAL DATA
The selected historical financial data presented below for the five years
ended December 31, 1995, are derived from the Company's Consolidated Financial
Statements and related Notes thereto which have been audited by Arthur Andersen
LLP, independent public accountants. The amounts provided as pro forma statement
of income data have been adjusted to reflect this offering and related
transactions. The selected financial data as of and for each of the interim
periods ended September 30, 1995 and 1996, have been derived from unaudited
financial statements of the Company, which in the opinion of management, include
all adjustments that are necessary for a fair presentation of the results for
the interim periods, and all such adjustments are of a normal recurring nature.
The results of operations for the interim period ended September 30, 1996, are
not necessarily indicative of the results to be expected for any other interim
period or for the full year. The selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF INCOME DATA:
Revenues............................ $23,241 $32,382 $43,795 $56,358 $67,399 $50,496 $61,499
Cost of revenues.................... 18,005 25,223 33,505 42,836 53,609 39,873 46,539
------- ------- ------- ------- ------- ------- -------
Gross profit........................ 5,236 7,159 10,290 13,522 13,790 10,623 14,960
Selling, general and administrative
expenses.......................... 4,639 5,750 8,354 10,887 11,824 9,078 11,086
------- ------- ------- ------- ------- ------- -------
Income from operations.............. 597 1,409 1,936 2,635 1,966 1,545 3,874
Interest expense.................... 90 184 196 345 692 537 446
------- ------- ------- ------- ------- ------- -------
Income before provision for income
taxes and minority interest....... 507 1,225 1,740 2,290 1,274 1,008 3,428
Provision for income taxes.......... -- -- -- -- -- -- 127
Minority interest................... -- 36 127 176 252 120 180
------- ------- ------- ------- ------- ------- -------
Net income.......................... $ 507 $ 1,189 $ 1,613 $ 2,114 $ 1,022 $ 888 $ 3,121
======= ======= ======= ======= ======= ======= =======
PRO FORMA STATEMENT OF INCOME DATA:
Revenues............................ $67,399 $50,496 $61,499
Gross profit........................ 13,790 10,623 14,960
Income from operations(1)........... 1,796 1,417 3,746
Interest income(2).................. 32 24 27
Provision for income taxes(3)....... 368 291 1,444
Net income(4)....................... $ 1,460 $ 1,150 $ 2,329
Net income per common share......... $ $ $
Weighted average shares
outstanding(5)....................
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER
AS OF DECEMBER 31, 30,
-------------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Cash and cash equivalents............ $ 34 $ 66 $ 425 $ 319 $ 830 $ 523 $ 3,461
Working capital...................... 2,375 1,962 2,420 3,745 5,799 4,984 9,646
Total assets......................... 6,580 11,021 16,031 20,740 23,423 27,125 31,938
Revolving credit facility and
long-term debt..................... 1,517 2,754 4,189 5,933 6,316 10,334 7,016
Minority interest.................... -- 48 175 351 552 435 1,524
Total shareholders' equity........... 3,409 4,598 6,211 8,325 9,188 9,101 13,365
</TABLE>
- -------------------------
(1) Reflects the amortization of goodwill over a period of 25 years as a result
of the Company's purchase of the 28% minority interest in CBS Mauritius.
(2) Reflects the elimination of interest expense to give effect to the repayment
of the Company's revolving credit facility and long-term debt. See "Use of
Proceeds."
(3) Reflects provision for Federal and state income taxes at the effective
income tax rate as if the Company had been taxed as a C corporation and no
foreign tax holidays had been granted during the periods presented. The tax
provision was computed as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------ ----------------
1995 1995 1996
<S> <C> <C> <C>
Statutory Federal income tax rate............................................. 34.0% 34.0% 34.0%
State income taxes, net of Federal tax effect................................. 3.0 3.0 3.0
Tax rate differences on foreign earnings not subject to U.S. tax.............. (26.6) (26.6) (1.1)
Amortization of goodwill...................................................... 7.0 7.0 1.6
Other......................................................................... 2.8 2.8 0.8
----- ----- ----
20.2% 20.2% 38.3%
===== ===== ====
</TABLE>
(4) Reflects the elimination of minority interest due to the issuance of
shares of Common Stock in exchange for the minority interest in CBS
Mauritius.
(5) Reflects pro forma weighted average shares of Common Stock, plus the portion
of Common Stock offered hereby needed to generate proceeds sufficient to
repay the Company's revolving credit facility and long-term debt at the end
of each period. See "Use of Proceeds" and "Capitalization."
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this section, the
words "anticipate," "believe," "estimate," "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed in "Risk Factors."
OVERVIEW
Complete Business Solutions, Inc. is a worldwide provider of IT services to
large and mid-size organizations. The Company has been profitable every year
since its inception in 1985, and has experienced a compound annual revenue
growth rate of 30% over the past five years. The Company leverages its existing
client base by providing quality services and client responsiveness. For each of
the years 1994 and 1995 and for the nine month period ended September 30, 1996,
existing clients from the previous fiscal year generated at least 80% of the
Company's revenues.
The Company's revenues are generated primarily from professional services
fees provided through either client-managed or CBSI-managed projects.
Historically, the majority of the Company's revenues have been generated from
client-managed projects. On client-managed projects, CBSI provides professional
services as a member of the project team working under the direct supervision of
the client, typically on a time-and-materials basis. The Company recognizes
revenues on time-and-materials projects as the services are performed. On
CBSI-managed projects, the Company assumes responsibility for project management
and may bill the client on either a time-and-materials or fixed-price basis. The
Company recognizes fixed-price revenues under the percentage of completion
method. The Company is seeking to shift a larger portion of its business to
CBSI-managed projects which have higher gross profit margin potential.
CBSI's most significant cost is project personnel cost, which consists
primarily of salaries, wages and benefits for its IT professionals. The Company
strives to maintain its gross profit margin by controlling project costs and
offsetting increases in salaries and benefits with increases in billing rates.
The Company has also established a human resource allocation team to ensure that
IT professionals are quickly placed on assignments to minimize nonbillable time
and are placed on assignments that utilize their technical skills and allow for
maximum billing rates. In addition, the Company has been able to improve its
margins by performing more project work offshore. For example, for the nine
month period ended September 30, 1996, CBSI's operating income as a percentage
of revenues overall was 6%, whereas operating income as a percentage of revenues
for work performed offshore was 22%.
In 1994, the Company began to provide services as a subcontractor on a
client-managed, fixed-price project to design and develop a human services and
child support enforcement system for a state government. The Company incurred
$3.0 million in excess personnel costs, primarily in 1995, to meet the demands
of this project and overall gross profit margin therefore declined from 24% in
1994 to 21% in 1995. Excluding the excess costs associated with this project,
gross profit margins would have remained constant from 1994 to 1995.
In an effort to sustain its growth and profitability, the Company has made
substantial investments in infrastructure, including: (i) software development
centers in three locations in the U.S. and two locations in India; (ii) Year
2000 conversion factories in the U.S. and India; (iii) global recruiting and
training centers; (iv) a local technical charter school; and (v) an expanded
training program for recent U.S. college graduates. The Company believes that
the results of these strategic investments have not yet been fully realized.
16
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statement of income data as a percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER SEPTEMBER
31, 30,
-------------------- ------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Revenues.................................................... 100 % 100 % 100 % 100 % 100 %
Cost of revenues............................................ 77 76 79 79 76
---- ---- ---- ---- ----
Gross profit................................................ 23 24 21 21 24
Selling, general and administrative expenses................ 19 19 18 18 18
---- ---- ---- ---- ----
Income from operations...................................... 4 % 5 % 3 % 3 % 6 %
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Revenues. The Company's revenues increased 22% to $61.5 million in the
first nine months of 1996 from $50.5 million in the first nine months of 1995.
This growth in revenues is primarily attributable to additional services
provided to existing clients and the expansion of the Company's client base to
220 as of September 30, 1996 from 198 as of September 30, 1995. Revenues from
existing clients during the nine months ended September 30, 1996 increased $7.2
million over revenues from those clients during the comparable period in 1995.
Revenues from the Company's international operations increased 24% to $4.2
million in the first nine months of 1996 from $3.4 million in the first nine
months of 1995.
Gross Profit. Gross profit consists of revenues less cost of revenues. Cost
of revenues consists primarily of salaries (including nonbillable time),
benefits, travel and relocation for IT professionals. In addition, cost of
revenues includes the amortization of software and project equipment and
contractual services. Gross profit increased approximately 41% to $15.0 million
in the first nine months of 1996 from $10.6 million for the first nine months of
1995. This increase in gross profit is attributable primarily to the expansion
of the Company's client base and the impact of the fixed-price project
termination on 1995 results. Gross profit as a percentage of revenues increased
to 24% for the nine months ended September 30, 1996 from 21% for the nine months
ended September 30, 1995. This increase is due primarily to billing rate
increases partially offset by salary increases to IT professionals in 1996,
higher gross profit margins resulting from the Company's shift to offshore
projects in India and the impact of the fixed-price project termination on 1995
results.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of costs associated with the Company's
direct selling and marketing efforts, human resources and recruiting
departments, administration, training and facilities costs. Selling, general and
administrative expenses increased 22% to $11.1 million for the first nine months
of 1996, from $9.1 million for the first nine months of 1995. This increase
resulted from expenses incurred to build and enhance the infrastructure
necessary to support the Company's continued revenue growth. As a percentage of
revenues, selling, general and administrative expenses remained constant from
period to period.
1995 COMPARED TO 1994
Revenues. The Company's revenues increased 20% to $67.4 million in 1995
from $56.4 million in 1994. This growth in revenues is primarily attributable to
additional services provided to existing clients, the expansion of the Company's
client base to 208 as of December 31, 1995 from 196 as of December 31, 1994, and
the expansion of the Company's international operations. Revenues from existing
clients in 1995 increased $5.6 million over revenues from those clients during
1994. Revenues from the Company's international operations increased 73% to $4.6
million in 1995 from $2.6 million in 1994.
Gross Profit. Gross profit increased 2% to $13.8 million in 1995 from $13.5
million in 1994, despite the impact of the fixed-price project termination on
1995 results. Gross profit represented 21% of total revenues in
17
<PAGE> 19
1995 as compared to 24% in 1994. Excluding the excess costs associated with the
fixed-price project, gross profit margins would have remained relatively
constant from 1994 to 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 9% to $11.8 million in 1995 from $10.9 million
in 1994. This increase was primarily attributable to infrastructure investments
in CBSI's offshore facilities and general overhead cost increases. As a
percentage of revenues, these expenses decreased to 18% in 1995 from 19% in
1994.
1994 COMPARED TO 1993
Revenues. The Company's revenues increased 29% to $56.4 million in 1994
from $43.8 million in 1993. This growth in revenues is primarily due to the
addition of four major projects which amounted to $6.7 million and included a
Year 2000 conversion for an automotive manufacturer, additional services
provided to existing clients and the expansion of the Company's client base to
196 as of December 31, 1994 from 148 as of December 31, 1993. Revenues from
existing clients in 1994 increased $11.0 million over revenues from those
clients during 1993. Revenues from the Company's international operations
increased 100% to $2.6 million in 1994 from $1.3 million in 1993.
Gross Profit. Gross profit increased 31% to $13.5 million in 1994 from
$10.3 million in 1993. Gross profit increased to 24% of total revenues in 1994
as compared to 23% in 1993. This increase is associated with higher gross profit
margins resulting from the Company's shift to offshore projects in India.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 30% to $10.9 million in 1994 from $8.4 million
in 1993. As a percentage of revenues, selling, general and administrative
expenses represented 19% in both 1994 and 1993.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the seven quarters ending with the quarter ended
September 30, 1996. This information has been prepared on the same basis as the
audited consolidated financial statements contained elsewhere in this Prospectus
and includes, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
information for the periods presented. This information should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto. Results of operations for any previous fiscal quarter are not
indicative of results for the full year or any future quarter. See "Risk Factors
- -- Variability of Quarterly Operating Results."
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1995 1995 1995 1995 1996 1996 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $16,959 $ 17,050 $ 16,487 $ 16,903 $19,128 $ 20,420 $ 21,951
Cost of revenues............... 12,746 13,882 13,245 13,736 14,284 15,518 16,737
------- ------- ------- ------- ------- ------- -------
Gross profit................... 4,213 3,168 3,242 3,167 4,844 4,902 5,214
Selling, general and
administrative expenses...... 3,087 3,063 2,928 2,746 3,613 3,618 3,855
------- ------- ------- ------- ------- ------- -------
Income from operations......... 1,126 105 314 421 1,231 1,284 1,359
Interest expense............... 140 192 205 155 141 159 146
Provision for income taxes..... -- -- -- -- 25 55 47
Minority interest.............. 212 (86) (6) 132 35 78 67
------- ------- ------- ------- ------- ------- -------
Net income (loss).............. $ 774 $ (1) $ 115 $ 134 $ 1,030 $ 992 $ 1,099
======= ======= ======= ======= ======= ======= =======
Pro forma incremental
income tax provision......... 102 -- 15 18 362 329 374
------- ------- ------- ------- ------- ------- -------
Pro forma net income (loss).... $ 672 $ (1) $ 100 $ 116 $ 668 $ 663 $ 725
======= ======= ======= ======= ======= ======= =======
</TABLE>
18
<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
From the Company's inception in 1985 through September 30, 1996, the
Company generally financed its working capital needs through internally
generated funds, periodically supplemented by borrowings under the Company's
revolving credit facility with a commercial bank. The Company's cash provided by
operations was $0.6 million, $0.6 million, $1.3 million and $2.4 million for the
years ended December 31, 1993, 1994 and 1995, and for the nine months ended
September 30, 1996, respectively.
The principal use of cash for investing activities during the three years
ended December 31, 1995, and the nine month period ended September 30, 1996 was
for the purchase of equipment, software and property as part of the creation and
enhancement of the Company's software development centers. As of September 30,
1996, the net book value of investments in equipment, software and property
total $2.1 million in India, $1.5 million for existing projects and $0.6 million
for the client/server labs. Included in the net $2.1 million investment in India
is approximately $0.8 million of recent investments in hardware and software for
the Bangalore facility.
Borrowings under the revolving credit facility represented the most
significant component of cash provided by financing activities. Under an
arrangement with the Bank, the Company may borrow an amount not to exceed the
lesser of $16.0 million or 80% of trade accounts receivable less than 90 days
outstanding, with interest at the Bank's prime interest rate or a Eurodollar
rate. At September 30, 1996, the borrowings available under this facility were
$15.5 million. The borrowings under this facility are short-term and are secured
by trade accounts receivable of the Company. As of September 30, 1996, $6.1
million was outstanding under this revolving credit facility. In addition, the
Company has a working capital facility aggregating $3.0 million with the Bank
with interest at the Bank's prime interest rate. The borrowings under this
facility are short-term and are secured by all assets of the Company. There have
been no borrowings under this facility. In recent years, the Company has
executed several term notes with the Bank to finance the purchase of equipment
and software. As of September 30, 1996, approximately $0.9 million was
outstanding under the notes.
During 1996, CBS Mauritius repurchased its stock held by an affiliated
entity for approximately $2.7 million. Concurrently therewith, CBS Mauritius
sold a 28% ownership interest to JF Electra for approximately $4.0 million, with
proceeds of approximately $3.5 million, net of transaction costs.
Gains and losses as a result of fluctuations in foreign currency exchange
rates have not had a significant impact on results of operations.
In 1996, Mr. Vattikuti made a capital contribution to CBSI of approximately
$1.1 million, and loaned the Company approximately $0.6 million. This loan is
due December 30, 1996 and bears interest at 8.25%.
The Company currently anticipates that the proceeds from this offering,
together with existing sources of liquidity and cash generated from operations,
will be sufficient to satisfy its cash needs at least through the next twelve
months.
The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling operating costs and, whenever possible, seeking to ensure
that billing rates reflect increases in costs due to inflation.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" was issued in October 1995. The Company will be required to
adopt the new standard for the year ended December 31, 1996. This standard
establishes the fair value based method (the "SFAS 123 Method") rather than the
intrinsic value based method as the preferred accounting methodology for stock
based compensation arrangements. Entities are allowed to: (i) continue to use
the intrinsic value based methodology in their basic financial statements and
provide in the footnotes pro forma net income and earnings per share information
as if the SFAS 123 Method had been adopted; or (ii) adopt the SFAS 123 Method.
The Company plans to adopt this statement by providing the required pro forma
disclosures in the footnotes.
19
<PAGE> 21
BUSINESS
SUMMARY
CBSI is a worldwide provider of IT services to large and mid-size
organizations. The Company offers its clients a broad range of IT services, from
advising clients on strategic technology plans to developing and implementing
appropriate IT solutions. CBSI offers custom-tailored solutions based on an
assessment of each client's needs. The Company's services include: (i) large
systems applications development and maintenance; (ii) reengineering legacy
applications to client/server technology; (iii) client/server applications
development; (iv) Year 2000 conversion services; (v) IT consulting services;
(vi) packaged software implementation; and (vii) contract programming services.
CBSI provides services in a wide variety of computing environments and uses
leading technologies, including client/server architectures, object-oriented
programming languages and tools, distributed database management systems and the
latest network and communications technologies. The Company believes that the
breadth of its service offerings fosters long-term client relationships, affords
cross-selling opportunities, minimizes dependence on any single technology or
client and enables the Company to serve as a single source provider for its
clients' IT applications solutions. This single or preferred provider approach
is consistent with CBSI's full life-cycle, client-oriented approach to IT
solutions.
CBSI provides IT services to clients in a diverse range of industries. Its
clients include American President Lines, Chrysler Corporation, Ford Motor
Company, IBM, ISSC/Foremost Insurance, the State of Indiana, the State of
Nevada, S.W.I.F.T., Spartan Stores and UNUM Ltd. During 1996, the Company
provided services to over 220 clients in the U.S., Europe and Asia. The
Company's strategy is to maximize its client retention rate and secure
additional engagements by providing both quality services and client
responsiveness. For each of the years 1994 and 1995 and for the nine month
period ended September 30, 1996, existing clients from the previous fiscal year
generated at least 80% of the Company's revenues. These recurring revenues have
contributed significantly to the Company's 30% compound annual revenue growth
rate over the past five years. As the Company has grown, the Company has
aggressively marketed CBSI-managed projects, which generally are more profitable
than client-managed projects, and the percentage of revenues generated from
CBSI-managed projects has increased each year since 1994.
Since 1992, CBSI has developed an extensive offshore infrastructure in
India, including two modern software development centers in Bangalore and Madras
and a training center in Hyderabad. The Company believes this established
offshore infrastructure is one of the largest in the industry and differentiates
it from those competitors who either have no offshore capability or depend on
subcontractor relationships to offer such services. With its offsite and
offshore development options, the Company can quickly provide clients with IT
solutions on a cost-effective basis.
The Company's goal is to become the preferred provider of IT services to an
expanding base of clients. The Company's strategy to achieve this goal is to:
(i) cross-sell services to existing clients; (ii) increase and build upon Year
2000 engagements; (iii) capitalize on significant investments in infrastructure
and capabilities; (iv) develop new and expand recently added service offerings
such as Enterprise Resource Planning ("ERP") software package installation,
Internet/intranet applications and Electronic Data Interchange ("EDI")
applications; (v) increase its international presence; and (vi) pursue targeted
acquisitions.
THE IT SERVICES INDUSTRY
Heightened competition, deregulation, globalization and rapid technological
advances are forcing organizations to make fundamental changes in their business
processes. These pressures have compelled organizations to improve the quality
of products and services, shorten time to market, reduce costs and strengthen
client relationships. Increasingly, organizations are addressing these issues by
utilizing IT solutions that facilitate the rapid and flexible collection,
analysis and dissemination of information. Accordingly, an organization's
ability to integrate and deploy new information technologies in a cost-effective
manner has become critical to competing successfully in today's rapidly changing
business environment.
20
<PAGE> 22
During this time of increasing reliance on IT, rapid technological change
is challenging the capabilities of MIS departments within these organizations.
The pace of this change quickly renders existing IT infrastructure obsolete and
makes it more difficult for organizations to maintain the requisite internal
expertise needed to evaluate, develop and integrate new technologies. As a
result, organizations are increasingly turning to third-party IT service
providers to help them develop and support complex IT systems and applications.
Due to the foregoing factors, demand for IT services has grown
significantly. According to industry sources, the worldwide market for IT
services was approximately $185 billion in 1995, and is projected to increase to
$292 billion in 2000. The worldwide market for systems integration, consulting
applications development and outsourcing services was approximately $91 billion
in 1994 according to industry sources and is estimated to grow by 16.5% annually
through 1999. The domestic IT services market is projected to grow from
approximately $75 billion in 1995 to approximately $130 billion in 2000.
The Year 2000 problem, which prevents existing applications from properly
interpreting dates after 1999, represents a significant opportunity for IT
services providers. The prevalence and interdependence of date-dependent
applications in complex control systems is expected to cause the Year 2000
problem to have a widespread impact on technology-dependent organizations.
Industry sources estimate that a Fortune 100 company will spend between $50
million and $100 million for Year 2000 services. Smaller companies will also
spend significant amounts to solve this problem. Solutions to the Year 2000
problem include: (i) renovation of existing applications with Year 2000
compliant code; (ii) replacement of existing software with Year 2000 compliant
software packages; and (iii) reengineering of legacy applications to Year 2000
compliant client/server technologies.
While the general industry trend is toward client/server architectures,
many organizations choose to maintain certain legacy mainframe systems because
such systems provide a superior solution to their specific needs or because of
the costs required to replace such systems. As university programs cease
teaching mainframe related skills and programmers cross-train away from these
areas, MIS managers are experiencing increasing difficulty finding affordable,
qualified personnel to support the vast number of legacy systems. For these
reasons, the maintenance and reengineering of legacy systems continues to
represent a substantial opportunity for IT services providers.
THE CBSI SOLUTION
The CBSI solution enables its clients to use IT as a more effective
business tool consistent with their evolving business needs. The following are
key attributes of the CBSI solution:
Provide a Broad Range of IT Services. The Company offers its clients a
broad range of IT services along the IT continuum, from development,
reengineering and maintenance of legacy systems to client/server applications
development, Internet/intranet and other emerging technologies. The Company
therefore can serve as the single source for a client's IT applications
solutions. The Company provides its services in a wide variety of computing
environments and uses technologies that include mainframe and client/server
architectures, object-oriented programming languages and tools, distributed
database management systems and network and communications technologies.
Offer Flexible Project Delivery. The Company offers its clients a choice
among any combination of the following three options for delivery of project
work: (i) onsite at the client facility; (ii) offsite at a CBSI development
facility in Michigan, California or Illinois; and (iii) offshore at CBSI
development facilities in India. These options enable the Company's clients to
determine their degree of project oversight and to control the costs and speed
of project delivery. Execution of all or part of IT projects offshore can result
in significant time and cost savings when compared to domestic delivery of such
services. CBSI has developed a formal project management methodology, CBSI
Offsite Success Management Methodology ("COSMO"), which is specifically designed
to meet the needs of offsite and offshore projects.
To meet the growing worldwide demand for offshore IT services, the Company
has invested in an extensive offshore infrastructure in India, including two ISO
9001 compliant software development centers in Madras and Bangalore. In contrast
to competitors who have no offshore capability or depend on subcontractor
21
<PAGE> 23
relationships to offer such services, the Company has established an offshore
infrastructure which it believes is one of the largest in the industry. The
Company employs approximately 400 professionals in these centers which have the
capacity to accommodate approximately 800 professionals. With its offsite and
offshore development options, the Company can quickly provide solutions tailored
to the IT needs of its clients.
Recruit and Train Globally. The Company has established a domestic and
international network to recruit employees of all experience levels, from recent
college graduates to seasoned IT professionals. The Company provides new
recruits with up to two months of training in software engineering techniques
and key technologies. The Company has made significant investments in two
training centers, located in Michigan and India. These centers employ full-time
instructors and are equipped with client/server and mainframe hardware, software
and development tools. These training resources provide the Company with
qualified IT professionals to service its clients' needs.
Solve Year 2000 Problem. The Company has developed a formal project
management methodology, known as The Time Machine 2000, that addresses all
aspects of the Year 2000 problem. This methodology helps assure a quality
conversion process and addresses application portfolio analysis, impact
assessment, strategic planning, conversion, testing and implementation. The
Company has developed Year 2000 conversion factories to provide cost-effective
and timely conversion solutions for its clients. The conversion factories,
located at both CBSI's U.S. and Indian headquarters, employ professionals who
have been specifically trained to meet the particular demands of Year 2000
engagements. CBSI has already successfully completed all phases of Year 2000
projects for a division of Chrysler Corporation and for ISSC/Foremost Insurance
and is currently working on ten additional Year 2000 projects.
CBSI GROWTH STRATEGIES
The Company's goal is to become the preferred provider of IT services to an
expanding base of clients. The Company's strategy to achieve this goal includes
the following elements:
Cross-Sell Services to Existing Clients. The Company believes it will grow
by continuing to establish and maintain long-term client relationships. The
access and goodwill offered by these relationships provide the Company with
significant advantages over its competitors in marketing additional services and
solutions to such clients. The Company also believes its long-term client
relationships and ability to address its clients' needs along the IT continuum
distinguish the Company from many of its competitors. During 1996, the Company
provided services to over 220 clients in the U.S., Europe and Asia. The
Company's strategy is to maximize its client retention rate and secure
additional engagements by providing quality services and client responsiveness.
For each of the years 1994 and 1995 and for the nine month period ended
September 30, 1996, existing clients from the previous fiscal year generated at
least 80% of the Company's revenues.
Increase and Build Upon Year 2000 Engagements. The Company is actively
marketing its Year 2000 conversion capabilities to existing and new clients.
CBSI anticipates that Year 2000 conversion services will represent an increasing
percentage of its revenues for the next few years. The Company performs a
detailed analysis of clients' existing IT systems and applications in connection
with these services. The Company's strategy is to leverage its knowledge of
clients' IT systems obtained during Year 2000 projects into additional
engagements involving other services, including maintenance of existing systems
and reenginering to client/server technology.
Capitalize on Significant Investments in Infrastructure and
Capabilities. The Company has made significant investments in its offsite and
offshore infrastructures as well as its systems, methodologies and training
programs. These investments include two client/server labs, three U.S. software
development centers, two offshore software development centers, two training
centers and dedicated, high-speed satellite communication links. The Company
believes that these investments can support a larger organization.
Expand Service Offerings. The Company evaluates emerging technologies as a
source of additional service offerings for its existing and prospective clients.
For example, the Company recently added new service offerings including
Internet/intranet, Year 2000 and implementation of ERP software packages such as
22
<PAGE> 24
ORACLE, PEOPLESOFT and SAP. The Company anticipates that its broad and expanding
range of services will minimize its dependence on any single technology.
Increase International Presence. The Company opened offices in the United
Kingdom in 1990; in Madras, India in 1992; in Bangalore, India in 1995; and in
Hyderabad, India in 1996. The international operations of the Company accounted
for 2.9%, 4.7%, 6.8% and 6.8% of the Company's total revenues in fiscal years
1993, 1994 and 1995 and the nine month period ended September 30, 1996,
respectively. The Company plans to enhance its international presence by
expanding existing sales forces based in India and the U.K. and opening new
sales offices in Singapore and Continental Europe. The Company believes that
these regions represent significant potential markets for the Company's
services.
Pursue Targeted Acquisitions. CBSI seeks acquisitions that complement its
core skills and that have the potential to increase the overall value of the
Company, rather than merely increase its sales revenues. Examples of such
companies would include those with specific industry or technical skills that
fit well with the Company's existing and targeted client base.
23
<PAGE> 25
CBSI SERVICES
The Company offers its clients a broad range of IT services, from advising
clients on strategic technology plans to developing and implementing appropriate
IT solutions. The Company provides services in the following categories:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CBSI SERVICES DESCRIPTION
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Large Systems Applications Development, - Design large-scale, complex solutions capable of
Reengineering and Maintenance managing transaction-intensive applications
- Develop and maintain applications using COBOL,
CICS, DB2 and other mainframe programming
environments
- -------------------------------------------------------------------------------------------------------------
Reengineer Legacy Applications to - Reengineer from centralized, mainframe-based
Client/Server Technology systems to open, distributed architecture
- Preserve core application logic
- Reengineer existing legacy systems into
mainframe-based super server in multi-tiered,
distributed architecture
- -------------------------------------------------------------------------------------------------------------
Client/Server Applications Development - Conceptualize and design systems based on
distributed object-oriented technologies and
methodologies such as BOOCH and RAMBAUGH
- Develop applications using SYBASE, SQL Server,
ORACLE, INFORMIX, Access databases; Visual
Basic, Powerbuilder, C++ as graphical user
interfaces; and UNIX, OS/2 and Windows NT
operating systems
- -------------------------------------------------------------------------------------------------------------
Year 2000 Conversion Services - Conduct impact assessments and assist clients
with strategic planning for Year 2000 compliance
- Renovate existing applications to make them Year
2000 compliant
- Reengineer legacy applications to Year 2000
compliant client/server technology
- Replace existing software with Year 2000
compliant software packages
- -------------------------------------------------------------------------------------------------------------
Packaged Software Implementation - Implement packaged software solutions
(PEOPLESOFT, ORACLE, SAP, WALKER)
- Customize software packages to client
specifications
- Provide user group training
- -------------------------------------------------------------------------------------------------------------
IT Consulting Services - Provide technical architecture and network
design, information technology planning, data
warehousing and business process reengineering
consulting services
- Conceptualize and design Internet and intranet
solutions using Java/Java Script/Java applets
and HTML
- -------------------------------------------------------------------------------------------------------------
Contract Programming Services - Develop software applications (client/server and
mainframe)
- Reengineer software applications across
platforms
- Maintain and enhance software applications
(client/server and mainframe)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Company uses both industry-proven and proprietary methodologies to
enhance the quality, consistency and efficiency of its CBSI-managed projects.
All levels of the Company's IT consultants, from entry-level programmers to
project managers, are given formal instruction in various aspects of these
methodologies. A methodology used by the Company is METHOD/1, which the Company
licenses from Andersen Consulting. CBSI has extended METHOD/1 to incorporate the
Company's Time Machine
24
<PAGE> 26
2000 and COSMO methodologies. These three methodologies enable CBSI to provide
applications development in a controlled manner with repeatable and proven
processes. Quality assurance is handled by a common centralized unit. A team of
quality specialists performs project quality reviews and inspections, maintains
the Company's project management methodologies and assists project managers in
the estimating costs and executing projects.
SOFTWARE PRODUCTS
The Company's primary software product offering is the Advanced Program for
Educational Computer Solutions ("APECS") software which is licensed by 70
different clients. Clients use APECS to manage the business and student records
of educational institutions for K-12 school districts and for higher education.
The Company provides periodic enhancements to the product and maintenance to the
users. APECS systems are installed at major sites throughout the United States.
Among the current users are Allentown High School District, Pennsylvania;
University of Detroit Mercy, Michigan; Martin County Schools, Florida; and
Monroe Community College, Michigan. The Company is currently reengineering this
system to a client/server environment. The Company maintains this product at its
Madras, India facility.
SALES AND MARKETING
The majority of new sales are generated by the Company's business units,
each of which focuses on clients within a geographic area or industry group. The
manager of each business unit is compensated based on the financial performance
of the unit. The business unit manager is responsible for managing client
relationships, ensuring the delivery team is performing as expected and
identifying new business opportunities. This structure fosters an
entrepreneurial atmosphere within each business unit. Because of the
relationships the business unit managers maintain with their clients, these
managers are positioned to identify opportunities to cross-sell the Company's
services. Such relationships also result in a significant number of client
referrals.
The Company also uses telemarketers to establish initial client contact and
prequalify potential new clients. Qualified prospective clients are referred to
the Company's dedicated sales group, whose backgrounds include both technical
and sales experience. This sales group is responsible for identifying clients'
needs and promoting the Company's services to potential clients. Once potential
clients are further qualified by the sales group, the Company assembles a team
consisting of sales group members, the appropriate business unit manager and a
project delivery manager. This team makes the client sales call and is
ultimately responsible for closing the sale.
In addition to its sales group, the Company has a dedicated marketing
department which works in conjunction with an outside public relations firm. The
marketing department is responsible for coordination of all corporate
communications, including the scheduling of press conferences to promote the
Company's services and delivery methodologies.
CLIENTS
During 1996, the Company provided services to over 220 clients in the U.S.,
Europe and Asia. The Company's strategy is to maximize its client retention rate
and secure additional engagements by providing quality services and client
responsiveness.
25
<PAGE> 27
Organizations to which the Company provided services in 1996 include:
<TABLE>
<CAPTION>
YEAR OF
FIRST
CLIENT ENGAGEMENT
<S> <C>
Manufacturing:
Chrysler Corporation......... 1985
Ford Motor................... 1989
Johnson Controls............. 1994
Retail Distribution:
Spartan Stores............... 1992
The Gap...................... 1993
Handleman Company............ 1995
Public Sector:
State of Michigan............ 1988
State of Indiana............. 1992
State of Nevada.............. 1992
Transportation:
American President Lines..... 1990
<CAPTION>
YEAR OF
FIRST
CLIENT ENGAGEMENT
<S> <C>
Financial Services:
S.W.I.F.T.................... 1985
Harris Bank.................. 1993
Bank of America.............. 1995
Insurance:
UNUM Ltd. ................... 1995
ISSC/Foremost Insurance...... 1996
Technology:
Tandem Computers............. 1989
IBM Corporation.............. 1990
Union Pacific Technology..... 1992
Utilities:
Michigan Consolidated Gas
Co........................ 1992
Southern California Edison... 1994
</TABLE>
REPRESENTATIVE ENGAGEMENTS
Examples of the Company's engagements, which are representative of the
nature of CBSI services and client relationships, are set forth below:
CLIENT/SERVER-BASED APPLICATION DEVELOPMENT/END-TO-END YEAR 2000 CONVERSION
PROJECT (OFFSITE/ONSITE)
Problem. A division of a manufacturer required software enhancements
in order to properly process expanded part number codes and dates beyond
the year 1999.
Solution. The Company provided impact assessment, strategic planning,
coding, testing and implementation of the required software enhancements.
Year 2000 modifications were carried out in accordance with the Company's
Time Machine 2000 methodology. The project environment included IMS/DB,
DB2, CICS, IMS/DC and COBOL on an IBM mainframe. The majority of work was
completed offsite at one of the Company's U.S. software development
centers. At its peak, 75 Company IT professionals were assigned to this
project, which was completed in nine months.
LARGE-SCALE APPLICATION DEVELOPMENT IN CLIENT/SERVER ENVIRONMENT (OFFSITE)
Problem. A manufacturing company required IT systems which would tie
production volume to international sales forecasts, thereby eliminating
undesired inventory build-up.
Solution. The Company provided a team of project managers,
client/server architects and software developers to design, code, test and
implement a forecasting tool using C++, Powerbuilder, APOL, ENTERA and
SYBASE. Software design was carried out using object-oriented methodologies
(BOOCH), Erwin for database design and Rational Rose for data modeling. At
its peak, the project team consisted of 30 Company IT professionals. Two
versions of the forecasting tool have already been delivered, and the
Company is currently developing an enhanced version. The project, which is
being conducted offsite, has an expected duration of two years.
REENGINEERING OF LEGACY SYSTEMS TO CLIENT/SERVER ENVIRONMENT (ONSITE/OFFSHORE)
Problem. An insurance company wanted to replace existing
mainframe-based applications with client/server-based applications in order
to reduce software maintenance costs.
26
<PAGE> 28
Solution. The Company has partnered with this client to redesign its
existing systems in a client/server environment under OS/2, SYBASE, and SQL
Server as RDBMS using NS-DK as the graphical user interface and C as the
development language. Using a combination of onsite and offshore project
teams, the Company is responsible for requirements analysis, as well as for
designing, coding, testing and implementation of the new systems.
LARGE SYSTEMS APPLICATION MAINTENANCE (ONSITE/OFFSHORE)
Problem. A financial services organization wanted to outsource
maintenance of a software application in order to reduce costs and
re-deploy its internal IT professionals on new projects.
Solution. The Company is executing the project both onsite at the
client's facilities and offshore at CBSI's Bangalore, India facility. The
client uses the Company as the "center of expertise" with respect to the
application. A team of 15 Company IT professionals has been assigned to
this project for two years. The project environment includes VAX/VMS, Open
VMS, DOS, UNIX, Novell Netware, PROIV, ANSI C and Pascal.
REENGINEERING LEGACY APPLICATIONS TO CLIENT/SERVER TECHNOLOGY (ONSITE)
Problem. A grocery wholesaler wanted to reengineer all of its business
applications, including Year 2000 conversion.
Solution. The Company provided the client with the necessary technical
expertise onsite to redesign, program, test and implement all of its core
software applications. The Company has deployed a project team of 30 IT
professionals, which is expected to grow to 60 IT professionals once the
Year 2000 conversion commences. The Company has executed strategic studies
through joint application development ("JAD") sessions, business process
reengineering and phased design, development and implementation. Some of
the client's systems are being reengineered onto a client/server platform
under a UNIX operating system, using INFORMIX as the database and Visual
Basic as the graphical user interface ("GUI"). Mainframe applications to
undergo Year 2000 conversion will include systems running under DB2,
ADABAS, NATURAL and COBOL.
HUMAN RESOURCES
The Company's success depends in large part on its ability to attract,
develop, motivate and retain highly skilled IT professionals. The Company's
strategy for achieving "career-based employment" includes career planning,
thorough initial and ongoing training, allocation of assignments in accordance
with employee skills and career objectives and a comprehensive benefits package
including a Company-matched 401(k) plan, health and dental insurance, short-term
disability insurance, a flexible spending account and tuition reimbursement.
Following this offering, the Company intends to increase the use of employee
stock options as part of its recruitment and retention strategy.
The Company has 26 full-time employees dedicated to recruiting IT
professionals and managing its human resources. The Company's recruiting
activities draw on an international pool of IT talent. The Company has full-time
personnel dedicated to handling visa application and compliance issues for
international recruits. CBSI actively recruits in the United States, India,
England, Australia, New Zealand, the Philippines, Mexico and Singapore.
Recruiting methods include advertisement in leading newspapers, trade magazines,
the Company's web site and participation in career fairs. The Company also
participates in on-campus recruiting for recent college graduates and in 1996
recruited at various schools, including the University of Michigan, Michigan
State University, Wayne State University, the University of Notre Dame, Albion
College, Loyola College, Indiana University and the University of California.
During the past two years, the Company has hired 125 recent U.S. college
graduates. In addition, the Company's employees are actively involved in
referring individuals and screening candidates for new positions.
The Company has established two training centers located in Michigan and
India. These training centers employ full-time instructors and are equipped with
client/server and mainframe hardware, software and
27
<PAGE> 29
development tools. New college graduates receive two months of full-time
classroom instruction in mainframe (IMS, DB2, CICS, COBOL) or client/server
(UNIX, C, C++, OS/2 Presentation Manager) skills. This training is followed by
one month of self-study. Employees receive full salary and benefits during this
training period. Between projects and after business hours, all IT professionals
receive ongoing training on a variety of technology platforms. The Company's
education and training department helps employees make the transition from
legacy to client/server skills by providing cross-platform training in new
technologies. In addition to comprehensive technical training, the Company
provides extensive training in quality processes and cross-cultural
communication skills.
As part of its retention efforts, the Company has formulated a strategy for
minimizing turnover which emphasizes: (i) human resource management; (ii)
contractual limitations effective upon termination of employment; (iii)
competitive salaries; (iv) comprehensive benefits; and (v) employee stock
options.
CBSI's IT professionals typically have Bachelor's or Master's degrees in
Computer Science or another technical discipline. Over 70% of the Company's IT
professionals have advanced technical degrees. As of September 30, 1996, the
Company had 1,380 employees comprised of 1,235 IT professionals, 21 sales and
marketing personnel and 124 general and administrative personnel. As of
September 30, 1996, the Company also had 49 independent contractors working on
client engagements.
COMPETITION
The IT services industry is highly competitive and served by numerous
national, regional and local firms, all of which are either existing or
potential competitors of the Company. Primary competitors include participants
from a variety of market segments, including "Big Six" accounting firms, and
implementation firms, applications software firms, service groups of computer
equipment companies, general management consulting firms, programming companies
and temporary staffing firms. The Company believes that the principal
competitive factors in the IT services industry include the range of services
offered, technical expertise, responsiveness to client needs, speed in
delivering IT solutions, quality of service and perceived value. The Company
believes that it competes favorably with respect to these factors. See "Risk
Factors -- Competition."
INTELLECTUAL PROPERTY RIGHTS
The Company relies upon a combination of nondisclosure and other
contractual arrangements and trade secret, copyright and trademark laws to
protect its proprietary rights and the proprietary rights of third parties from
whom the Company licenses intellectual property. The Company enters into
confidentiality agreements with its employees and limits distribution of
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.
Software developed by the Company in connection with a client engagement is
typically assigned to the client. In limited situations, the Company may retain
ownership, or obtain a license from its client, which permits CBSI or a third
party to market the software for the joint benefit of the client and CBSI or for
the sole benefit of CBSI. The Company has also developed and copyrighted or
acquired software products which are generally licensed to users pursuant to a
license agreement. The Company's software products include APECS, APECS Custom
View and Micro APECS Scheduler.
FACILITIES
The Company leases approximately 42,000 square feet of office space in
Farmington Hills, Michigan which serves as its headquarters. The Company's
senior management, administrative personnel, human resources and sales and
marketing functions are housed in this facility. This lease expires on June 15,
2003. The Company also leases facilities in Lombard, Illinois and Milpitas,
California.
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<PAGE> 30
In addition, the Company has offshore offices. The Company leases
approximately 24,530 square feet of office space in Madras, India which serves
as its headquarters in India. This lease expires on January 13, 1997, and
contains an option clause for an additional term of five years renewable at the
end of each new term. The Company owns a facility totaling approximately 6,375
square feet in Bangalore, India. The Company also leases facilities in the
United Kingdom and Bangalore and Hyderabad, India.
The Company believes that these facilities are adequate for its anticipated
future needs.
LITIGATION
The Company is not a party to any litigation that is expected to have a
material adverse effect on the Company or its business.
29
<PAGE> 31
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors and their respective ages
and positions as of November 1, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Rajendra B. Vattikuti......... 45 President, Chief Executive Officer and Director
Timothy S. Manney............. 38 Executive Vice President of Finance and Administration,
Treasurer and Director
Daniel S. Rankin.............. 42 Vice President of Technical Services
Nanjappa S. Venugopal......... 44 Director of Human Resources
Douglas S. Land............... 39 Director
Frank D. Stella............... 77 Director
</TABLE>
Rajendra B. Vattikuti, the founder of the Company, has served as President
and Chief Executive Officer and as a Director since the Company's formation in
February 1985. From 1983 to 1985, Mr. Vattikuti was Director of M.I.S. for
Yurika Foods Corporation. From 1977 to 1983, Mr. Vattikuti was a M.I.S. Project
Leader for Chrysler Corporation. Mr. Vattikuti holds a Bachelor of Science
degree in Electrical Engineering from the College of Engineering, Guindy (India)
and a Master of Science degree in Electrical and Computer Engineering from Wayne
State University.
Timothy S. Manney has served as Executive Vice President of Finance and
Administration and Treasurer and as a Director since November 1993. From
February 1990 to November 1993, Mr. Manney held various positions with the
Company, most recently as Chief Financial Officer. From 1980 until 1990, Mr.
Manney was an Audit Manager at Arthur Andersen LLP. He is a member of the
Michigan Association of Certified Public Accountants. Mr. Manney holds a
Bachelor of Business Administration degree from the University of Michigan.
Daniel S. Rankin has served as Vice President of Technical Services since
September 1994. From September 1990 to September 1994, Mr. Rankin served as
Director of Insurance Services for Medstat, Inc. From July 1989 to September
1990, Mr. Rankin held the position of Vice President of Turnkey Systems for the
Company. From May 1978 to July 1989, Mr. Rankin served in various positions at
Andersen Consulting, during which time he managed several large, multi-year
systems-development projects in a variety of computer hardware and software
environments. Mr. Rankin holds a Bachelor of Business Administration degree and
Master of Business Administration degree from the University of Michigan.
Nanjappa S. Venugopal has served as Director of Human Resources since
October 1996. Mr. Venugopal also served as the business unit manager for the
manufacturing sector of the Company from September 1991 to September 1996. From
December 1975 to August 1991, he held several technical and managerial positions
at Tata Consultancy Services in the U.S., Asia and Europe. From October 1988 to
August 1991, Mr. Venugopal was regional manager of Tata's New York office. Mr.
Venugopal holds a Bachelor of Mechanical Engineering degree from Bangalore
University and a Master of Aeronautical Engineering degree from the Indian
Institute of Technology.
Douglas S. Land has served as a Director since November 1993 and an advisor
to the Company since 1988. Mr. Land is the founder and President of Economic
Analysis Group, Ltd., a Washington D.C.-based consulting firm that has been
providing financial and economic consulting services since 1983. Mr. Land is
also the President and founder of The Chesapeake Group, a financial advisory
firm that has been providing consulting to start-up and middle-market firms
since 1985. From January 1992 to February 1993, Mr. Land was an Executive Vice
President of Hambro Resource Development Incorporated, an affiliate of Hambros
Bank London, which provides investment and merchant banking services. Mr. Land
holds a Bachelor of Science degree in Economics, a Master of Business
Administration degree in Finance and a Master of Arts degree in International
Relations from the University of Pennsylvania.
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<PAGE> 32
Frank D. Stella has served as a Director since November 1993. Mr. Stella
has served as President of F.D. Stella Products Company, a food service and
dining equipment company, since 1946. Mr. Stella was appointed to the Commission
for White House Fellows by President Ronald W. Reagan in 1983 and has served as
Chairman of the Income Tax Board of Review, City of Detroit, since 1965. Mr.
Stella is also a board member of VFS, Inc., an insurance holding company, and a
former board member of Federal Home Bank of Indianapolis. He is also on the
boards of several medical and charitable organizations. Mr. Stella holds a
degree from the College of Commerce and Finance at the University of Detroit.
The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. The Company's Board of Directors is divided into three
classes. The Board of Directors currently consists of four members. Upon
completion of this offering, the Board of Directors will be increased from four
to seven members. The Board is divided into three classes, whose members serve
for staggered three year terms. Rajendra Vattikuti and Timothy Manney are Class
I Directors and will serve an initial one-year term. Douglas Land and Frank
Stella are Class II Directors and will serve an initial two-year term. The three
vacancies for the Class III Directors will be filled by appointment by the
current Board of Directors and the appointees will serve an initial three-year
term. At each annual meeting of shareholders after this offering, the
appropriate number of directors will be elected for a three-year term to succeed
the directors of the same class whose terms are then expiring. There are no
family relationships between any director or executive officer of the Company.
BOARD COMMITTEES
The Audit Committee is responsible for reviewing with management the
financial controls, accounting, audit and reporting activities of the Company.
The Audit Committee reviews the qualifications of the Company's independent
auditors, makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the scope, fees and results of any
audit and reviews non-audit services provided by the independent auditors. The
members of the Audit Committee are Frank Stella and Douglas Land. All members of
the Audit Committee are independent directors.
The Compensation Committee is responsible for the administration of all
salary and incentive compensation plans for the officers and key employees of
the Company, including bonuses. The Compensation Committee also administers the
Company's 1996 Plan (as hereinafter defined). The members of the Compensation
Committee are Frank Stella and Douglas Land. All members of the Compensation
Committee are independent directors.
DIRECTOR COMPENSATION
During 1996, Mr. Land and Mr. Stella were each paid $24,000 for their
services provided as directors. During 1996, Mr. Stella was granted a
non-incentive stock option to acquire shares of Common Stock at an
exercise price of $ per share. All directors are reimbursed for travel
expenses incurred in connection with attending board and committee meetings.
Directors are not entitled to additional fees for serving on committees of the
Board of Directors. Pursuant to the 1996 Plan, each year the Company shall issue
options to purchase up to 10,000 shares of Common Stock, as a formula grant, to
directors who are not executive officers.
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<PAGE> 33
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
earned by the Company's Chief Executive Officer and each of the other most
highly compensated executive officers whose salary and bonus compensation for
the fiscal year ended December 31, 1996 exceeded $100,000 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION(3)
<S> <C> <C> <C> <C> <C>
Rajendra B. Vattikuti............... $411,000 $288,000 $ 20,697(1) -0- $ 3,800
Chief Executive Officer and
President
Timothy S. Manney................... $150,000 $ 50,000 $ 5,000(2) -0- $ 3,800
Executive Vice President of
Finance and Administration,
Treasurer
Daniel S. Rankin.................... $160,000 $ 35,000 $ 5,000(2) -0- $ 3,800
Vice President of Technical
Services
Nanjappa S. Venugopal............... $100,000 $ 35,000 -0- -- $ 3,800
Director of Human Resources
Roy Ely............................. $160,621 -0- -0- -0- -0-
Executive Vice President of
Sales(4)
Jennifer Grey....................... $109,192 -0- -0- -0- -0-
Director of Human Resources(4)
</TABLE>
- -------------------------
(1) Includes $11,000 representing the imputed value of certain health and life
insurance benefits provided by the Company to Mr. Vattikuti and $9,697
representing the personal use of corporate cars. Does not include benefits
from certain non-interest bearing loans outstanding during 1996. See
"Certain Transactions."
(2) Represents the imputed value of certain health and life insurance benefits
provided by the Company.
(3) Represents amount of contribution by Company on behalf of such individual to
Company's 401(k) plan.
(4) No longer an employee of the Company.
The following table sets forth certain information with respect to the
grant of incentive stock options by the Company during 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
----------------------------------------------------- AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION(1)
OPTION EMPLOYEES IN OR BASE EXPIRATION ----------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Nanjappa S. Venugopal(2)........... 10% $ 9/12/06
</TABLE>
- -------------------------
(1) The potential realizable value is calculated based on the term of the option
at the time of grant (ten years). Assumed stock price appreciation of 5% and
10% is based on the fair value at the time of grant.
(2) Mr. Venugopal's options are exercisable in three equal annual installments
commencing on September 12, 1997.
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<PAGE> 34
The following table sets forth certain information with respect to the
value of options held at December 31, 1996 by the Named Executive Officer who
held options during 1996. This Named Executive Officer did not exercise any
options to purchase Common Stock during 1996.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR END(#) AT YEAR END ($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Nanjappa S. Venugopal.......................... -- -- $ -- $ --
</TABLE>
- -------------------------
(1) Calculated based on the initial public offering price of $ per share
less the exercise price payable for such shares.
EMPLOYEE BENEFIT PLANS
1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996
Plan") provides for the granting of incentive stock options to employees within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and
for the granting to employees, directors and consultants of nonstatutory stock
options. The 1996 Plan was adopted by the Board of Directors on July 10, 1996
and approved by the sole shareholder on September 10, 1996. Unless terminated
sooner, the 1996 Plan will terminate automatically on December 31, 2006. The
Board of Directors has the authority to amend, suspend or terminate the 1996
Plan, subject to any required shareholder approval under applicable law.
Notwithstanding the foregoing, no amendment, suspension or termination of the
1996 Plan, without the consent of the holder of a previously granted option, may
adversely affect such holder's right under such option.
A total of shares of Common Stock are authorized for issuance
pursuant to the 1996 Plan. As of December 31, 1996, options to purchase
shares were issued, and shares remained available for future
grant under the 1996 Plan.
The 1996 Plan may be administered by the Board of Directors or a committee
of the Board of Directors (in either case, the "Committee") consisting of two or
more members of the Board of Directors. The Committee has the power to determine
the terms of the options granted, including the exercise price, the number of
shares subject to the option and the exercisability thereof, and the form of
consideration payable upon exercise. Options granted under the 1996 Plan are not
generally transferable by the optionee, and each option is exercisable during
the lifetime of the optionee only by such optionee. Incentive stock options
granted under the 1996 Plan must be exercised within three months of such
optionee's termination by death or within twelve months of such optionee's
termination by disability, but in no event later than the expiration of the
option's term. The exercise price of all incentive stock options granted under
the 1996 Plan must be at least equal to the greater of the par value or the fair
market value of the Common Stock on the date of grant. With respect to any
employee who owns stock possessing more than 10% of the voting power of all
classes of the Company's outstanding capital stock, the exercise price of any
incentive stock option granted to such employee must equal or exceed 110% of the
fair market value of the Common Stock on the grant date and the term of the
option must not exceed five years. The aggregate fair market value of the Common
Stock (determined at the time the option is granted) with respect to which
incentive stock options granted to an individual first become exercisable in any
calendar year shall not exceed $100,000. The term of all options (other than the
incentive stock options referred to in the second preceding sentence) may not
exceed ten years.
The 1996 Plan provides that in the event of a merger, consolidation or sale
or transfer by the Company of substantially all its assets, the date of
termination of any outstanding options and the date on or after which such
options, or any portion of such options not then exercisable may be exercised,
shall be advanced to a date fixed by the Committee which date shall be no more
than 15 days prior to the date of such merger, consolidation, sale or transfer.
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<PAGE> 35
The Company has agreed to indemnify certain holders of the options against
certain liabilities resulting from the holders' involvement with the Company.
401(k) Plan. The Company maintains a 401(k) profit sharing and defined
contribution plan (the "401(k) Plan"). All employees of the Company who have
reached 21 years of age and who have completed one year of employment are
eligible to participate in the 401(k) Plan, pursuant to which each participant
may contribute up to 18% of eligible compensation (up to a statutorily
prescribed annual limit of $9,500 in 1996). The Company matches 40% of the
contributions made by employees to the 401(k) Plan (up to 6% of eligible
compensation). All amounts contributed by employee participants and earnings on
these contributions are fully vested at all times. Employee participants may
elect to invest their contributions in various established funds.
EMPLOYMENT AGREEMENTS
In December 1996, the Company entered into an agreement with Rajendra B.
Vattikuti that will become effective concurrently with this offering, which
provides for his employment as President and Chief Executive Officer for an
initial term ending on December 31, 2001. On January 1 of each year thereafter,
the term is automatically extended for an additional year, unless before such
date either party shall notify the other of its refusal to extend the term. The
agreement provides for an annual base salary of $350,000, a bonus in an amount
not to exceed the base annual salary, to be determined by the Compensation
Committee, and benefits under the Company's benefit plans. Special death and
disability benefits also are included. The agreement also provides, among other
things, that, if Mr. Vattikuti's employment is terminated by the Company with or
without cause for any reason other than willful misconduct, or by Mr. Vattikuti
under certain conditions (including a change in control as defined in the
agreement), the Company will pay to him an amount equal to 2.99 times his annual
base salary and bonus in effect immediately prior to such termination. If the
Company terminates Mr. Vattikuti's employment for any reason other than willful
misconduct, the Company is obligated to provide certain benefits to Mr.
Vattikuti over a period of time.
In December 1996, the Company entered into an agreement with Timothy Manney
which provides for his employment as Executive Vice President of Finance and
Administration for an initial term ending on December 31, 1999. On January 1 of
each year thereafter, the term is automatically extended for an additional year,
unless before such date either party shall notify the other of its refusal to
extend the term. The agreement provides for an annual base salary of not less
than $180,000, a bonus in an amount not to exceed 60% of his base annual salary,
to be determined by the Compensation Committee, and benefits under the Company's
benefit plans. Special death and disability benefits also are included. The
agreement also provides, among other things, that, if Mr. Manney's employment is
terminated by the Company without cause, or by Mr. Manney under certain
conditions (including a change in control as defined in the agreement), the
Company will pay to him an amount equal to 2.5 times his base salary in effect
immediately prior to such termination and the greater of his most recent bonus
or the bonus received immediately prior to his most recent annual bonus.
CERTAIN TRANSACTIONS
Pursuant to an Agreement (the "Acquisition Agreement") among the Company,
JF Electra, CBS Mauritius and Rajendra Vattikuti, on July 19, 1996, JF Electra
acquired a 28% interest in CBS Mauritius for approximately $4.0 million. CBS
Mauritius concurrently redeemed, for a purchase price of approximately $2.7
million, all of the shares of CBS Mauritius then owned by the India Investment
Trust, a revocable grantor trust of which Padmaja Vattikuti, Rajendra
Vattikuti's wife, was the grantor and trustee. Also concurrently, Mr. Vattikuti
made a capital contribution to CBSI of approximately $1.1 million and loaned the
Company approximately $0.6 million. This loan is due December 30, 1996 and bears
interest at 8.25% per annum.
In connection with the investment by JF Electra, the parties to the
Acquisition Agreement and CBS India entered into a Shareholders Agreement which
gives JF Electra the right, under certain conditions, to convert its shares of
CBS Mauritius into shares of Common Stock. JF Electra has elected to
convert all of its CBS Mauritius shares into Common Stock and to sell a portion
of such shares in this offering. See "Principal and Selling Shareholders."
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<PAGE> 36
During 1993, 1994 and 1995, the Company made non-interest bearing advances
totaling $370,000, $87,000 and $177,000, respectively to Mr. Vattikuti. In 1993,
$300,000 of these advances were converted into a loan bearing interest at 5% per
annum. The outstanding advances and loan were repaid in full in 1995. In 1996,
the Company made a non-interest bearing advance of $46,000 to Mr. Vattikuti,
which as of September 30, 1996 is outstanding.
In 1993, 1994 and 1995, and for the nine months ended September 30, 1996,
Douglas Land and certain entities affiliated with Mr. Land, earned collectively
$30,152, $226,128, $96,370, and $243,566, respectively, for serving as a
Director and providing consulting services to the Company.
During 1995 and 1996, CBSI provided consulting services to Little Caesars
Enterprises, of which one of the former directors of the Company is a principal
shareholder. For services rendered, the Company earned approximately $111,000 in
1995 and $205,000 in 1996.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 20, 1996, and as adjusted
to reflect the sale of the shares offered hereby, by: (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock; (ii) each director of the Company; (iii) each of the Named Executive
Officers; and (iv) by all executive officers and directors as a group. Except as
noted, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP
PRIOR TO OFFERING NUMBER AFTER OFFERING(1)
--------------------- OF SHARES ---------------------
NUMBER OF BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
<S> <C> <C> <C> <C> <C>
Rajendra B. Vattikuti(2).................. % %
JF Electra (Mauritius) Limited(3)......... % %
Timothy S. Manney......................... % %
Douglas S. Land........................... % %
Frank D. Stella(4)........................ * *
Daniel S. Rankin.......................... * *
Nanjappa S. Venugopal..................... * *
Roy Ely................................... * *
Jennifer Grey............................. * *
All directors and executive officers as a
group (8 persons).......................
</TABLE>
- -------------------------
* Less than 1%.
(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of shares of Common Stock from the following
Selling Shareholders: Rajendra Vattikuti ( ), JF Electra ( ), Timothy
Manney ( ) and Douglas Land ( ).
(2) The address of Mr. Vattikuti is c/o Complete Business Solutions, Inc., 32605
West Twelve Mile Road, Suite #250, Farmington Hills, Michigan 48334.
(3) The address of JF Electra is 4/F Les Cascades Building, Edith Cavell Street,
Port Louis, Mauritius.
(4) Includes currently exercisable options to purchase shares of Common
Stock.
35
<PAGE> 37
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, no par value per share, and 1,000,000 shares of Preferred
Stock, no par value per share. The following description of the capital stock of
the Company is a summary, and as such, does not purport to be complete and is
subject, and qualified in its entirety by reference to, the more complete
descriptions contained in the Restated Articles of Incorporation of the Company,
as amended (the "Articles"), and the Bylaws of the Company, as amended (the
"Bylaws"), copies of each of which are incorporated by reference as exhibits to
the Registration Statement of which this Prospectus is a part. Upon completion
of this offering, the Company will have outstanding shares
of Common Stock and no outstanding shares of Preferred Stock. As of December 20,
1996, there were three record holders of Common Stock.
COMMON STOCK
The Company's authorized common stock consists of 30,000,000 shares of
Common Stock. The holders of Common Stock are entitled to one vote for each
share held of record on all matter submitted to a vote of shareholders. Subject
to preferences that may be applicable to outstanding shares of Preferred Stock,
if any, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Company's Board of Directors out of funds
legally available therefor. Holders of Common Stock have no preemptive,
subscription or redemption rights, and there are no conversion or similar rights
with respect to such shares. The outstanding shares of Common Stock are fully
paid and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock, as well as to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the shareholders. The Board of Directors, without
shareholder approval, may issue Preferred Stock with voting and conversion
rights which could materially adversely affect the voting power of the holders
of Common Stock. The issuance of Preferred Stock could also decrease the amount
of earnings and assets available for distribution to holders of Common Stock. In
addition, the issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company. At present, the
Company has no plans to issue any shares of Preferred Stock. See "Risk
Factors -- Anti-Takeover Provisions."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have shares of
Common Stock outstanding. See "Capitalization." Of these shares, the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, except that any shares purchased
by "affiliates" of the Company, as that term is defined under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations of
Rule 144 described below. All of the remaining shares of Common Stock are
restricted securities (the "Restricted Shares") within the meaning of Rule 144
("Rule 144") under the Securities Act, and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption offered by Rule 144.
The Company's current shareholders have agreed not to sell or otherwise
dispose of any of their shares of Common Stock for a period of 180 days after
the effective date of this offering (the "Lock-Up Period") without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ").
Because
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<PAGE> 38
of these restrictions, on the date of this Prospectus, none of the shares, other
than the shares offered hereby, will be eligible for sale. Beginning
after the expiration of the Lock-Up Period (or earlier upon the prior written
consent of DLJ), of the Restricted Shares may be sold in the public market
subject to Rule 144.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, on (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two years,
including a person who may be deemed an Affiliate of the Company, may sell
within any three-month period a number of shares of Common Stock that does not
exceed the greater of 1% of the then outstanding shares of Common Stock of the
Company ( shares after giving effect to this offering) or the average weekly
trading volume of the Common Stock as reported through the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
of the Securities Act are subject to certain restrictions relating to manner of
sale, notice and the availability of current public information about the
Company. In addition, under Rule 144(k) of the Securities Act, a person who is
not an Affiliate of the Company at any time 90 days preceding a sale, and who
has beneficially owned shares for at least three years, would be entitled to
sell such shares immediately following this offering without regard to the
volume limitations, manner of sale provisions or notice or other requirements of
Rule 144. The Commission has proposed to amend the holding period required by
Rule 144 to permit sales of "restricted" securities after one year rather than
two years (and two years rather than three years for "non-affiliates" under Rule
144(k)).
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. In both cases, a holder of Rule 701 shares is required to wait until
90 days after the date of this Prospectus before selling such shares.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register an aggregate of shares of Common Stock
reserved for issuance under the Company's 1996 Plan. See "Management -- Employee
Benefit Plans -- 1996 Stock Option Plan." Accordingly, shares registered under
such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, unless such
shares are subject to vesting restrictions with the Company or the lock-up
agreements described above. The Company has granted options to purchase
shares under the 1996 Plan to certain key employees and options to purchase
shares under the directors formula program of the 1996 Plan.
Prior to this offering there has been no market for the Common Stock of the
Company. The Company can make no prediction as to the effect, if any, that
market sales of shares of Common Stock or the availability of shares for sale
will have on the market price prevailing from time to time. Nevertheless, sales
of significant numbers of shares of the Common Stock in the public market, could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of its equity
securities. See "Risk Factors -- Shares Eligible for Future Sale."
37
<PAGE> 39
UNDERWRITING
Subject to certain terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and Ferris, Baker Watts, Incorporated
are acting as representatives (collectively, the "Representatives") have
severally agreed to purchase from the Company and the Selling Shareholders, and
the Company and the Selling Shareholders have agreed severally to sell to each
of the Underwriters, the number of shares of Common Stock (the "Shares") set
forth opposite their respective names at the initial public offering price per
share less the underwriting discounts and commissions set forth on the cover of
this Prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................................
Ferris, Baker Watts, Incorporated..................................................
-------
Total.........................................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Shares are subject to approval of certain legal
matters by their counsel and to certain other conditions. If any of the Shares
are purchased by the Underwriters pursuant to the Underwriting Agreement, the
Underwriters are obligated to purchase all Shares (other than those covered by
the over-allotment option described below).
The Company and the Selling Shareholders have been advised by the
Underwriters that they propose to offer the Shares to the public initially at
the price to the public set forth on the cover page of this Prospectus and to
certain dealers at such price, less a concession not in excess of $ per
Share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per Share to certain other dealers. After this
offering, the offering price and other selling terms may be changed by the
Underwriters.
Pursuant to the Underwriting Agreement, the Selling Shareholders have
granted to the Underwriters an option, exercisable not later than 30 calendar
days from the date of the Underwriting Agreement, to purchase up to an aggregate
of additional shares at the initial offering price set forth on the cover
page of this Prospectus, less the underwriting discounts and commissions, solely
to cover over-allotments.
To the extent that the Underwriters exercise such option, each of the
Underwriters will have a commitment to purchase approximately the same
percentage of the option shares as the number of Shares to be purchased by it
shown in the above table bears to the total number of Shares shown in the above
table, and the Selling Shareholders will be obligated, pursuant to the option,
to sell such Shares to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of the
Shares. If purchased, the Underwriters will sell such additional shares on the
same terms as those on which the Shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act.
The Company and all of its current shareholders have agreed that during the
Lock-Up Period they will not, without the prior written consent of DLJ, on
behalf of the Underwriters, sell, offer to sell, contract to sell, grant any
option to purchase or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
other than the Shares, except that the Company may
38
<PAGE> 40
grant options under its 1996 Plan, provided that, without the prior written
consent of DLJ, such options shall not be exercisable during such period.
The Representatives have informed the Company and the Selling Shareholders
that the Underwriters do not intend to confirm sales to any discretionary
accounts without prior specific written approval of the customer.
Prior to this offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company, the Selling Shareholders and the Underwriters. Among the factors to be
considered in determining the initial public offering price of the Common Stock,
in addition to prevailing market conditions, will be the Company's historical
performance, estimates of the business potential and earnings prospects of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby and certain
other legal matters in connection with this offering will be passed upon for the
Company by Camhy Karlinsky & Stein LLP, New York, New York. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Sachnoff & Weaver, Ltd., Chicago, Illinois.
EXPERTS
The Consolidated Financial Statements included in this Prospectus and the
Consolidated Financial Statement Schedule included in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods as indicated in their reports
with respect thereto, and are included therein in reliance upon the authority of
said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement, of which the
Prospectus constitutes a part, on Form S-1 under the Securities Act with respect
to the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete; reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in all respects by such reference to such exhibit.
The Registration Statement, including exhibits and schedules thereto, may
be inspected without charge at the Commission's principal office in Washington,
D.C., public reference facilities maintained by the Commission in Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following regional offices
of the Commission: Seven World Trade Center, Room 1400, New York, New York 10048
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street N.W., Washington, D.C.
20549, Room 1024, at prescribed rates. The Registration Statement, including the
exhibits and schedules thereto, is also available at the Commission's web site
at www.sec.gov. Copies of reports, proxy and information statements and other
information regarding the Company will be available at the Commission's web
site.
39
<PAGE> 41
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995, and for the nine months ended September 30, 1995 and 1996 (unaudited)......... F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993,
1994 and 1995, and for the nine months ended September 30, 1996 (unaudited)......... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995, and for the nine months ended September 30, 1995 and 1996 (unaudited)......... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 42
After the proposed reverse stock split discussed in Note 15 to Complete
Business Solutions, Inc.'s consolidated financial statements is effected, we
expect to be in a position to render the following audit report.
Arthur Andersen LLP
April 11, 1996
(except for the matters discussed in
Note 15 for which the date is
, 1996).
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Complete Business Solutions, Inc.:
We have audited the accompanying consolidated balance sheets of COMPLETE
BUSINESS SOLUTIONS, INC. (a Michigan corporation) and subsidiaries as of
December 31, 1994 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Complete Business Solutions,
Inc. and subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Detroit, Michigan.
F-2
<PAGE> 43
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 (NOTE 14)
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 319 $ 830 $ 3,461 $ 3,461
Accounts receivable, net................ 12,332 16,759 19,806 19,806
Unbilled revenues....................... 2,090 534 2,030 2,030
Prepaid expenses and other.............. 563 531 652 652
-------- -------- -------- --------
Total current assets............... 15,304 18,654 25,949 25,949
-------- -------- -------- --------
Property and equipment, net.................. 3,165 3,571 4,875 4,875
Computer software, net....................... 1,543 992 894 894
Notes receivable -- shareholder.............. 519 -- -- --
Other assets................................. 209 206 220 220
-------- -------- -------- --------
Total assets....................... $20,740 $23,423 $31,938 $31,938
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $ 946 $ 1,305 $ 2,156 $ 2,156
Accrued payroll and related costs....... 3,328 3,895 4,841 4,841
Revolving credit facility............... 5,450 5,350 6,100 13,000
Other accrued liabilities............... 807 806 861 861
Deferred taxes.......................... -- -- -- 1,619
Note payable -- shareholder............. -- -- 608 608
Current portion of deferred revenue..... 809 1,062 1,209 1,209
Current portion of long-term debt....... 219 437 528 528
-------- -------- -------- --------
Total current liabilities.......... 11,559 12,855 16,303 24,822
-------- -------- -------- --------
Deferred revenue, less current portion....... 241 299 358 358
Long-term debt, less current portion......... 264 529 388 388
Deferred taxes............................... -- -- -- 593
Minority interest............................ 351 552 1,524 1,524
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, 30,000,000
shares authorized, 10,000,000 shares
issued and outstanding................ -- -- -- --
Additional paid-in capital.............. 1 1 1,101 4,456
Retained earnings....................... 8,324 9,346 12,467 --
Cumulative translation adjustment....... -- (159) (203) (203)
-------- -------- -------- --------
Total shareholders' equity......... 8,325 9,188 13,365 4,253
-------- -------- -------- --------
Total liabilities and shareholders'
equity........................... $20,740 $23,423 $31,938 $31,938
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 44
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Professional service fees................... $41,865 $53,696 $64,635 $48,622 $59,590
Software products........................... 1,930 2,662 2,764 1,874 1,909
------- ------- ------- ------- -------
Total revenues......................... 43,795 56,358 67,399 50,496 61,499
------- ------- ------- ------- -------
Cost of revenues:
Salaries, wages and employee benefits....... 28,392 36,439 47,127 35,027 40,045
Contractual services........................ 2,541 2,647 2,104 1,963 2,906
Project travel and relocation............... 2,283 3,195 3,200 2,112 2,395
Amortization of software and project
equipment................................. 289 555 1,178 771 1,193
------- ------- ------- ------- -------
Total cost of revenues................. 33,505 42,836 53,609 39,873 46,539
------- ------- ------- ------- -------
Gross profit........................... 10,290 13,522 13,790 10,623 14,960
Selling, general and administrative expenses..... 8,354 10,887 11,824 9,078 11,086
------- ------- ------- ------- -------
Income from operations................. 1,936 2,635 1,966 1,545 3,874
Interest expense................................. 196 345 692 537 446
------- ------- ------- ------- -------
Income before provision for income
taxes and minority interest.......... 1,740 2,290 1,274 1,008 3,428
Provision for income taxes....................... -- -- -- -- 127
Minority interest................................ 127 176 252 120 180
------- ------- ------- ------- -------
Net income............................. $ 1,613 $ 2,114 $ 1,022 $ 888 $ 3,121
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA INFORMATION --
(UNAUDITED) (NOTE 14)
<S> <C> <C> <C> <C> <C>
Net income as reported........................... $ 1,022 $ 888 $ 3,121
Pro forma incremental income tax provision....... 135 117 1,065
------- ------- -------
Pro forma net income............................. $ 887 $ 771 $ 2,056
======= ======= =======
Pro forma net income per common share............ $ .07 $ .06 $ .17
======= ======= =======
Pro forma weighted average shares outstanding.... 12,030 12,022 12,402
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 45
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT EQUITY
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance, December 31, 1992........................... $ 1 $ 4,597 $ -- $ 4,598
Net income......................................... -- 1,613 -- 1,613
------ ------- ----- -------
Balance, December 31, 1993........................... 1 6,210 -- 6,211
Net income......................................... -- 2,114 -- 2,114
------ ------- ----- -------
Balance, December 31, 1994........................... 1 8,324 -- 8,325
Net income......................................... -- 1,022 -- 1,022
Translation adjustment............................. -- -- (159) (159)
------ ------- ----- -------
Balance, December 31, 1995........................... 1 9,346 (159) 9,188
Net income......................................... -- 3,121 -- 3,121
Translation adjustment............................. -- -- (44) (44)
Capital contribution............................... 1,100 -- -- 1,100
------ ------- ----- -------
Balance, September 30, 1996 (unaudited).............. $1,101 $ 12,467 $(203) $13,365
====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 46
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income..................................... $ 1,613 $ 2,114 $ 1,022 $ 888 $ 3,121
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization............. 783 1,082 1,812 1,305 1,772
Provision for doubtful accounts........... 76 100 105 79 90
Minority interest......................... 127 176 252 120 180
Change in assets and liabilities --
Accounts receivable and unbilled
revenues............................. (3,550) (3,503) (3,164) (6,244) (4,596)
Prepaid expenses and other.............. (148) (170) 29 15 (162)
Other assets............................ (143) (33) (4) (66) (14)
Accounts payable........................ (204) 83 384 (154) 842
Accrued payroll and related costs and
other accrued liabilities............ 2,100 340 518 668 999
Deferred revenue........................ (61) 251 312 599 207
Other................................... 50 125 -- -- --
------- ------- ------- ------- -------
Net cash provided by (used in)
operating activities............... 643 565 1,266 (2,790) 2,439
------- ------- ------- ------- -------
Cash flows from investing activities:
Investment in computer software........... (595) (313) -- -- (566)
Purchases of property and equipment....... (912) (2,155) (1,618) (1,350) (2,411)
Net repayments (advances) on notes
receivable -- shareholder............... (213) 54 519 (13) --
------- ------- ------- ------- -------
Net cash used in investing
activities......................... (1,720) (2,414) (1,099) (1,363) (2,977)
------- ------- ------- ------- -------
Cash flows from financing activities:
Net borrowings (payments) on revolving
credit facility......................... 1,650 1,500 (100) 3,850 750
Proceeds from issuance of long-term
debt.................................... -- 500 828 811 356
Proceeds from issuance of note payable --
shareholder............................. -- -- -- -- 608
Payments on long-term debt................ (214) (257) (346) (260) (406)
Proceeds from sale of stock in subsidiary,
net..................................... -- -- -- -- 3,500
Repurchase of stock in subsidiary......... -- -- -- -- (2,708)
Capital contribution...................... -- -- -- -- 1,100
------- ------- ------- ------- -------
Net cash provided by financing
activities......................... 1,436 1,743 382 4,401 3,200
------- ------- ------- ------- -------
Effect of exchange rate changes on cash........ -- -- (38) (44) (31)
------- ------- ------- ------- -------
Increase (decrease) in cash and cash
equivalents.................................. 359 (106) 511 204 2,631
Cash and cash equivalents at beginning of
period. ..................................... 66 425 319 319 830
------- ------- ------- ------- -------
Cash and cash equivalents at end of period. ... $ 425 $ 319 $ 830 $ 523 $ 3,461
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 47
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL INFORMATION FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
Complete Business Solutions, Inc. (the Company) was founded in 1985. The
Company is a worldwide provider of information technology (IT) services to large
and mid-size organizations. The Company offers its clients a broad range of IT
services, from advising clients on strategic technology plans to developing and
implementing appropriate IT solutions.
The Risk Factors on pages 6 to 11 of this Registration Statement are
incorporated herein by reference.
Unaudited Consolidated Financial Statements
The accompanying consolidated balance sheet as of September 30, 1996 and
consolidated statements of income, cash flows and shareholders' equity for the
nine months ended September 30, 1995 and 1996 are unaudited, but in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation thereof. The results of operations
for the nine months ended September 30, 1995 and 1996 are not necessarily
indicative of results to be expected for the full year.
Common Stock
The Company has effected a 10,000-for-1 forward stock split and an increase
in the authorized capital to 30,000,000 shares of Common Stock. Accordingly, the
Company's shareholders' equity accounts and the number of shares in the
accompanying consolidated financial statements and notes thereto have been
retroactively restated to give effect to the stock split and increase in the
number of authorized shares of Common Stock.
Principles of Consolidation and Organization
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in the accompanying consolidated financial statements.
Through July 1996, the Company held a 76% interest in Complete Business
Solutions (India) Private Limited (CBS India) with the remaining 24% interest
held by an entity affiliated with the Company's shareholder (affiliated entity).
In July 1996, the Company formed CBS Complete Business Solutions (Mauritius)
Limited (CBS Mauritius) and the Company and the affiliated entity each
contributed its ownership interest in CBS India for a similar interest in CBS
Mauritius.
In July 1996, CBS Mauritius sold an ownership interest to an unrelated
entity for approximately $3,500, net of transaction costs. Simultaneously, CBS
Mauritius repurchased its stock held by the affiliated entity for approximately
$2,708 and the Company made a capital contribution of $1,708 to CBS Mauritius.
The net loss on this transaction was not material. As of September 30, 1996, the
Company owns 72% and the unrelated entity owns 28% of CBS Mauritius, which owns
100% of CBS India.
The 28% shareholder of CBS Mauritius has an option to convert its ownership
interest in CBS Mauritius into an 8.5% ownership interest in the Company during
the option period as specified in the CBS Mauritius shareholders agreement. This
8.5% ownership interest was calculated based upon the outstanding shares of the
Company on the date of the shareholders agreement. This option will be exercised
in connection with the Company's contemplated initial public offering. Upon
conversion, the Company will issue additional shares of Common Stock and acquire
all outstanding minority shares of CBS Mauritius. The acquisition of the
minority
F-7
<PAGE> 48
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares will be accounted for under the purchase method of accounting. The excess
of the aggregate purchase price over the fair value of the net assets acquired
will be recognized as goodwill. See Note 16 for further discussion on the pro
forma effects of this transaction.
Foreign Currency
For significant foreign operations, the local currencies have been
designated as the functional currencies. The financial statements of these
subsidiaries are translated into U.S. dollars using exchange rates in effect at
year end for assets and liabilities and at the average rate during the year for
revenues and expenses. The resulting foreign currency translation adjustment is
reflected as a separate component of shareholders' equity as of December 31,
1995 and September 30, 1996. The translation adjustment as of December 31, 1994
was not material.
Transaction gains and losses, which were not significant in the periods
presented, are reflected in the consolidated statements of income.
Cash and Cash Equivalents
Cash and cash equivalents include investments in highly liquid money market
funds with an initial maturity of three months or less.
Financial Instruments
The fair values and carrying amounts of certain of the Company's financial
instruments, primarily accounts receivable and payable, are approximately
equivalent. These financial instruments are classified as current and will be
liquidated within the next operating cycle.
The carrying amount for the revolving credit facility and certain long-term
debt approximates fair value due to the variable rate of interest on these
notes. The fair value of the fixed-rate debt, which approximates the carrying
value, has been estimated based on current rates offered to the Company for debt
of the same remaining maturities.
Accounting for Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, was issued in October 1995. The Company will be
required to adopt the new standard for the year ended December 31, 1996,
although early adoption is permitted. This standard establishes the fair value
based method (the SFAS 123 Method) rather than the intrinsic value based method
as the preferred accounting methodology for stock-based compensation
arrangements. Entities are allowed to: (i) continue to use the intrinsic value
based methodology in their basic financial statements and provide in the
footnotes pro forma net income and earnings per share information as if the SFAS
123 Method had been adopted; or (ii) adopt the SFAS 123 Method. The Company
plans to adopt this statement by providing the required pro forma disclosures in
the footnotes.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the expected life of the asset or term
of the lease, whichever is shorter.
Revenue Recognition
The Company recognizes professional service fee revenue on
time-and-materials contracts as the services are performed for the clients.
Revenues on fixed-priced contracts are recognized using the percentage of
F-8
<PAGE> 49
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
completion method. Percentage of completion is determined by relating the actual
cost of work performed to date to the estimated total cost for each contract. If
the estimate indicates a loss on a particular contract, a provision is made for
the entire estimated loss without reference to the percentage of completion.
Software products revenue consists of both license revenue and maintenance
revenue. License revenue is recognized when both a software license agreement is
signed and the software has been shipped and made available to the customer.
Maintenance revenue is recorded as deferred revenue in the consolidated balance
sheets when invoiced and is recognized over the term of the maintenance
contract, generally one to three years.
Unbilled Revenues
Unbilled revenues represent costs incurred and related earnings not
currently billable under the terms of the contract. These amounts are expected
to be billed and collected over a period of less than twelve months.
Computer Software
The Company performs research to develop software for various business
applications. The costs of such research are charged to expense when incurred.
When the technological feasibility of the product is established, subsequent
costs are capitalized and amortized using the straight-line method over the
estimated economic life of the product, generally three years. The establishment
of technological feasibility and the ongoing assessment of the recoverability of
these costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future gross
product revenue, estimated economic product lives and changes in software and
hardware technology. The policy is reevaluated and adjusted as necessary at the
end of each accounting period. On an ongoing basis, management reviews the
valuation and amortization of capitalized development costs. As part of this
review, the Company considers the value of future cash flows attributable to the
capitalized development costs in evaluating potential impairment of the asset.
The amortization of software development costs was $289, $371 and $551 for the
years ended December 31, 1993, 1994 and 1995, respectively, and $414 and $664
for the nine months ended September 30, 1995 and 1996, respectively.
Accumulated amortization on computer software amounted to $884, $1,392 and
$1,491 as of December 31, 1994 and 1995 and September 30, 1996, respectively.
Amounts capitalized were $595 and $313 for the years ended December 31,
1993 and 1994, respectively, and $566 for the nine months ended September 30,
1996. No amounts were capitalized during the year ended December 31, 1995.
Amounts charged to expense for research and development of computer
software were not material in the periods presented.
Income Taxes
The Company and its shareholders have elected to be taxed under the
provisions of Sub-Chapter S of the United States Internal Revenue Code. Under
those provisions, the shareholders are liable for individual Federal income
taxes on the Company's taxable income. As a result, no provision for United
States income taxes has been included in the accompanying statements of income.
CBS Mauritius is incorporated in Mauritius and is not subject to income
taxes. CBS India is an Indian corporation subject to income taxes. CBS India's
operating facilities are located in a free trade zone. Under the Indian Income
Tax Act of 1961, the entire profits of a company situated in a free trade zone
are exempt from income tax for a period of five consecutive years within the
first eight years of operations, at the option of the Company. The Company has
opted for this exemption for the years ended March 31, 1992 to March 31, 1996
for its original facility in India. Two other facilities were opened during 1995
and 1996. These facilities
F-9
<PAGE> 50
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are exempt from income tax until 2000 and 2001, respectively. CBS India also
receives various export deductions at all three facilities reducing its regular
taxable income. As a result, other than the minimum alternative tax discussed
below, no tax provision related to the CBS India income has been required.
During 1996, the government of India instituted a minimum alternative tax
with an effective rate of approximately 13% of CBS India's income. This tax
provision has been included in the consolidated statement of income for the nine
months ended September 30, 1996 as a provision for income taxes.
Termination of S Corporation Election
Certain events, including the public offering of the Company's Common
Stock, will automatically terminate its S corporation status, thereby subjecting
future income to Federal and state income taxes at the corporate level. Due to
temporary differences in recognition of revenue and expenses, income for
financial reporting purposes has exceeded income for income tax purposes.
Accordingly, the application of the provisions of SFAS No. 109, "Accounting for
Income Taxes" will result in the recognition of deferred tax liabilities and a
corresponding charge to expense in the period in which the initial public
offering occurs. If the S corporation status had been terminated as of September
30, 1996, this liability would have been approximately $4,683. As a result of
certain tax elections made by the Company, approximately $2,471 of this
liability will be payable by the shareholders. The remaining liability of
approximately $2,212 will be paid by the Company over a period of four years.
This liability has been reflected as deferred taxes in the accompanying
consolidated pro forma balance sheet as of September 30, 1996.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
Allowance for doubtful accounts was $100, $162 and $184 at December 31,
1994 and 1995 and September 30, 1996, respectively.
The Company's largest client represents 21%, 18%, and 10% of accounts
receivable as of December 31, 1994 and 1995 and September 30, 1996,
respectively, and represents 24%, 29% and 19% of total revenues for the years
ended December 31, 1993, 1994 and 1995, respectively, and 24% and 12% for the
nine months ended September 30, 1995 and 1996, respectively. Revenues from this
client are generated by multiple projects for various end users. No other client
accounted for more than 10% of revenues in the periods presented. In addition,
74%, 80%, and 82% of total revenues in each year for the years ended December
31, 1993, 1994, and 1995, respectively, and 82% and 84% of total revenues in
each period for the nine months ended September 30, 1995 and 1996, respectively,
were generated from existing clients from the previous fiscal year.
The Company grants credit to clients based upon management's assessment of
their creditworthiness. Substantially all of the Company's revenues (and the
resulting accounts receivable) are from large and mid-size companies, major
systems integrators and governmental agencies.
F-10
<PAGE> 51
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
As of December 31, 1994 and 1995 and September 30, 1996, property and
equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, ESTIMATED
----------------- 1996 USEFUL
1994 1995 (UNAUDITED) LIVES
<S> <C> <C> <C> <C>
Equipment.................................... $ 3,610 $ 4,422 $ 5,217 3-5 years
Buildings.................................... -- 58 848 31 years
Purchased software........................... 967 1,432 1,853 3-5 years
Furniture and fixtures....................... 464 656 867 5-7 years
Leasehold improvements....................... 127 230 323 5 years
Automobiles.................................. 75 84 185 5 years
------- ------- -------
5,243 6,882 9,293
Accumulated depreciation..................... (2,078) (3,311) (4,418)
------- ------- -------
Property and equipment, net.................. $ 3,165 $ 3,571 $ 4,875
======= ======= =======
</TABLE>
4. RELATED PARTY TRANSACTIONS
During July 1996, the shareholder loaned $608 to the Company in exchange
for a note. The note is short-term and bears interest at the weighted average
interest rate on borrowings under the Company's credit arrangement.
The Company entered into two note arrangements aggregating $660 with its
shareholder with a weighted average interest rate of approximately 6%. The
amount outstanding on the notes was $574 as of December 31, 1994. These notes
were repaid during 1995.
The Company provided services to a client whose principal shareholder was a
former director of the Company. The Company received approximately $111 and $205
for these services in 1995 and for the nine months ended September 30, 1996,
respectively. No services were provided to this client for the years ended
December 31, 1993 and 1994.
The Company expensed approximately $30, $226 and $96 for the years ended
December 31, 1993, 1994 and 1995, respectively, and $244 for the nine months
ended September 30, 1996, respectively, for consulting services to an affiliate
of an outside director.
The above transactions were at prices and terms believed to be equivalent
to those available from unrelated parties.
5. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest for the years ended December 31, 1993, 1994 and 1995
was $223, $404 and $705 respectively, and $523 and $444 for the nine months
ended September 30, 1995 and 1996, respectively. There were no income taxes paid
during the periods presented.
6. REVOLVING CREDIT FACILITY
Under a credit arrangement with a commercial bank, the Company may borrow
an amount not to exceed the lesser of $16,000 or 80% of trade accounts
receivable less than 90 days outstanding at the bank's prime interest rate, or a
Eurodollar rate. At December 31, 1994 and 1995 and September 30, 1996, the
permitted borrowings under the agreement were approximately $10,000, $10,500,
and $15,500, respectively. The borrowings under the facility are short-term and
are secured by trade accounts receivable of the Company.
F-11
<PAGE> 52
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The balance outstanding under this agreement at December 31, 1994 and 1995
and September 30, 1996 was $5,450, $5,350, and $6,100, respectively. Average
month-end outstanding borrowings under these arrangements were $3,541, $4,862
and $7,231 for the years ended December 31, 1993, 1994 and 1995, respectively,
and $7,345 and $6,135 for the nine months ended September 30, 1995 and 1996,
respectively. The weighted average interest rate on the outstanding borrowings
was 8.5%, 7.9% and 7.6% at December 31, 1994 and 1995 and September 30, 1996,
respectively.
The Company also has a working capital facility aggregating $3,000 with a
commercial bank at the bank's prime interest rate (8.5%, 8.5% and 8.25% at
December 31, 1994 and 1995 and September 30, 1996, respectively). The borrowings
under the facility are due on demand and secured by all assets of the Company.
No amounts have been borrowed under this facility during the periods presented.
The credit agreements contain various restrictive covenants which, among
other items, require the Company to maintain certain levels of tangible net
worth and a current ratio.
7. LONG-TERM DEBT
As of December 31, 1994 and 1995 and September 30, 1996, long-term debt
consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a bank, payable in monthly installments of
$15 plus interest at 9.6% through March 1998,
collateralized by equipment............................. $ -- $ 408 $ 248
Note payable to a bank, payable in monthly installments of
$14 plus interest at prime plus .25% (8.75%, 8.75% and
8.5% at December 31, 1994 and 1995 and September 30,
1996, respectively) through July 1997, collateralized by
equipment............................................... 431 278 139
Note payable to a bank, payable in monthly installments of
$8 plus interest at prime (8.5% and 8.25% at December
31, 1995 and September 30, 1996, respectively) through
August 1998, collateralized by equipment................ -- 262 183
Note payable to a bank, payable in monthly installments of
$10 plus interest at prime (8.25% at September 30, 1996)
through August 1999, collateralized by equipment........ -- -- 346
Other..................................................... 52 18 --
----- ----- -----
483 966 916
Less -- Current portion................................... (219) (437) (528)
----- ----- -----
$ 264 $ 529 $ 388
===== ===== =====
</TABLE>
Maturities of the principal amounts outstanding at December 31, 1995 are as
follows:
<TABLE>
<S> <C>
1996...................................................................... $ 437
1997...................................................................... 382
1998...................................................................... 130
1999...................................................................... 1
2000...................................................................... 1
2001 and thereafter....................................................... 15
----
$ 966
====
</TABLE>
F-12
<PAGE> 53
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Subsequent to December 31, 1995, the Company entered into an additional
note payable with a bank with annual principal payments of $119 beginning
September 1996 through August 1999. These payments have not been reflected in
the above schedule.
8. SELF-INSURANCE
The Company is self-insured for health and dental benefits up to $70 per
occurrence. Insurance coverage is carried for risks in excess of this amount.
The Company has recognized health and dental benefits expense of approximately
$1,376, $1,702 and $1,691 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $1,323 and $1,656 for the nine months ended September 30, 1995
and 1996, respectively. Estimated claims incurred but not reported were $251,
$282 and $255 as of December 31, 1994 and 1995 and September 30, 1996,
respectively, and are included in other accrued liabilities in the accompanying
consolidated balance sheets. There are no receivables from insurance carriers as
of December 31, 1994 and 1995 and September 30, 1996.
9. LEASES
The Company leases its headquarters, regional offices, equipment and
certain automobiles under noncancelable, long-term operating leases.
Rent expense for the years ended December 31, 1993, 1994 and 1995 amounted
to approximately $458, $720 and $1,005, respectively, and $765 and $743 for the
nine months ended September 30, 1995 and 1996, respectively. The future minimum
lease payments required under these operating leases for the years ending
December 31, are as follows:
<TABLE>
<S> <C>
1996...................................................................... $ 706
1997...................................................................... 718
1998...................................................................... 627
1999...................................................................... 703
2000...................................................................... 731
Thereafter................................................................ 759
------
$ 4,244
======
</TABLE>
Subsequent to December 31, 1995, the Company entered into additional
operating lease agreements. The following schedule includes these additional
lease commitments:
<TABLE>
<S> <C>
Three months ended December 31, 1996...................................... $ 246
Year ended December 31:
1997.................................................................... 956
1998.................................................................... 813
1999.................................................................... 905
2000.................................................................... 939
2001.................................................................... 921
Thereafter.............................................................. 1,355
------
$ 6,135
======
</TABLE>
F-13
<PAGE> 54
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. STOCK OPTIONS
The Company maintains a Stock Option Plan (the Plan). Under the Plan,
eligible employees and directors may be granted either Incentive Stock Options
(ISOs) or Non-Incentive Stock Options (NISOs) at the discretion of the Board of
Directors. There are 2,732,500 shares of Common Stock authorized for grant under
the Plan. Options under the Plan are granted at fair value on the date of grant
as determined by an independent appraisal, therefore, no compensation expense
has been recognized.
The stock option agreements provide for the option holder to exercise the
options in exchange for a promissory note payable to the Company over a period
of at least five years for NISOs and at least two years for ISOs. These notes
are full recourse and bear interest at the prime rate of interest determined at
the date of exercise.
During 1995, the Company granted 1,125,000 NISOs at $2.50 per share. During
the nine months ended September 30, 1996, an additional 40,000 NISOs were
granted at $5.00 per share. These options vest over periods ranging from one to
four years. As of September 30, 1996, none of the NISOs were exercisable. No
NISOs were exercised, canceled or expired during the year ended December 31,
1995 and the nine-month period ended September 30, 1996.
During the nine months ended September 30, 1996, the Company granted
460,500 ISOs at $5.00 per share under the Plan. These options vest over periods
ranging from three to four years. As of September 30, 1996, none of the ISOs
were exercisable. No ISOs were exercised, canceled or expired during the nine
months ended September 30, 1996.
11. COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, a party to ordinary, routine litigation
incidental to the Company's business. After discussion with its legal counsel,
the Company does not believe that the ultimate resolution of any existing matter
will have a material adverse effect on its financial condition, results of
operations or cash flows.
12. BENEFIT PLAN
The Company maintains the Complete Business Solutions, Inc. Incentive
Savings Plan and Trust (the Savings Plan). All employees of the Company are
eligible to participate in the Savings Plan once they have completed one year of
service and have attained age 21.
The Savings Plan is a defined contribution plan, qualified as a profit
sharing plan under Section 401(k) of the Internal Revenue Code. The Savings Plan
allows eligible employees to contribute up to 18% of their compensation with the
Company matching a percentage of the contributions. The matching contribution
percentages and maximum Company match (as a percentage of the participant's
compensation) for each plan year are as follows:
<TABLE>
<CAPTION>
MATCHING
COMPANY MAXIMUM COMPANY
CONTRIBUTION MATCH
<S> <C> <C>
1993............................................... 15% 0.9%
1994............................................... 30% 1.8%
1995............................................... 40% 2.4%
1996............................................... 40% 2.4%
</TABLE>
Matching contributions made by the Company amounted to approximately $65,
$183 and $301 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $244 and $302 for the nine months ended
F-14
<PAGE> 55
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
September 30, 1995 and 1996, respectively. The Company may also make an
additional contribution, at its discretion, to the Savings Plan. No such
additional contributions have been made to date.
13. GEOGRAPHIC OPERATIONS INFORMATION
The following table summarizes selected financial information of the
Company's operations by geographic location:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
United States........................ $42,658 $55,220 $65,906 $49,095 $59,740
International........................ 1,251 2,645 4,586 3,436 4,202
Intercompany......................... (114) (1,507) (3,093) (2,035) (2,443)
------- ------- ------- ------- -------
Total........................... $43,795 $56,358 $67,399 $50,496 $61,499
======= ======= ======= ======= =======
Income from operations:
United States........................ $ 1,493 $ 1,927 $ 844 $ 781 $ 2,945
International........................ 443 708 1,122 764 929
------- ------- ------- ------- -------
Total........................... $ 1,936 $ 2,635 $ 1,966 $ 1,545 $ 3,874
======= ======= ======= ======= =======
Identifiable assets:
United States........................ $15,227 $19,580 $21,731 $24,930 $26,412
International........................ 804 1,160 1,692 2,195 5,526
------- ------- ------- ------- -------
Total........................... $16,031 $20,740 $23,423 $27,125 $31,938
======= ======= ======= ======= =======
</TABLE>
14. PRO FORMA AND SUPPLEMENTAL NET INCOME PER COMMON SHARE (UNAUDITED)
Pro Forma Statement of Income Information
The pro forma adjustments for the incremental income tax provision included
in the accompanying consolidated statements of income reflects the additional
provision for Federal and state income taxes at the effective income tax rate as
if the Company had been taxed as a C corporation and no foreign tax holidays had
been granted during the periods presented. The differences between the United
States Federal statutory rate and the consolidated effective rate are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------ ----------------
1995 1995 1996
<S> <C> <C> <C>
Statutory Federal income tax rate....................... 34.0% 34.0% 34.0%
State income taxes, net of Federal tax effect........... 3.0 3.0 3.0
Tax rate differences on foreign earnings not subject to
U.S. tax.............................................. (26.6) (26.6) (1.1)
Other................................................... 2.8 2.8 0.8
----- ----- ----
13.2% 13.2% 36.7%
===== ===== ====
</TABLE>
The Company considers all undistributed earnings of foreign subsidiaries to
be permanently invested. Therefore, no United States income taxes have been
provided on these earnings.
F-15
<PAGE> 56
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pro forma weighted average shares outstanding is based on the following:
(i) the weighted average number of shares of Common Stock outstanding; (ii) the
dilutive effect of outstanding Common Stock equivalents; (iii) the stock options
and convertible shares issued during the twelve months immediately preceding the
offering date (using the treasury stock method and the mid-point of the proposed
initial public offering price per share) for all periods presented; and (iv) the
sale of a sufficient number of shares of the Company's common stock necessary to
provide funds to pay the cash portion of the S corporation distribution.
Pro forma fully diluted earnings per share approximates primary earnings
per share for the year ended December 31, 1995 and for the nine months ended
September 30, 1995 and 1996.
Pro Forma Balance Sheet
Due to the anticipated termination of the Company's S corporation status,
the accompanying pro forma consolidated balance sheet as of September 30, 1996
reflects the distribution to the Company's shareholders of $6,900 through
additional borrowings under the revolving credit facility, along with the
recording of deferred tax liabilities. The pro forma consolidated balance sheet
also reflects the reclassification of undistributed earnings in the Company to
additional paid-in capital.
Supplemental
Supplemental net income per common share reflects: (i) pro forma net
income; (ii) the elimination of interest expense related to the use of proceeds,
net of related income tax effects using an assumed effective tax rate; and (iii)
the issuance of shares of Common Stock, the net proceeds of which are used to
repay indebtedness. Supplemental net income for the year ended December 31, 1995
and the nine months ended September 30, 1995 and 1996 was $1,515, $1,258 and
$2,355, respectively. Supplemental net income per common share for the same
periods was $.12, $.10, and $.18, respectively.
15. SUBSEQUENT EVENTS
In connection with the proposed initial public offering by the Company,
subsequent to September 30, 1996, the following transactions are anticipated to
occur:
(i) termination of the Company's S corporation status as described in
Note 1. In connection with this termination, the Company will be required
to record deferred tax liabilities with a corresponding tax provision in
accordance with SFAS 109 in the period the termination occurs;
(ii) a reverse stock split of 1-for- shares;
(iii) the issuance of 930,000 shares of the Company's Common Stock in
exchange for the 28% minority interest in CBS Mauritius;
(iv) the exercise by certain option holders of 850,000 options and the
Company will loan the option holders approximately $2,125.
16. INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS (UNAUDITED)
On December 20, 1996, the Company filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission for the sale of its Common
Stock. The net proceeds to the Company from this offering are intended to be
used for: the repayment of existing debt estimated to be $7,000; payment of
undistributed S corporation earnings estimated to be $6,900; expansion of
existing operations, including the Company's offshore software development
operations; development of new service lines and possible acquisitions of
related businesses; and general corporate purposes, including working capital.
The unaudited pro forma consolidated balance sheet shown below as of
September 30, 1996 gives effect to the following transactions as if such
transactions occurred on that date: (i) the sale of shares of Common
F-16
<PAGE> 57
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock by the Company and the application of the estimated net proceeds
therefrom; (ii) recording of deferred tax liabilities upon termination of the
Company's S corporation status; (iii) the transfer of undistributed retained
earnings to additional paid-in capital; (iv) issuance of 930,000 shares of
Common Stock in exchange for the 28% minority interest in CBS Mauritius,
including the elimination of the minority interest; and (v) the exercise of
850,000 stock options in exchange for notes.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
--------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 3,461 $22,284 $25,745
Other............................................... 22,488 -- 22,488
------- ------- -------
Total current assets........................... 25,949 22,284 48,233
------- ------- -------
Property and equipment, net........................... 4,875 -- 4,875
Computer software, net................................ 894 -- 894
Goodwill.............................................. -- 4,252 4,252
Other assets.......................................... 220 -- 220
------- ------- -------
Total assets................................... $ 31,938 $26,536 $58,474
======= ======= =======
Current liabilities:
Current portion of long-term debt................... $ 528 $ (528) $ --
Revolving credit facility........................... 6,100 (6,100) --
Deferred taxes...................................... -- 1,619 1,619
Other............................................... 9,675 -- 9,675
------- ------- -------
Total current liabilities...................... 16,303 (5,009) 11,294
------- ------- -------
Deferred revenue...................................... 358 -- 358
Long-term debt........................................ 388 (388) --
Deferred taxes........................................ -- 593 593
Minority interest..................................... 1,524 (1,524) --
Shareholders' equity:
Common stock........................................ -- -- --
Additional paid-in capital.......................... 1,101 47,456 48,557
Retained earnings................................... 12,467 (12,467) --
Stock subscription receivable....................... -- (2,125) (2,125)
Cumulative translation adjustment................... (203) -- (203)
------- ------- -------
Total shareholders' equity..................... 13,365 32,864 46,229
------- ------- -------
Total liabilities and shareholders' equity..... $ 31,938 $26,536 $58,474
======= ======= =======
</TABLE>
F-17
<PAGE> 58
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unaudited pro forma consolidated statements of income shown below for
the year ended December 31, 1995 and for the nine months ended September 30,
1995 and 1996, give effect to the following transactions as if such transactions
had occurred as of the beginning of the periods:
(i) amortization of goodwill over a period of 25 years as a result
of the Company's purchase of the 28% minority interest in CBS Mauritius,
including the elimination of the minority interest;
(ii) elimination of interest expense to give effect to the repayment
of the Company's revolving credit facility and long-term debt;
(iii) provision for Federal and state income taxes at the effective
income tax rate as if the Company had been taxed as a C corporation and no
foreign tax holidays had been granted during the periods presented. The tax
provision was computed as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED SEPTEMBER
DECEMBER 31, 30,
------------ ---------------
1995 1995 1996
<S> <C> <C> <C>
Statutory Federal income tax rate......................... 34.0% 34.0% 34.0%
State income taxes, net of Federal tax effect............. 3.0 3.0 3.0
Tax rate differences on foreign earnings not subject to
U.S. tax................................................ (26.6) (26.6) (1.1)
Amortization of goodwill.................................. 7.0 7.0 1.6
Other..................................................... 2.8 2.8 0.8
---- ---- ----
20.2% 20.2% 38.3%
==== ==== ====
</TABLE>
(iv) reflects pro forma weighted average shares of Common Stock, plus
the portion of Common Stock offered hereby needed to generate proceeds
sufficient to repay the Company's revolving credit facility and long-term
debt at the end of each period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------
PRO
HISTORICAL ADJUSTMENTS FORMA
<S> <C> <C> <C>
Revenues.................................................. $ 67,399 $ -- $67,399
Cost of revenues.......................................... 53,609 -- 53,609
------- ----- -------
Gross profit............................................ 13,790 -- 13,790
Selling, general and administrative expenses.............. 11,824 -- 11,824
Amortization of goodwill.................................. -- 170 170
------- ----- -------
Income from operations.................................. 1,966 (170) 1,796
Interest expense (income)................................. 692 (724) (32)
------- ----- -------
Income before provision for income taxes and minority
interest............................................. 1,274 554 1,828
Provision for income taxes................................ -- 368 368
Minority interest......................................... 252 (252) --
------- ----- -------
Net income.............................................. $ 1,022 $ 438 $ 1,460
======= ===== =======
Pro forma net income per share............................ -- -- $ 0.11
=======
Pro forma weighted average shares outstanding............. -- -- 12,935
=======
</TABLE>
F-18
<PAGE> 59
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1995
-------------------------------------
PRO
HISTORICAL ADJUSTMENTS FORMA
<S> <C> <C> <C>
Revenues.................................................. $ 50,496 $ -- $50,496
Cost of revenues.......................................... 39,873 -- 39,873
------- ----- -------
Gross profit............................................ 10,623 -- 10,623
Selling, general and administrative expenses.............. 9,078 -- 9,078
Amortization of goodwill.................................. -- 128 128
------- ----- -------
Income from operations.................................. 1,545 (128) 1,417
Interest expense (income)................................. 537 (561) (24)
------- ----- -------
Income before provision for income taxes and minority
interest............................................. 1,008 433 1,441
Provision for income taxes................................ -- 291 291
Minority interest......................................... 120 (120) --
------- ----- -------
Net income.............................................. $ 888 $ 262 $ 1,150
======= ===== =======
Pro forma net income per share............................ $ 0.09
=======
Pro forma weighted average shares outstanding............. 12,926
=======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
-------------------------------------
PRO
HISTORICAL ADJUSTMENTS FORMA
<S> <C> <C> <C>
Revenues.................................................. $ 61,499 $ -- $61,499
Cost of revenues.......................................... 46,539 -- 46,539
------- ------ -------
Gross profit............................................ 14,960 -- 14,960
Selling, general and administrative expenses.............. 11,086 -- 11,086
Amortization of goodwill.................................. -- 128 128
------- ------ -------
Income from operations.................................. 3,874 (128) 3,746
Interest expense (income)................................. 446 (473) (27)
------- ------ -------
Income before provision for income taxes and minority
interest............................................. 3,428 345 3,773
Provision for income taxes................................ 127 1,317 1,444
Minority interest......................................... 180 (180) --
------- ------ -------
Net income.............................................. $ 3,121 $ (792) $ 2,329
======= ====== =======
Pro forma net income per share............................ $ 0.18
=======
Pro forma weighted average shares outstanding............. 13,307
=======
</TABLE>
F-19
<PAGE> 60
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 6
The Company............................... 11
Use of Proceeds........................... 12
S Corporation Distribution................ 12
Dividend Policy........................... 13
Capitalization............................ 13
Dilution.................................. 14
Selected Financial Data................... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 16
Business.................................. 20
Management................................ 30
Certain Transactions...................... 34
Principal and Selling Shareholders........ 35
Description of Capital Stock.............. 36
Shares Eligible for Future Sale........... 36
Underwriting.............................. 38
Legal Matters............................. 39
Experts................................... 39
Additional Information.................... 39
Index to Financial Statements............. F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
================================================================================
SHARES
[CBSI LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FERRIS, BAKER WATTS
INCORPORATED
, 1997
================================================================================
<PAGE> 61
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 19,341
National Association of Securities Dealers, Inc. fee............... 6,882
Nasdaq National Market listing fee................................. *
Printing expenses.................................................. *
Legal fees and expenses............................................ *
Blue sky fees and expenses......................................... *
Accountants' fees and expenses..................................... *
Miscellaneous...................................................... *
--------
Total......................................................... $750,000
========
</TABLE>
- -------------------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws require the Company to indemnify any director,
officer, former director or officer of the Company or any person who may have
served at the request of the Company as a director or officer of another
corporation in which the Company owns shares of capital stock, or of which it is
a creditor, against reasonable expenses (including attorneys' fees) actually and
necessarily incurred by such person in connection with the defense of any civil,
criminal or administrative action, suit or proceeding in which such person is
made a party or with which such person is threatened by reason of being or
having been or because of any act as a director or officer of the Company within
the course of such person's duties or employment, except in relation to matters
as to which such person is adjudged to be liable for negligence or misconduct in
the performance of such person's duties. The Company may also reimburse any
director or officer for the reasonable costs of settlement of any such action,
suit or proceeding, if it is found by a majority of a committee composed of the
directors not involved in the matter in controversy (whether or not a quorum)
that it was in the interests of the Company that such settlement be made and
that the director or officer was not guilty of negligence or misconduct. The
right of indemnification will extend to the estate, personal representative,
guardian and conservator of any deceased or former director or officer or person
who would have been entitled to indemnification. Such rights of indemnification
and reimbursement will not be deemed exclusive of any other rights to which such
director or officer may be entitled under any statute, agreement, vote of
shareholders, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, the
Company has issued the following securities that were not registered under the
Securities Act:
Pursuant to the terms of a Nonqualified Stock Option Agreement, dated as of
April 25, 1996, Timothy Manney exercised his stock option and the Company on
December , 1996 issued an aggregate of shares of Common Stock for an
aggregate purchase price of $ to Mr. Manney.
II-1
<PAGE> 62
Pursuant to the terms of a Nonqualified Stock Option Agreement, dated as of
April 25, 1996, Douglas Land exercised his stock option and the Company on
December , 1996 issued an aggregate of shares of Common Stock for an
aggregate purchase price of $ to Mr. Land.
Pursuant to an Agreement (the "Acquisition Agreement") among the Company,
JF Electra (Mauritius) Limited ("JF Electra"), CBS Complete Business Solutions
(Mauritius) Limited ("CBS Mauritius") and Rajendra Vattikuti, on July 19, 1996,
JF Electra acquired a 28% interest in CBS Mauritius. On , 1997, JF
Electra converted all of its shares of CBS Mauritius into shares of
Common Stock of the Company.
The sales and issuances of the shares of the Common Stock discussed above
were exempt from registration by virtue of Sections 3(a), 3(b) and 4(2) of the
Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Articles of Incorporation
and Restated Bylaws of the Company defining rights of the holders of Common Stock of
the Company.
4.2 Specimen Stock Certificate.
5.1 Opinion of Camhy Karlinsky & Stein LLP, counsel to the Company, as to the legality
of the shares being registered.
10.1 Employment Agreement dated December 12, 1996 between the Company and Rajendra B.
Vattikuti.
10.2 Employment Agreement dated December 12, 1996 between the Company and Timothy S.
Manney.
10.3 Lease dated October 22, 1992 and its seven amendments dated October 1, 1993, June
14, 1994, June 28, 1994, September 30, 1994, October 14, 1994, August 10, 1995 and
August 6, 1996, between the Company and Orchard Ridge Office Park Limited
Partnership.
10.4 Lease Agreement dated March 26, 1993 between the Company and President of India
through the Development Commissioner and Madras, India Lease Letters No.
MEPZ/Appln/31/84(1) dated September 23, 1986, No. 2 LA (18) 92-EM/2458, No.
2/28/93-EM/251, No. 2/LA (18) 92-EM/8872, No. 8/25/84 - MEPZ dated January 13, 1992,
No. 8/25/84 - MEPZ dated May 14, 1985, No. 2 LA (18) 92-EM dated August 3, 1993 from
Government of India, Ministry of Commerce, Madras Export Processing Zone.
10.5 1996 Stock Option Plan.
10.6 Form of Incentive Stock Option Agreement.
10.7 Nonqualified Stock Option Agreement dated April 25, 1996 between the Company and Dan
Rankin.
10.8 Nonqualified Stock Option Agreement dated April 25, 1996 between the Company and
Douglas S. Land.
10.9 Nonqualified Stock Option Agreement dated April 25, 1996 between the Company and
Timothy S. Manney.
10.10 U.S. License Agreement dated November 3, 1995 between the Company & Andersen
Consulting LLP, as amended.
10.11* Acquisition Agreement, dated as of July 19, 1996 between the Company, JF Electra
(Mauritius) Limited, CBS Complete Business Solutions (Mauritius) Limited and Raj
Vattikuti.
10.12* Shareholders Agreement dated as of July 19, 1996 between JF Electra (Mauritius)
Limited, CBS Complete Business Solutions (Mauritius) Limited, Complete Business
Solutions (India) Private Limited and Raj Vattikuti.
10.13* Agreement by and between the Company and NBD Bank.
</TABLE>
II-2
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11.1 Statement re Computation of Per Share Earnings.
21.1 Subsidiaries of Registrant.
23.1 Consent of Camhy Karlinsky & Stein LLP (included as part of Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 17. UNDERTAKING
The undersigned Registrant hereby undertakes:
(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
(2) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of Prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) of 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective; and
(3) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described above or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Farmington Hills, State of Michigan,
on December 20, 1996.
COMPLETE BUSINESS SOLUTIONS, INC.
By: /s/ RAJENDRA B. VATTIKUTI
------------------------------------
Rajendra B. Vattikuti
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Rajendra B.
Vattikuti and Timothy Manney, or either of them singly, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities to sign any
or all amendments to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, each acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ RAJENDRA B. VATTIKUTI President, Chief Executive Officer December 20, 1996
- ------------------------------------- and Director
Rajendra B. Vattikuti
/s/ TIMOTHY MANNEY Executive Vice President of December 20, 1996
- ------------------------------------- Finance and Administration,
Timothy Manney Treasurer and Director
/s/ FRANK STELLA Director December 20, 1996
- -------------------------------------
Frank Stella
/s/ DOUGLAS LAND Director December 20, 1996
- -------------------------------------
Douglas Land
</TABLE>
II-4
<PAGE> 65
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Complete Business Solutions, Inc. and
subsidiaries included in this Registration Statement and have issued our report
thereon dated April 11, 1996. Our audits were made for the purpose of forming an
opinion on the basic consolidated financial statements as a whole. The schedule
of Valuation and Qualifying Accounts -- Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Detroit, Michigan,
April 11, 1996.
II-5
<PAGE> 66
SCHEDULE II
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
DEDUCTIONS -
BALANCE AT CHARGED TO AMOUNTS BALANCE AT
BEGINNING COSTS AND DEEMED TO BE END OF
PERIOD ENDED DESCRIPTION OF PERIOD EXPENSES UNCOLLECTIBLE PERIOD
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1993......... Allowance for uncollectible accounts $154 $ 76 $ (168) $ 62
December 31, 1994......... Allowance for uncollectible accounts 62 100 (62) 100
December 31, 1995......... Allowance for uncollectible accounts 100 105 (43) 162
September 30, 1996........ Allowance for uncollectible accounts 162 90 (68) 184
</TABLE>
II-6
<PAGE> 67
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Restated Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated Articles of
Incorporation and Restated Bylaws of the Company defining rights of the
holders of Common Stock of the Company.
4.2 Specimen Stock Certificate.
5.1 Opinion of Camhy Karlinsky & Stein LLP, counsel to the Company, as to the
legality of the shares being registered.
10.1 Form of Employment Agreement dated December 12, 1996 between the Company
and Rajendra B. Vattikuti.
10.2 Form of Employment Agreement dated December 12, 1996 between the Company
and Timothy S. Manney.
10.3 Lease dated October 22, 1992 and its seven amendments dated October 1,
1993, June 14, 1994, June 28, 1994, September 30, 1994, October 14, 1994,
August 10, 1995 and August 6, 1996, respectfully between the Company and
Orchard Ridge Office Park Limited Partnership.
10.4 Lease Agreement dated March 26, 1993 between the Company and President of
India through the Development Commissioner and Madras, India Lease
Letters No. MEPZ/Appln/31/84(1) dated September 23, 1986, No. 2 LA (18)
92-EM/2458, No. 2/28/93-EM/251, No. 2/LA (18) 92-EM/8872, No. 8/25/84 -
MEPZ dated January 13, 1992, No. 8/25/84 - MEPZ dated May 14, 1985, No. 2
LA (18) 92-EM dated August 3, 1993 from Government of India, Ministry of
Commerce, Madras Export Processing Zone.
10.5 1996 Stock Option Plan.
10.6 Form of Incentive Stock Option Agreement.
10.7 Nonqualified Stock Option Agreement dated April 25, 1996 between the
Company and Dan Rankin.
10.8 Nonqualified Stock Option Agreement dated April 25, 1996 between the
Company and Douglas S. Land.
10.9 Nonqualified Stock Option Agreement dated April 25, 1996 between the
Company and Timothy S. Manney.
10.10 U.S. License Agreement dated November 3, 1995 between the Company &
Andersen Consulting LLP.
10.11* Acquisition Agreement, dated as of July 19, 1996 between the Company, JF
Electra (Mauritius) Limited, CBS Complete Business Solutions (Mauritius)
Limited and Raj Vattikuti.
10.12* Shareholders Agreement dated as of July 19, 1996 between JF Electra
(Mauritius) Limited, CBS Complete Business Solutions (Mauritius) Limited,
Complete Business Solutions (India) Private Limited and Raj Vattikuti.
11.1 Statement re Computation of Per Share Earnings.
21.1 Subsidiaries of Registrant.
23.1 Consent of Camhy Karlinsky & Stein LLP (included as part of Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by Amendment
<PAGE> 1
EXHIBIT 1.1
Shares
COMPLETE BUSINESS SOLUTIONS, INC.
Common Stock
UNDERWRITING AGREEMENT
__________, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FERRIS, BAKER WATTS, INCORPORATED
As representatives of the
several underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Complete Business Solutions, Inc., a Michigan corporation (the "Company"),
and the shareholders of the Company named in Schedule II hereto (collectively,
the "Selling Shareholders"), severally propose to sell an aggregate of
__________ shares of common stock, par value $.01, of the Company (the "Firm
Shares"), to the several underwriters named in Schedule I hereto (the
"Underwriters"). The Firm Shares consist of __________ shares to be issued and
sold by the Company and __________ outstanding shares to be sold by the Selling
Shareholders. The Selling Shareholders also propose to issue and sell to the
several Underwriters not more than __________ additional shares of common
stock, par value $.01, of the Company (the "Additional Shares"), if requested
by the Underwriters as provided in Section 2 hereof. The Firm Shares and the
Additional Shares are herein collectively called the Shares. The shares of
common stock of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the Common Stock. The
Company and the Selling Shareholders are hereinafter collectively called the
Sellers.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and
<PAGE> 2
regulations of the Commission thereunder (collectively called the "Act"), a
registration statement on Form S-1 including a prospectus relating to the
Shares, which may be amended. The registration statement, as amended at the
time when it becomes effective, including a registration statement (if any)
filed pursuant to Rule 462(b) under the Act increasing the size of the offering
registered under the Act and information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the Registration Statement; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, (i) the Company agrees to issue and sell __________ Firm Shares,
(ii) each Selling Shareholder agrees, severally and not jointly, to sell the
number of Firm Shares set forth opposite such Selling Shareholder's name in
Schedule II hereto, and (iii) each Underwriter agrees, severally and not
jointly, to purchase from each Seller at a price per share of $______ (the
"Purchase Price") the number of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) which bears the same
proportion to the total number of Firm Shares to be sold by such Seller as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) each Selling
Shareholder agrees, severally and not jointly, to sell the number of Additional
Shares set forth opposite such Selling Shareholder's name in Schedule __
hereto, and (ii) the Underwriters shall have the right to purchase, severally
and not jointly, up to an aggregate __________ Additional Shares from such
Selling Shareholders at the Purchase Price. Additional Shares may be
purchased solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. The Underwriters may exercise their
right to purchase Additional Shares in whole or in part from time to time by
giving written notice thereof to the Company within 30 days after the date of
this Agreement. You shall give any such notice on behalf of the Underwriters
and such notice shall specify the aggregate number of Additional Shares to be
purchased pursuant to such exercise and the date for payment and delivery
thereof. The date specified in any such notice shall be a business day (i) no
earlier than the Closing Date (as hereinafter defined), (ii) no later than ten
business days after such notice has been given and (iii) no earlier than two
business days after such notice has been given. If any Additional Shares are
to be purchased, each Underwriter, severally and not jointly, agrees to
purchase from the Company the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) which bears
the same proportion to the total number of Additional Shares to be purchased
from the Company as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I bears to the total number of Firm Shares.
2
<PAGE> 3
The Sellers hereby agree, severally and not jointly, and the Company
shall, concurrently with the execution of this Agreement, deliver an agreement
executed by (i) each of the directors and officers of the Company who is not a
Selling Shareholder and (ii) each shareholder listed on Annex I hereto,
pursuant to which each such person agrees, not to offer, sell, contract to
sell, grant any option to purchase, or otherwise dispose of any common stock of
the Company or any securities convertible into or exercisable or exchangeable
for such common stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any such common stock,
except to the Underwriters pursuant to this Agreement, for a period of 180 days
after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding the
foregoing, during such period (i) the Company may grant stock options pursuant
to the Company's existing stock option plan and (ii) the Company may issue
shares of its common stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof.
3. Terms of Public Offering. The Sellers are advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the effective date of the Registration Statement as
in your judgment is advisable and (ii) initially to offer the Shares upon the
terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment for
the Firm Shares shall be made at 10:00 A.M., New York City time, on the third
or fourth business day unless otherwise permitted by the Commission pursuant to
Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (the "Closing Date") following the date of the initial public offering,
at such place outside the State of New York as you shall designate. The
Closing Date and the location of delivery of and the form of payment for the
Firm Shares may be varied by agreement between you and the Sellers.
Delivery to the Underwriters of, and payment for, any Additional Shares to
be purchased by the Underwriters shall be made at such place as you shall
designate at 10:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of
and the form of payment for such Additional Shares may be varied by agreement
between you and the Company.
Certificates for the Shares shall be registered in such names and issued
in such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or an Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day next preceding
the Closing Date or an Option Closing Date, as the case may be. Certificates
in definitive form evidencing the Shares shall be delivered to you on the
Closing Date or an Option Closing Date, as the case may be, with any transfer
taxes, if any, thereon duly paid by the respective Sellers, for the respective
accounts of the
3
<PAGE> 4
several Underwriters, against payment of the Purchase Price therefor by wire
transfer of same day funds to the order of the applicable Sellers.
5. Agreements of the Company. The Company agrees with you:
(a)To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b)To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become effective and
when any post-effective amendment to it becomes effective, (ii) of any request
by the Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of the suspension of qualification of the Shares
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purposes, and (iv) of the happening of any event during the period
referred to in paragraph (e) below which makes any statement of a material fact
made in the Registration Statement or the Prospectus untrue or which requires
the making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible time.
(c)To furnish to you, without charge, five signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits, and to furnish to you and each Underwriter
designated by you such number of conformed copies of the Registration Statement
as so filed and of each amendment to it, without exhibits, as you may
reasonably request.
(d)Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus of which you shall not
previously have been advised or to which you shall reasonably object; and to
prepare and file with the Commission, promptly upon your reasonable request,
any amendment to the Registration Statement or supplement to the Prospectus
which may be necessary or advisable in connection with the distribution of the
Shares by you, and to use its best efforts to cause the same to become promptly
effective.
(e)Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the reasonable opinion of
counsel for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any amendment
or supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
4
<PAGE> 5
(f)If during the period specified in paragraph (e) any event shall
occur as a result of which, in the reasonable opinion of counsel for the
Underwriters it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if it is
necessary to amend or supplement the Prospectus to comply with any law,
forthwith to prepare and file with the Commission an appropriate amendment or
supplement to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will not in the light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with law,
and to furnish to each Underwriter and to such dealers as you shall specify,
such number of copies thereof as such Underwriter or dealers may reasonably
request.
(g)Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such qualification in effect so long as required
for distribution of the Shares and to file such consents to service of process
or other documents as may be necessary in order to effect such registration or
qualification.
(h)To mail and make generally available to its shareholders as soon as
reasonably practicable an earnings statement covering a period of at least
twelve months after the effective date of the Registration Statement (but in no
event commencing later than 90 days after such date) which shall satisfy the
provisions of Section 11(a) of the Act.
(i)During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal year
to the record holders of its Common Stock a financial report of the Company and
its subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified
by independent certified public accountants, and (ii) to mail and make
generally available as soon as practicable after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the corresponding
periods of the preceding year.
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(j)During the period referred to in paragraph (i), to furnish to you as
soon as available a copy of each report or other publicly available information
of the Company mailed to the holders of Common Stock or filed with the
Commission and such other publicly available information concerning the Company
and its subsidiaries as you may reasonably request.
(k)To pay all costs, expenses, fees and taxes (other than expenses of
counsel to the Underwriters, except as provided in subcvlause (iii) below)
incident to (i) the preparation, printing, filing and distribution under the
Act of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus and all amendments and supplements to
any of them prior to or during the period specified in paragraph (e), (ii) the
printing and delivery of the Prospectus and all amendments or supplements to it
during the period specified in paragraph (e), (iii) the printing and delivery
of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda and all
other agreements, memoranda, correspondence and other documents printed and
delivered in connection with the offering of the Shares (including in each case
any disbursements of counsel for the Underwriters relating to such printing and
delivery), (iv) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of the several states (including in
each case the fees and disbursements of counsel for the Underwriters relating
to such registration or qualification and memoranda relating thereto), (v)
filings and clearance with the National Association of Securities Dealers, Inc.
in connection with the offering, (vi) the listing of the Shares on the Nasdaq
National Market (vii) furnishing such copies of the Registration Statement, the
Prospectus and all amendments and supplements thereto as may be requested for
use in connection with the offering or sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold and (viii) the performance by the
Sellers of their other obligations under this Agreement.
(l)To use its best efforts to maintain the inclusion of the Common
Stock in the Nasdaq National Market (or on a national securities exchange) for a
period of five years after the effective date of the Registration Statement.
(m)To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
6. Representations and Warranties of the Company and the Selling
Shareholders. The Company and the Selling Shareholders represent and warrant
to each Underwriter that:
(a)The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the
Commission.
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<PAGE> 7
(b) (i) Each part of the Registration Statement, when such part became
effective, did not contain and each such part, as amended or supplemented, if
applicable, will 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 not misleading, (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will comply
in all material respects with the Act and (iii) the Prospectus does not contain
and, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c)Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, and each Registration Statement filed
pursuant to Rule 462(b) under the Act, if any, complied when so filed in all
material respects with the Act; and did 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 the light of the circumstances
under which they were made, not misleading.
(d)The Company owns, beneficially and of record, 100% of the capital
stock of CBS Complete Business Solutions (Mauritius) Limited, a company
organized under the laws of Mauritius ("CBSI Mauritius"), which owns 100% of
the capital stock of Complete Business Solutions (India) Private Limited, a
company organized under the laws of India ("CBSI India" and collectively with
CBSI Mauritius, the "Subsidiaries"); all such shares of capital stock are owned
by the Company free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the Subsidiaries.
(e)The Company and each of the Subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to
carry on its business as it is currently being conducted and to own, lease and
operate its properties, and each is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
(f)The purchases by the Company of the minority interests in CBSI
Mauritius [and CBSI India] contemplated by the CBSI Minority Stock Purchase
Agreement, dated __________, 199_ (the "Minority Stock Purchase Agreement"),
between the holders of the minority interests in each of the Subsidiaries, and
the
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<PAGE> 8
Company has been duly and validly consummated and is effective under applicable
law. No consent, approval, authorization or order of any government or
governmental agency, which has jurisdiction over any of the parties to the
Minority Stock Purchase Agreement or over their respective properties is
required for the execution and delivery of the Minority Stock Purchase
Agreement and the consummation of the transactions contemplated thereby, except
for such consents, approvals, authorizations or orders as have been duly and
timely received or obtained. The performance of the Minority Stock Purchase
Agreement and the consummation of the transactions therein contemplated will
not result in a breach or violation of any of the terms or provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence of
indebtedness, indenture, mortgage, deed of trust or loan agreement, or under
any material lease, contract, joint venture or other agreement, in each case to
the best of the Company's knowledge, to which any of the parties to the
Minority Stock Purchase Agreement was a party or by which any of such parties
or their respective properties were bound, (ii) the charter or by-laws of
either of the parties to the Minority Stock Purchase Agreement, or (iii) any
law or, to the best of the Company's knowledge, order of any court which had
jurisdiction over any of the parties to the Minority Stock Purchase Agreement
or over their respective property.
(g)All the outstanding shares of capital stock of the Company and the
Subsidiaries (including the Shares to be sold by the Selling Shareholders) have
been duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights; and the Shares to be issued
and sold by the Company hereunder have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights.
(h)The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained in the
Prospectus.
(i)Neither the Company nor either of the Subsidiaries is in violation
of its respective charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and the
Subsidiaries, taken as a whole, to which the Company or either of the
Subsidiaries is a party or by which it or either of the Subsidiaries or their
respective property is bound.
(j)The execution, delivery and performance of this Agreement, the [S
Corporation Termination Agreement, the Tax Allocation and Indemnification
Agreement] collectively, the "Ancillary Agreements"), compliance by the Company
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and by the Ancillary Agreements will not
require any consent, approval, authorization or other order of any court,
regulatory body, administrative
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<PAGE> 9
agency or other governmental body, except as such may be required under the
securities or Blue Sky laws of the various states, and will not conflict with
or constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which it or any of its subsidiaries
is a party or by which it or any of the Subsidiaries or their respective
property is bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company or the
Subsidiaries, or their respective property.
(k)Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any of their respective property is
the subject, and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated. No contract or document of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement is not so described or
filed as required.
(l)Neither the Company nor either of the Subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), nor any foreign,
federal or state law relating to discrimination in the hiring, promotion or pay
of employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and the Subsidiaries, taken as a whole.
(m)The Company and each of the Subsidiaries has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate its respective properties and
to conduct its business; the Company and each of its subsidiaries has fulfilled
and performed all of its material obligations with respect to such permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit; and, except as
described in the Prospectus, such permits contain no restrictions that are
materially burdensome to the Company or any of its subsidiaries.
(n)Except as otherwise set forth in the Prospectus or such as are not
material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the Company
and each of the Subsidiaries has good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes not yet
due and payable, to all property and assets described in the Registration
Statement as being owned by it. All leases to which the Company or either of
the Subsidiaries is a party are valid and binding
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<PAGE> 10
and no default has occurred or is continuing thereunder, which might result in
any material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries taken as a whole, and
the Company and the Subsidiaries enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with such
exceptions as do not materially interfere with the use made by the Company or
such Subsidiary.
(o)The Company and each of the Subsidiaries maintain reasonably
adequate insurance.
(p)Arthur Andersen LLP are independent public accountants with
respect to the Company as required by the Act.
(q)The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the
Company and the Subsidiaries on the basis stated in the Registration Statement
at the respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) is, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(r)The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own, lease and operate its
respective properties and to conduct its business in the manner described in
the Prospectus, subject to such qualifications as may be set forth in the
Prospectus; the Company and each of the Subsidiaries has fulfilled and
performed all of its material obligations with respect to such permits and no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment
of the rights of the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and, except as described
in the Prospectus, such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries.
(s)Except as disclosed in or specifically contemplated by the
Prospectus, the Company and the Subsidiaries have sufficient intellectual
property rights (including, without limitation, trademarks, trade names, patent
rights, mask works, copyrights and licenses), approvals and governmental
authorizations to conduct their businesses as now conducted; the expiration of
any intellectual property rights (including, without limitation, trademarks,
trade names, patent rights, mask works, copyrights and licenses), approvals or
governmental authorizations would not have a material adverse effect on the
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condition (financial or otherwise), business, results of operations or
prospects of the Company or the Subsidiaries; and the Company has no knowledge
of any infringement by it or the Subsidiaries of intellectual property rights
(including, without limitation, trademarks, trade names, patent rights, mask
works, copyrights and licenses), trade secret or other similar rights of
others, and there is no claim being made against the Company or the
Subsidiaries regarding trademark, trade name, patent, mask work, copyright,
license, trade secret or other infringement of intellectual property rights
which could have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company or on
the operations or prospects of Subsidiaries.
(t)The Company is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(u)No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company.
(v)The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(w)The Company has filed a registration statement pursuant to Section
12(g) of the Exchange Act, to register the Common Stock, has filed an
application to list the Shares on the Nasdaq National Market, and has received
notification that the listing has been approved, subject to notice of issuance.
(x)Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed therein by
Item 404 of Regulation S-K of the Commission.
(y)There is (i) no significant unfair labor practice complaint pending
against the Company or any of its subsidiaries or, to the best knowledge of the
Company, threatened against any of them, before the National Labor Relations
Board or any state or local labor relations board, and no significant grievance
or more significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any of its
subsidiaries or, to the best knowledge of the Company, threatened against any
of them, and (ii) no significant strike, labor dispute, slowdown or stoppage
pending against the Company or any of its subsidiaries or, to the best
knowledge of the Company, threatened against it or any of its subsidiaries
except for such actions specified in clause (i) or (ii) above, which, singly or
in the aggregate could not reasonably be expected to have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(z)All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest,
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assessments, fees and other charges due pursuant to such returns or pursuant to
any assessment received by the Company or any of its subsidiaries have been
paid, other than those being contested in good faith and for which adequate
reserves have been provided.
7. Representations and Warranties of the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to each Underwriter that:
(a)Such Selling Shareholder is the lawful owner of the Shares to be
sold by such Selling Shareholder pursuant to this Agreement and has, and on the
Closing Date (and Option Closing Date, if applicable) will have, good and clear
title to such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
(b)Upon delivery of and payment for such Shares pursuant to this
Agreement, good and clear title to such Shares will pass to the Underwriters,
free of all restrictions on transfer, liens, encumbrances, security interests
and claims whatsoever.
(c)Such Selling Shareholder has, and on the Closing Date will have,
full legal right, power and authority to enter into this Agreement and the
Custody Agreement between the Selling Shareholders and ___________________, as
Custodian (the "Custody Agreement") and to sell, assign, transfer and deliver
such Shares in the manner provided herein and therein, and this Agreement and
the Custody Agreement have been duly authorized, executed and delivered by such
Selling Shareholder and each of this Agreement and the Custody Agreement is a
valid and binding agreement of such Selling Shareholder enforceable in
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited by applicable law.
(d)The power of attorney signed by such Selling Shareholder appointing
_________________ and ________________, or either one of them, as his
attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement and the
Custody Agreement has been duly authorized, executed and delivered by or on
behalf of such Selling Shareholder and is a valid and binding instrument of
such Selling Shareholder enforceable in accordance with its terms, and,
pursuant to such power of attorney, such Selling Shareholder has authorized
_________________ and ________________, or either one of them, to execute and
deliver on his behalf this Agreement and any other document necessary or
desirable in connection with transactions contemplated hereby and to deliver
the Shares to be sold by such Selling Shareholder pursuant to this Agreement.
(e)Such Selling Shareholder has not taken, and will not take, directly
or indirectly, any action designed to, or which might reasonably be expected to,
cause or result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares pursuant to the
distribution contemplated by this Agreement, and other than as permitted by the
Act, the Selling Shareholder has not
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distributed and will not distribute any prospectus or other offering material
in connection with the offering and sale of the Shares.
(f)The execution, delivery and performance of this Agreement by such
Selling Shareholder, compliance by such Selling Shareholder with all the
provisions hereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body
(except as such may be required under the Act, state securities laws or Blue
Sky laws) and will not conflict with or constitute a breach of any of the terms
or provisions of, or a default under, organizational documents of such Selling
Shareholder, if not an individual, or any agreement, indenture or other
instrument to which such Selling Shareholder is a party or by which such
Selling Shareholder or property of such Selling Shareholder is bound, or
violate or conflict with any laws, administrative regulation or ruling or court
decree applicable to such Selling Shareholder or property of such Selling
Shareholder.
(g)Such parts of the Registration Statement under the caption
"Principal and Selling Shareholders" which specifically relate to such Selling
Shareholder do not, and will not on the Closing Date (and any Option Closing
Date, if applicable), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of circumstances under which they were made,
not misleading.
(h)At any time during the period described in paragraph 5(e) hereof, if
there is any change in the information referred to in paragraph 7(g) above, the
Selling Shareholders will immediately notify you of such change.
8. Indemnification. (a) The Company and each Selling Shareholder,
jointly and severally, agree to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to any Underwriters
furnished in writing to the Company by or on behalf of any Underwriter through
you expressly for use therein. Notwithstanding the foregoing, the aggregate
liability of any Selling Shareholder pursuant to the provisions of this
paragraph shall be limited to an amount equal to the aggregate purchase price
received by such Selling Shareholder from the sale of such Selling
Shareholder's Shares hereunder; provided, however, that the foregoing indemnity
agreement with respect to
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any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, claims, damages and liabilities
and judgments purchased Shares, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended and supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or judgment.
(b) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company and the
Selling Shareholders, such Underwriter shall promptly notify the Company and
the Selling Shareholders in writing and the Company and the Selling
Shareholders shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such indemnified party and payment of all
fees and expenses. Any Underwriter or any such controlling person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the
employment of such counsel has been specifically authorized in writing by the
Company, (ii) the Company and the Selling Shareholders shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such Underwriter or such
controlling person and the Company or any Selling Shareholder, as the case may
be, and such Underwriter or such controlling person shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company or the
Selling Shareholders, as the case may be, (in which case the Company and the
Selling Shareholders shall not have the right to assume the defense of such
action on behalf of such Underwriter or such controlling person, it being
understood, however, that the Company and the Selling Shareholders shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all such
Underwriters and controlling persons, which firm shall be designated in writing
by Donaldson, Lufkin & Jenrette Securities Corporation and that all such fees
and expenses shall be reimbursed as they are incurred). A Seller shall not be
liable for any settlement of any such action effected without the written
consent of such Seller but if settled with the written consent of such Seller,
such Seller agrees to indemnify and hold harmless any Underwriter and any such
controlling person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in any case
where the fees and expenses of counsel are at the expense of the indemnifying
party and an indemnified party shall have requested the indemnifying party to
reimburse the indemnified party for such fees and expenses of counsel as
incurred,
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such indemnifying party agrees that it shall be liable for any settlement of
any action effected without its written consent if (i) such settlement is
entered into more than ten business days after the receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall have
failed to reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, any person controlling the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Shareholder and each person, if any, controlling such Selling Shareholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Sellers to each
Underwriter but only with reference to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter through you expressly
for use in the Registration Statement, the Prospectus or any preliminary
prospectus. In case any action shall be brought against the Company, any of
its directors, any such officer or any person controlling the Company or any
Selling Shareholder or any person controlling such Selling Shareholder based on
the Registration Statement, the Prospectus or any preliminary prospectus and in
respect of which indemnity may be sought against any Underwriter, the
Underwriter shall have the rights and duties given to the Sellers (except that
if any Seller shall have assumed the defense thereof) such Underwriter shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Underwriter), and the Company, its directors,
any such officers and any person controlling the Company and the Selling
Shareholders and any person controlling such Selling Shareholders shall have
the rights and duties given to the Underwriter, by Section 8(b) hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Sellers on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Sellers and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or
15
<PAGE> 16
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Sellers and the Underwriters shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Sellers, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Sellers and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, the
Selling Shareholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8(d) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder and
not joint.
(e) Each Seller hereby designates Complete Business Solutions, Inc.,
32605 West Twelve Mile Road, Suite 250, Farmington Hills, Michigan, a Michigan
corporation, as its authorized agent, upon which process may be served in any
action, suit or proceeding which may be instituted in any state or federal
court in the State of New York by any Underwriter or person controlling an
Underwriter asserting a claim for indemnification or contribution under or
pursuant to this Section 8, and each Seller will accept the jurisdiction of
such court in such action, and waives, to the fullest extent permitted by
applicable law, any defense based upon lack of personal jurisdiction or venue.
A copy of any such process shall be sent or given to such Seller, at the
address for notices specified in Section 13 hereof.
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<PAGE> 17
9. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Firm Shares under this Agreement are subject to
the satisfaction of each of the following conditions:
(a)All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b)The Registration Statement shall have become effective not later
than 5:00 P.M. (and in the case of a Registration Statement filed under Rule
462(b) of the Act, not later than 10:00 p.m.), New York City time, on the date
of this Agreement or at such later date and time as you may approve in writing,
and at the Closing Date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
affairs or business prospects, whether or not arising in the ordinary course of
business, of the Company, (ii) since the date of the latest balance sheet
included in the Registration Statement and the Prospectus there shall not have
been any change, or any development involving a prospective material adverse
change, in the capital stock or in the long-term debt of the Company from that
set forth in the Registration Statement and Prospectus, (iii) the Company and
its subsidiaries shall have no liability or obligation, direct or contingent,
which is material to the Company and its subsidiaries, taken as a whole, other
than those reflected in the Registration Statement and the Prospectus and (iv)
on the Closing Date you shall have received a certificate dated the Closing
Date, signed by _______________ and _______________, in their capacities as the
_______________ and _________________ of the Company, confirming the matters
set forth in paragraphs (a), (b), and (c) of this Section 9.
(d)All the representations and warranties of the Selling Shareholders
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you
shall have received a certificate to such effect, dated the Closing Date, from
each Selling Shareholder.
(e)You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Camhy
Karlinsky & Stein LLP, counsel for the Company and the Selling Shareholders, to
the effect that:
(i) the Company [and each of the domestic Subsidiaries] has been
duly incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power and
authority required to carry
17
<PAGE> 18
on its business as it is currently being conducted and to own, lease and
operate its properties;
(ii) the Company [and each of the domestic Subsidiaries] is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company and the Subsidiaries, taken as a whole;
(iii) all of the outstanding shares of capital stock of, or other
ownership interests in, each of the domestic Subsidiaries have been duly and
validly authorized and issued and are fully paid and non-assessable, and are
owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature;
(iv) all the outstanding shares of Common Stock (including the
Shares to be sold by the Selling Shareholders) have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights;
(v) the Shares to be issued and sold by the Company hereunder have
been duly authorized, and when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement, will have been validly issued
and will be fully paid and non-assessable, and the issuance of such Shares is
not subject to any preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company and each of the Selling Shareholders and is a valid
and binding agreement of the Company and each Selling Shareholder enforceable
in accordance with its terms (except as rights to indemnity and contribution
hereunder may be limited by applicable law);
(vii) the authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof
contained in the Prospectus;
(viii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the knowledge of such counsel, pending
before or contemplated by the Commission;
(ix) the statements under the captions "_______________",
"_______________", "_______________", "_______________", "_______________",
"_______________", and "Description of Capital Stock" in the Prospectus and
Items 14 and 15 of Part II of the Registration Statement insofar as such
statements constitute a 18 152206/0013/42094 summary of legal matters documents
or proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings;
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<PAGE> 19
(x) neither the Company nor any of the domestic Subsidiaries is in
violation of its respective charter or by-laws and, to the best of such
counsel's knowledge after due inquiry, neither the Company nor either of the
Subsidiaries is in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any other agreement, indenture or instrument material to the
conduct of the business of the Company and its subsidiaries, taken as a whole,
to which the Company or either of the Subsidiaries is a party or by which it or
either of the Subsidiaries or their respective property is bound;
(xi) the execution, delivery and performance of this Agreement by
the Company and each Selling Shareholder, compliance by the Company and each
Selling Shareholder with all the provisions hereof and the consummation of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the Act
or other securities or Blue Sky laws) and will not conflict with or constitute
a breach of any of the terms or provisions of, or a default under, the charter
or by-laws of the Company or any of its subsidiaries or the organizational
documents of any Selling Shareholder that is not an individual or any
agreement, indenture or other instrument to which the Company or any of its
subsidiaries or any Selling Shareholder is a party or by which the Company or
any of its subsidiaries or any Selling Shareholder or their respective
properties are bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company or any of its
subsidiaries or any Selling Shareholder or their respective properties;
(xii) after due inquiry, such counsel does not know of any legal or
governmental proceeding pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of their respective property is
subject which is required to be described in the Registration Statement or the
Prospectus and is not so described, or of any contract or other document which
is required to be described in the Registration Statement or the Prospectus or
is required to be filed as an exhibit to the Registration Statement which is
not described or filed as required;
(xiii) to the best of such counsel's knowledge, after due inquiry,
neither the Company nor any of its subsidiaries has violated any Environmental
Laws, nor any federal or state law relating to discrimination in the hiring,
promotion or pay of employees nor any applicable federal or state wages and
hours laws, nor any provisions of the Employee Retirement Income Security Act
or the rules and regulations promulgated thereunder, which in each case might
result in any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries, taken as
a whole;
(xiv) the Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities
19
<PAGE> 20
("permits"), including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate its respective properties and
to conduct its business in the manner described in the Prospectus; to the best
of such counsel's knowledge, after due inquiry, the Company and each of its
subsidiaries has fulfilled and performed all of its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company or either of the
Subsidiaries;
(xv) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended;
(xvi) to the best of such counsel's knowledge, after due inquiry, no
holder of any security of the Company has any right to require registration of
shares of Common Stock or any other security of the Company;
(xvii) to the best of such counsel's knowledge, after due inquiry,
except as otherwise set forth in the Registration Statement or such as are not
material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the Company
and each of the Subsidiaries has good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes not yet
due and payable, to all property and assets described in the Registration
Statement as being owned by it;
(xviii) to the best of such counsel's knowledge, after due inquiry,
all leases to which the Company or any of its subsidiaries is a party are
valid and binding and no default has occurred or is continuing thereunder,
which might result in any material adverse change in the business, prospects,
financial condition or results of operation of the Company and the Subsidiaries
taken as a whole, and the Company and the Subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a party as
lessee with such exceptions as do not materially interfere with the use made by
the Company or such subsidiary;
(xix) (1) the Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus and any
supplement or amendment thereto (except for financial statements as to which
no opinion need be expressed) comply as to form in all material respects with
the Act, and (2) such counsel believes that (except for financial statements,
as aforesaid) the Registration Statement and the prospectus included therein
at the time the Registration Statement became effective did 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 not
misleading, and that the Prospectus, as amended or supplemented, if applicable
(except for financial
20
<PAGE> 21
statements, as aforesaid) does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(xx) the Custody Agreement has been duly authorized, executed and
delivered by each Selling Shareholder and is a valid and binding agreement of
such Selling Shareholder enforceable in accordance with its terms;
(xxi) each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than any approval imposed by
the applicable state securities and Blue Sky laws) to sell, assign, transfer and
deliver the Shares to be sold by him in the manner provided in this Agreement
and the Custody Agreement;
(xxii) each Selling Shareholder has good and clear title to the
certificates for the Shares to be sold by him and upon delivery thereof,
pursuant hereto and payment therefor, good and clear title will pass to the
Underwriters, severally, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever; and
(xxiii) the power of attorney signed by each Selling Shareholder
appointing _________________ and ___________, or either of them, as his
attorney-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement has been
duly authorized, executed and delivered by or on behalf of each Selling
Shareholder and are valid and binding instruments of such Selling Shareholder
enforceable in accordance with its terms, and pursuant to such power of
attorney, each of the Selling Shareholders has authorized _________________ and
________________, or either of them, to execute and deliver on their behalf
this Agreement and any other document necessary or desirable in connection with
transactions contemplated hereby and to deliver the Shares to be sold by them
pursuant to this Agreement
In giving such opinion with respect to the matters covered by clause
(xvii) such counsel may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
The opinion of Camhy Karlinsky & Stein LLP described in paragraph (e)
above shall be rendered to you at the request of the Company or one or more of
the Selling Shareholders, as the case may be, and shall so state therein.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of ____________________, counsel for the non-domestic Subsidiaries to the effect
that:
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<PAGE> 22
(i) Each of such Subsidiaries has been duly organized and is validly
existing as a {__________} in good standing under the laws of [India];
(ii) CBSI (India) has _____ {shares} of {type of} stock authorized,
_______ of which are issued and outstanding; all necessary and proper corporate
proceedings have been taken in order to authorize validly such authorized
stock; all outstanding shares of {type of} stock have been duly and validly
issued, are fully paid and non-assessable, have been issued in compliance with
Indian law, were not issued in violation of or subject to any preemptive rights
or other rights to subscribe for or purchase any securities;
(iii) all of the outstanding shares of capital stock of, or other
ownership interests in, each of the foreign Subsidiaries have been duly and
validly authorized and issued and are fully paid and non-assessable, and are
owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature;
(iv) The {describe transactions contemporaneous with offering or
other material transaction} and the consummation of the transactions
contemplated hereby and by the Ancillary Agreements will not result in a breach
of, or constitute a default under, any indenture, mortgage, deed of trust,
trust {constructive or other}, loan agreement, lease, franchise, license or
other agreement or instrument to which any of the Subsidiaries is a party or by
which any of its properties may be bound, or violate any statute, judgment,
decree, order, rule or regulation known to such counsel of any court or
governmental body having jurisdiction over the Subsidiaries or any of their
properties and to the best of such counsel's knowledge, no approval,
authorization, order or consent of any court, regulatory body, administrative
agency or other governmental body is required for {describe transactions
contemporaneous with offering or other material transaction} the execution and
delivery of this Agreement, the Ancillary Agreements or the Shareholders
Agreement or the consummation by the Selling Shareholders of the transactions
contemplated herein and therein, except as have been made or obtained;
(v) The statements set forth in the Prospectus under the headings
"__________," "__________" and "__________," insofar as such statements
constitute a summary of the terms of legal matters, documents, agreements or
other instruments or governmental, regulatory or other legal proceedings, are
fair and accurate in all material respects.
In rendering such opinion, such counsel may rely as to matters of fact, on
certificates of the officers of the Subsidiaries and of governmental officials,
in which case their opinion is to state that they are so doing and that the
Underwriters are justified in 22 152206/0013/42094 relying on such opinions or
certificates and copies of said opinions or certificates are to be attached to
the opinion.
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<PAGE> 23
(g)[Opinion of Immigration counsel.]
(h)You shall have received on the Closing Date an opinion, dated
the Closing Date, of Sachnoff & Weaver, Ltd., counsel for the Underwriters, as
to the matters referred to in clauses (v), (vi) (but only with respect to the
Company), (viii), (ix) (but only with respect to the statements under the
captions "Description of Capital Stock" and "Underwriting") and (xvii) of the
foregoing paragraph (e). In giving such opinion with respect to the matters
covered by clause (xix) such counsel may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification except as specified.
(i)You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Arthur Andersen LLP, independent
public accountants, with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus and substantially in the form and substance of the letter delivered
to you by Arthur Andersen LLP on the date of this Agreement.
(j)The Company and the Selling Shareholders shall not have failed
at or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
(k)You shall have received on the Closing Date, a certificate of
each Selling Shareholder who is not a US Person to the effect that such Selling
Shareholder is not a US Person (as defined under applicable US federal tax
legislation), which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form
or statement specified by Treasury Department regulations in lieu thereof).
(l) You shall have received on the Closing Date a properly
completed and executed United States Treasury Department Form W-9 from each
selling shareholder.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
10. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the later of (i) execution of this Agreement and (ii)
when
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<PAGE> 24
notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Sellers if any of the following has occurred: (i)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, any material adverse change or development
involving a prospective material adverse change in the condition, financial or
otherwise, of the Company and subsidiaries, taken as a whole, or the earnings,
affairs, or business prospects of the Company and its subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business, which would,
in your judgment, make it impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus, (ii) any outbreak or escalation
of hostilities or other national or international calamity or crisis or change
in economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in your
judgment, make it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market or limitation on prices
for securities on any such exchange or Nasdaq National Market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business or operations of the Company or any Subsidiary,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
opinion has a material adverse effect on the financial markets in the United
States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it or they have agreed
to purchase hereunder on such date and the aggregate number of Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase is
not more than one-tenth of the total number of Shares to be purchased on such
date by all Underwriters, each non-defaulting Underwriter shall be obligated
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase, or in
such other proportion as you may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Firm Shares or
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter.
If on the Closing Date or on an Option Closing Date, as the case may be, any
Underwriter or
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<PAGE> 25
Underwriters shall fail or refuse to purchase Firm Shares, or Additional
Shares, as the case may be, and the aggregate number of Firm Shares or
Additional Shares, as the case may be, with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date by all Underwriters and arrangements satisfactory to you and the
applicable Sellers for purchase of such Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the applicable Sellers. In any such case
which does not result in termination of this Agreement, either you or the
Sellers shall have the right to postpone the Closing Date or the applicable
Option Closing Date, as the case may be, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of any such Underwriter under this
Agreement.
11. Agreements of the Selling Shareholders. Each Selling Shareholder
severally agrees with you and the Company:
(a)To pay or to cause to be paid all transfer taxes, if any, with
respect to the Shares to be sold by such Selling Shareholder; and
(b)To take all reasonable actions in cooperation with the Company
and the Underwriters to cause the Registration Statement to become effective
at the earliest possible time, to do and perform all things to be done and
performed under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares pursuant to this Agreement.
12. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to Complete
Business Solutions, Inc., , (b) if to the Selling Shareholders, to [NAME OF
ATTORNEY-IN-FACT] c/o [ADDRESS OF ATTORNEY-IN-FACT] and (c) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Shareholders, the Company, its
officers and directors and of the several Underwriters set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter or by or on behalf of the Sellers, the officers or directors of
the Company or any controlling person of the Sellers, (ii) acceptance of the
Shares and payment for them hereunder and (iii) termination of this Agreement.
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<PAGE> 26
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Sellers to comply with the terms or to
fulfill any of the conditions of this Agreement, the Sellers agree to reimburse
the several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Sellers, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, wihtout reference to the rules coverning the
conflicts of laws.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE> 27
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Shareholders and the several Underwriters.
Very truly yours,
Complete Business Solutions, Inc.
By:
_________________________________
Title:
THE SELLING SHAREHOLDERS NAMED
IN SCHEDULE II HERETO
By: ____________________________
Attorney-in-fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FERRIS, BAKER WATTS, INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: __________________________
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<PAGE> 28
SCHEDULE I
Underwriters Number of Firm Shares
to be Purchased
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FERRIS, BAKER WATTS,
INCORPORATED
________________________
Total
28
<PAGE> 29
SCHEDULE II
Selling Shareholders
Number of Firm
Name Shares Being Sold
________________________
Total
29
<PAGE> 30
ANNEX I
Required Shareholder Lock-Ups
30
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
COMPLETE BUSINESS SOLUTIONS, INC.
The following Restated Articles of Incorporation (i) correctly set forth
the provisions of the Articles of Incorporation originally filed with the
Department of Commerce of the State of Michigan on February 22, 1985, as
amended, and (ii) supersede and further amend the original Articles of
Incorporation and all amendments thereto. The corporation has had no previous
names and its corporation identification number is 095-049.
ARTICLE I
NAME
The name of the corporation is Complete Business Solutions, Inc.
ARTICLE II
PURPOSES
The purpose or purposes for which the corporation is formed is to engage
in any activity within the purposes for which corporations may be formed under
the Business Corporation Act of Michigan.
ARTICLE III
CAPITAL STOCK
SECTION 1. AUTHORIZED SHARES. The total number of shares of all classes
of stock which the corporation has authority to issue is Thirty One Million
(31,000,000) shares without par value, consisting of Thirty Million
(30,000,000) shares of Common Stock (the "Common Stock") without par value and
One Million (1,000,000) shares of Preferred Stock (the "Preferred Stock")
without par value. Except as otherwise provided by law, each outstanding share
of the Common Stock shall be entitled to one vote on each matter submitted to a
vote of the shareholders.
SECTION 2. PREFERRED STOCK. Shares of Preferred Stock may be issued from
time to time in one or more series, and each series shall be separately
designated. Authority is hereby expressly granted to the Board of Directors to
fix, before the issuance of any shares of a particular series, the voting
rights, if any, of such shares, the dividend rate per annum and any
restrictions, limitation and conditions upon the payment of dividends, the
redemption price or prices, if any, and the terms and conditions of redemption,
any sinking fund provisions for the redemption or purchase of the shares of
such series, the terms and conditions on which the shares of such series are
convertible, if they are convertible, the amount or amounts to which the
holders of shares of such series shall be entitled upon the voluntary or
involuntary liquidation, dissolution or winding up of the corporation,
and any other rights, preferences and limitations pertaining to such series as
<PAGE> 2
may be determined by the Board of Directors and are stated in the resolution or
resolutions of the Board of Directors providing for the issue of such series.
ARTICLE IV
RESIDENT AGENT AND REGISTERED OFFICE
The name of the resident agent and the location of the registered office
of the corporation are:
Rajendra B. Vattikuti
32605 W. Twelve Mile Road
Suite 250
Farmington Hills, Michigan 48334
ARTICLE V
DIRECTORS
SECTION 1. CLASSIFICATION OF DIRECTORS. In lieu of the annual election
of all of the directors of the corporation, the directors shall be divided into
three classes, each as nearly equal in number as possible. The term of office
of directors in the first class shall expire at the first annual meeting of
shareholders after their election, that of the second class shall expire at the
second annual meeting after their election, and that of the third class shall
expire at the third annual meeting after their election. At each annual
meeting of shareholders after such classification, a number of directors equal
to the number of the class whose term expires at the time of the meeting shall
be elected to hold office until the third succeeding annual meeting.
SECTION 2. LIMITATION OF LIABILITY. To the full extent permitted by law,
as the same now exists or may be hereafter amended, no director of the
corporation shall be personally liable to the corporation or its shareholders
for damages for breach of the director's fiduciary duty.
2
<PAGE> 3
These Restated Articles of Incorporation were duly adopted by the
shareholders on December 13, 1996 in accordance with the provisions of Section
642, Act 284, Public Acts of 1972, as amended. The necessary number of shares
as required by statute consented in writing to the adoption of these Restated
Articles of Incorporation in accordance with Section 407(1), Act 284, Public
Acts of 1972, as amended. Written notice to shareholders who have not
consented in writing has been given.
Signed this 13th day of December, 1996.
By /s/ Rajendra B. Vattikuti
------------------------------
Rajendra B. Vattikuti, President
3
<PAGE> 4
Please return filed document to:
Arthur Dudley II
Butzel Long
150 W. Jefferson, Suite 900
Detroit, Michigan 48226-4430
4
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
COMPLETE BUSINESS SOLUTIONS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I Shareholders . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Place and Time of Meetings . . . . . . . . . . . . . . . . 1
Section 4. Notice of Meetings. . . . . . . . . . . . . . . . . . . . 2
Section 5. Fixing of Record Dates . . . . . . . . . . . . . . . . . . 2
Section 6. List of Shareholders . . . . . . . . . . . . . . . . . . . 2
Section 7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Organization . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II Board of Directors . . . . . . . . . . . . . . . . . . . . 3
Section 1. Number and Term of Office . . . . . . . . . . . . . . . . 3
Section 2. Qualification . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Removal, Vacancies, and Additional Directors . . . . . . . 4
Section 4. Place of Meeting . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . 5
Section 7. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Compensation of Directors . . . . . . . . . . . . . . . . 5
Section 10. Organization . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Dissents . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III Committees . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Appointment and Powers . . . . . . . . . . . . . . . . . . 6
ARTICLE IV Officers . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Chairman of the Board . . . . . . . . . . . . . . . . . . 7
Section 3. President . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Vice Presidents . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Secretary . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Assistant Secretary and Assistant Treasurer . . . . . . . 8
Section 8. Giving of Bond by Officers . . . . . . . . . . . . . . . . 8
Section 9. Absence or Disability . . . . . . . . . . . . . . . . . . 9
Section 10. Voting Upon Stocks . . . . . . . . . . . . . . . . . . . . 9
Section 11. Compensation of Officers . . . . . . . . . . . . . . . . . 9
ARTICLE V Capital Stock . . . . . . . . . . . . . . . . . . . . . . 9
Section 1. Certificates for Shares . . . . . . . . . . . . . . . . . 9
Section 2. Lost, Stolen or Destroyed Certificates . . . . . . . . . . 10
Section 3. Transfer of Shares . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Checks, Notes, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Loans, Contracts and Conveyances . . . . . . . . . . . . . . . . . . . . 11
Section 5. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Participation by Communication Equipment . . . . . . . . . . . . . . . . 12
Section 8. Indemnification by the Corporation . . . . . . . . . . . . . . . . . . . 13
Section 9. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 10. Dealing with Corporation . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
-ii-
<PAGE> 4
BYLAWS
OF
COMPLETE BUSINESS SOLUTIONS, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders of the
Corporation shall be held at such time and place as shall be determined
by resolution of the Board of Directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of shareholders may be
called at any time by a majority of the Board of Directors acting with
or without a meeting, by the Chairman of the Board of Directors (if such office
is filled), or by the President, and shall be called by the President or
Secretary at the written request of any number of shareholders holding together
not less than 25% of the total outstanding shares of any class of stock of the
Corporation entitled to vote at such meeting. Each such request shall state the
purpose or purposes for which the meeting is to be called.
Upon request in writing delivered either in person or by registered
mail to the President or Secretary by any person or persons entitled to call a
meeting of shareholders, such officer shall forthwith cause to be given to the
shareholders entitled thereto notice of such meeting to be held on a date not
less than ten nor more than 60 days after the delivery or mailing of such
request, as such officer may fix. If such notice is not given within 15 days
after the delivery or mailing of such request, then the person or persons
making such request may call a meeting and give or cause to be given notice in
the manner as provided in the Bylaws.
SECTION 3. PLACE AND TIME OF MEETINGS. Any meeting of shareholders
may be held at the principal office of the Corporation, or at such other
place either within or without the State of Michigan and at such time as shall
be designated in the notice of the meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice of the time, place and
purposes of a meeting of shareholders shall be given, except as
otherwise required by law or provided in the Articles of Incorporation or
Bylaws, not less than ten nor more than 60 days before the date of such meeting
to each shareholder of the Corporation entitled to vote at such meeting, either
personally or by mailing such notice to each such shareholder's address as the
same appears upon the books of the Corporation. No notice need be given of any
adjourned meeting of shareholders if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken and at
the adjourned
<PAGE> 5
meeting only such business is transacted as might have been transacted at the
original meeting. However, if after the adjournment the Board of Directors
fixes a new record date for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record on the new record date
entitled to notice as provided in this Section 4.
SECTION 5. FIXING OF RECORD DATES. The Board of Directors may fix in
advance a date as the record date for the purpose of determining
shareholders entitled to notice of and to vote at a meeting of shareholders or
an adjournment thereof, or to express consent or dissent from a proposal without
a meeting, or for the purpose of determining shareholders entitled to receive
payment of a dividend or allotment of a right, or for the purpose of any other
action. The date shall not be more than 60 nor less than ten days before the
date of the meeting, nor more than 60 days before any other action. This
Section 5 shall not affect the rights between a shareholder and his transferor
or transferee.
SECTION 6. LIST OF SHAREHOLDERS. The Secretary of the Corporation
shall make and certify, or cause any agent having charge of the stock
transfer books for the Corporation to make and certify, a complete list of the
shareholders entitled to vote at a meeting of shareholders or any adjournment
thereof. Such list shall be arranged alphabetically within each class and
series, with the address of and number of shares held by, each shareholder; be
produced at the time and place of the meeting; be subject to inspection by any
shareholder during the whole time of the meeting; and be prima facie evidence as
to the names of the shareholders entitled to examine the list or to vote at the
meeting.
SECTION 7. QUORUM. At any meeting of shareholders, the holders of a
majority in number of all the shares of each class of the capital stock
of the Corporation issued and outstanding, entitled to vote at such meeting,
present in person or represented by proxy, shall constitute a quorum of the
shareholders for all purposes, unless the representation of a larger number of
shares of each class shall be required by law, by the Articles of Incorporation
or by a Bylaw adopted by the shareholders, and in that case the representation
of the number of shares so required shall constitute a quorum.
The shareholders present in person or by proxy at a meeting at which a
quorum is initially present may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. Whether or not a quorum is present, the meeting may be adjourned by a
vote of the shareholders present.
SECTION 8. ORGANIZATION. The Chairman of the Board (if such office
is filled), the President, or a Vice-President, shall call
-2-
<PAGE> 6
meetings of shareholders to order, and shall act as chairman of such meetings.
The Secretary of the Corporation shall act as secretary of all meetings of
shareholders; but in the absence of the Secretary, the chairman may appoint any
person to act as secretary of the meeting.
SECTION 9. PROXIES. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may
authorize other persons to act for such shareholder by proxy. A proxy shall be
signed by the shareholder or such shareholder's authorized agent or
representative. A proxy is not valid after the expiration of three years from
its date unless otherwise provided in the proxy. A proxy is revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
SECTION 10. VOTING. Each outstanding share of capital stock is
entitled to one vote on each matter submitted to a vote, unless otherwise
provided in the Articles of Incorporation. The vote upon any matter as to
which a vote by ballot is required by law, and, upon the demand of any
shareholder, the vote upon any other matter before the meeting, shall be cast
by ballot; otherwise all votes shall be cast orally. Except as to the election
of the Directors and as otherwise provided by law or by the Articles of
Incorporation, when an action is to be taken by a vote of the shareholders it
shall be authorized by a majority of the votes cast by the holders of the
shares entitled to vote thereon. Except as otherwise provided by the Articles
of Incorporation, Directors shall be elected by a plurality of the votes cast
at an election.
Shares of the capital stock of the Corporation belonging to the
Corporation shall not be voted, nor shall any stock so owned be counted in
determining whether a quorum is present at any meeting.
Shares of the capital stock held by a person in a representative or
fiduciary capacity may be voted by such person without a transfer of the shares
into such person's name. Except as otherwise provided by law, shares of the
capital stock held by two or more persons as joint tenants or as tenants in
common may be voted at a meeting of shareholders by any of such persons. A
shareholder whose shares are pledged is entitled to vote the shares unless or
until such shares have been transferred into the name of the pledgee or a
nominee or proxy of such pledgee.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER, CLASSIFICATION AND TERM OF OFFICE. The business,
affairs and property of the Corporation shall be managed and controlled
by a Board of at least one but not more than seven
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<PAGE> 7
Directors, as determined by the Board of Directors or shareholders from time to
time. The Directors shall be divided into three classes, each as nearly equal
in number as possible. The term of office of Directors of the first class
shall expire at the first annual meeting of shareholders after their election,
that of the second class shall expire at the second annual meeting after their
election, and that of the third class shall expire at the third annual meeting
after their election. At each annual meeting of shareholders after such
classification, a number of Directors equal to the number of the class whose
term expires at the time of the meeting shall be elected to hold office until
the third succeeding annual meeting. Directors need not be shareholders of the
Corporation or residents of the State of Michigan. A Director shall hold
office for the term for which such Director is elected and until such
Director's successor is elected and qualified, or until such Director's
resignation or removal. A Director may resign by written notice to the
Corporation.
SECTION 2. QUALIFICATION. Each Director shall qualify either by
accepting the election as a Director in writing, or by acting at a
meeting of the Board of Directors.
SECTION 3. REMOVAL, VACANCIES, AND ADDITIONAL DIRECTORS. The holders
of a majority in number of the shares of the capital stock of the
Corporation outstanding and entitled to vote at an election of Directors may
remove any Director or the entire Board of Directors with or without cause and
fill the vacancy or vacancies thereby created. Vacancies caused by such removal
and not filled by the shareholders at the meeting at which such removal shall
have been made, or any vacancy caused by the death or resignation of any
Director, the creation of additional directorships, or for any other reason, may
be filled by the affirmative vote of a majority of the Directors then in office
though less than a majority of the number of Directors authorized by Section 1
of this Article II; provided, however, that the term of office of any Director
so elected to fill such vacancy shall expire at the next election of Directors
by the shareholders.
SECTION 4. PLACE OF MEETING. The Board of Directors may hold their
meetings in such place or places in the State of Michigan or outside the
State of Michigan as the Board of Directors from time to time shall determine.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time
to time by resolution shall determine. No notice shall be required for any
regular meeting of the Board of Directors; but a copy of every resolution fixing
or changing the time or place of regular meetings shall be delivered personally
or by mail to each Director at least 15 days before the first meeting held
pursuant such resolution.
-4-
<PAGE> 8
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board (if
such office is filled), the President, or by a majority of the Directors then in
office. Notice of the time and place of holding each special meeting shall be
given to each Director at least three days before the meeting. Any and all
business may be transacted at any special meeting.
SECTION 7. NOTICE. Notice of regular or special meetings of the
Board of Directors need not specify the purpose of the meeting or the
business that may be transacted thereat, and may be personally delivered or
transmitted by mail, facsimile or telephone.
SECTION 8. QUORUM. Subject to the provisions of Section 3 of this
Article II, a majority of the members of the Board of Directors then in
office, or a majority of the members of a committee thereof, shall constitute a
quorum for the transaction of business. The vote of a majority of the Directors
present at any meeting of the Board of Directors, or of a committee thereof, at
which a quorum is present, constitutes the action of the Board of Directors or
of the committee, unless the vote of a larger number is required by the Articles
of Incorporation, the Bylaws, or applicable law, or in the case of a committee,
by resolution of the Board of Directors. If at any meeting of the Board of
Directors there be less than a quorum present, a majority of those present may
adjourn the meeting from time to time.
SECTION 9. COMPENSATION OF DIRECTORS. Directors shall not be
entitled to receive compensation for their services except as expressly
authorized by the Board of Directors from time to time.
SECTION 10. ORGANIZATION. The Chairman of the Board (if such office
is filled) shall preside and act as chairman at all meetings of the Board of
Directors. In the event there is no Chairman of the Board or in the absence of
the Chairman of the Board, the President shall so preside, and in the absence
of the President, a chairman shall be elected from the Directors present. If
present, the Secretary of the Corporation shall act as secretary of all
meetings of the Board of Directors; but in the absence of the Secretary, the
chairman may appoint any person to act as secretary of the meeting.
SECTION 11. DISSENTS. A Director who is present at a meeting of the
Board of Directors, or of a committee thereof, at which action on any matter is
taken shall be presumed to have assented to the action unless such Director's
dissent shall be entered in the minutes of the meeting or unless such Director
shall file a written dissent to such action with the person acting as secretary
of the meeting before the adjournment thereof, or shall send such dissent by
registered mail to the Secretary of the Corporation promptly
-5-
<PAGE> 9
after the adjournment of the meeting. It shall be the duty of the Secretary to
record such dissents in or with, as the case may be, the minutes of the meeting
at which the action to which the dissent relates was taken. Such right to
dissent shall not apply to a Director who voted in favor of or consented in
writing to such action. A Director who is absent from a meeting of the Board
of Directors or a committee thereof of which such Director is a member, at
which any action is taken, is presumed to have concurred in the action unless
such Director files a written dissent with the Secretary of the Corporation
within a reasonable time after such Director obtains knowledge of the action.
ARTICLE III
COMMITTEES
SECTION 1. APPOINTMENT AND POWERS. Unless otherwise provided in the
Articles of Incorporation, the Board of Directors may designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation. The Board of Directors may designate one or more Directors as
alternate members of a committee who shall replace an absent or disqualified
member at a meeting of the committee. A majority of any such committee may
determine its action and fix the time and place of its meetings unless otherwise
provided by the Board of Directors, the Articles of Incorporation, the Bylaws,
or law. The Board of Directors shall have the power at any time to fill
vacancies in, to change the size or membership of, and to discharge any such
committee. In the absence or disqualification of a member, or alternate member,
if any, of a committee, the members thereof present at a meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of such absent or disqualified member. A committee, to the
extent provided in the resolution of the Board of Directors, may exercise all
powers and authority of the Board of Directors in management of the business,
affairs and property of the Corporation, subject to any limitations provided by
law or the Articles of Incorporation. Each such committee shall keep a written
record of its acts and proceedings and shall submit such record to the Board of
Directors at such time and from time to time as requested by the Board of
Directors. Failure to submit such record will not invalidate such acts and
proceedings to the extent such acts and proceedings have been carried out by the
Corporation prior to the time the record of such action should have been
submitted to the Board of Directors.
-6-
<PAGE> 10
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Treasurer. All such officers shall be
elected or appointed by the Board of Directors. The Board of Directors may from
time to time elect or appoint other officers including a Chairman of the Board,
one or more Vice-Presidents, Assistant Treasurers and Assistant Secretaries, and
such other officers as the Board of Directors may deem advisable. The Chairman
of the Board (if such office is filled) shall be a member of the Board of
Directors. Any two or more offices may be held by the same person; provided
that no officer shall execute, acknowledge or verify an instrument in more than
one capacity if the instrument is required by law, the Articles of Incorporation
or the Bylaws to be executed, acknowledged or verified by two or more officers.
The term of office of each officer shall be the term for which such officer is
elected or appointed and until such officer's successor is elected or appointed
and qualified, or until such officer's resignation or removal. Each officer
shall qualify either by accepting the election or appointment of an office in
writing, or by acting on behalf of the Corporation in the capacity of such
office. An officer may resign by written notice to the Corporation.
Except where otherwise expressly provided in a written contract duly
authorized by the Board of Directors, all officers, agents and employees shall
be subject to removal at any time, with or without cause, by the Board of
Directors. The election or appointment of an officer for a given term, or a
general provision in the Articles of Incorporation or the Bylaws with respect
to term of office, shall not be deemed to create contract rights.
In addition to the powers, authority and duties of the officers of the
Corporation as set forth in the Bylaws, each officer shall have such other
powers and authority, and perform such other duties, as may be assigned to or
vested in such officer by the Board of Directors from time to time.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board (if
such office is filled) shall preside at all meetings of shareholders
and of Directors. He shall have such other powers and duties as may from time
to time be prescribed by these Bylaws or by resolution of the Board of
Directors.
SECTION 3. PRESIDENT. Subject to the direction of the Board of
Directors, the President shall be the chief executive officer of the
Corporation and as such shall supervise and direct the Corporation's affairs and
the administration thereof by the other executive officers of the Corporation.
The President shall from
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<PAGE> 11
time to time make such reports of the business of the Corporation as the Board
of Directors may require. In the absence or disability of the Chairman of the
Board, or if that office has not been filled, the President shall also perform
the duties and execute the powers and authority of the Chairman of the Board as
provided in the Bylaws and by resolution of the Board of Directors.
SECTION 4. VICE PRESIDENTS. In case the office of President shall
become vacant by death, resignation, or otherwise, or in case of the
absence of the President or of the President's disability to discharge the
duties of such office, such duties shall, for the time being, devolve upon the
Vice President, if any, having seniority by designation, or if not designated,
in order of seniority of election in such office.
SECTION 5. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and the minutes of all meetings of
shareholders in books provided for that purpose. The Secretary shall attend to
the giving or serving of all notices of the Corporation. The Secretary shall
have charge of the stock certificate books, transfer books and stock ledgers and
such other books and papers as the Board of Directors shall direct. The
Secretary shall have charge of the corporate seal, if any. The Board of
Directors shall have power by resolution to delegate any of the powers or duties
of the Secretary to other officers.
SECTION 6. TREASURER. The Treasurer shall be the financial officer
of the Corporation. The Treasurer shall have custody of all the funds
and securities of the Corporation. The Treasurer may endorse on behalf of the
Corporation for collection checks, notes and other obligations and shall deposit
the same to the credit of the Corporation in such bank or banks or depository or
depositories as the Board of Directors may designate. The Treasurer may sign
all receipts and vouchers for payments made to the Corporation. The Treasurer
shall enter or cause to be entered regularly in the books of the Corporation
kept for the purpose full and accurate accounts of all moneys received and paid
on account of the Corporation, and whenever required by the Board of Directors
shall render statements of such accounts. The Board of Directors shall have
power by resolution to delegate any of the powers or duties of the Treasurer to
other officers.
SECTION 7. ASSISTANT SECRETARY AND ASSISTANT TREASURER. The Assistant
Secretary and Assistant Treasurer, having seniority by designation, or
if not designated in order of seniority of election, shall perform the duties
and exercise the powers of the Secretary and Treasurer, respectively, in case of
the absence or disability of the Secretary or Treasurer.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the
Corporation, if required to do so by the Board of Directors, shall
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<PAGE> 12
furnish bonds to the Corporation for the faithful performance of their duties,
in such amounts and with such conditions and security as the Board of Directors
shall require.
SECTION 9. ABSENCE OR DISABILITY. In case of the absence or
disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such period of absence or
disability, the Board of Directors may from time to time delegate the powers and
duties of such officer to any of the officers or any Director, or any person
whom it may select.
SECTION 10. VOTING UPON STOCKS. The Chairman of the Board (if such
office is filled) and the President, or either of them, shall have the full
power and authority on behalf of the Corporation to vote the stock of any other
corporation owned by the Corporation, or in the name of the Corporation to
execute proxies to vote such stock or execute waivers and consents with respect
to such stock or the voting thereof, and to attend meetings of shareholders of
any such other corporations and at each such meeting, such officer or officers
shall possess and may exercise, in person or by proxy, any and all rights,
powers and privileges incident to the ownership of such stock. The Board of
Directors may by resolution from time to time confer like powers upon any other
person or persons.
SECTION 11. COMPENSATION OF OFFICERS. The officers of the
Corporation shall be entitled to receive such compensation for their services
as shall from time to time be determined by the Board of Directors.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES FOR SHARES. The interest of each shareholder
of the Corporation shall be evidenced by certificates for shares of the
capital stock of the Corporation certifying the number of shares represented
thereby and in such form, consistent with the Articles of Incorporation and the
laws of the State of Michigan, as shall be approved by the Board of Directors.
All certificates shall be signed by the Chairman of the Board (if such office is
filled) or the President or a Vice President and may be signed by another
officer of the Corporation, and shall not be valid unless so signed. The
signatures of the officers may be facsimiles if the certificate is countersigned
by a transfer agent or registered by a registrar other than the Corporation
itself or its employee. In case any officer or officers who shall have signed
or whose facsimile signature has been placed upon any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or
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<PAGE> 13
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be issued
and delivered as though the person or persons who signed or whose facsimile
signature has been placed upon such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered
as the same are issued. The name of the shareholder owning the shares
represented thereby with the number of shares and the date of issue thereof
shall be entered on the books of the Corporation.
Except as otherwise provided in the Bylaws, all certificates
surrendered to the Corporation for transfer shall be cancelled, and no new
certificates shall be issued until former certificates for the same number of
shares have been surrendered and cancelled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a person
owning a certificate of stock of the Corporation alleges that it has
been stolen, lost, or destroyed, such person shall file in the office of the
Corporation an affidavit setting forth, to the best of such person's knowledge
and belief, the time, place and circumstances of the loss, theft or destruction,
and, if required by the Board of Directors, a bond of indemnity sufficient in
the opinion of the Board of Directors to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss. Thereupon the
Board of Directors may cause to be issued to such person a new certificate or a
duplicate of the certificate alleged to have been lost, stolen or destroyed.
Upon the ledger of each new or duplicate certificate so issued shall be noted
the fact of such issue and the number, date, and the name of the registered
owner of the lost, stolen or destroyed certificate in lieu of which the new or
duplicate certificate is issued.
SECTION 3. TRANSFER OF SHARES. Shares of the capital stock of the
Corporation shall be transferred on the books of the Corporation by the
holder thereof, in person or by such holder's attorney duly authorized in
writing, upon surrender and cancellation of certificates for the number of
shares to be transferred properly endorsed for transfer, except as provided in
the preceding Section 2 of this Article V. Books for the transfer of shares of
its capital stock shall be kept by the Corporation or by one or more transfer
agents appointed by it.
SECTION 4. REGULATIONS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem appropriate
concerning the issue, transfer and registration of certificates for shares of
the capital stock of the Corporation.
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<PAGE> 14
SECTION 5. LIEN. The Corporation shall have a lien upon all capital
stock and property invested in the Corporation for all debts due it from
the owners thereof.
SECTION 6. DIVIDENDS. Subject to the Articles of Incorporation, the
Board of Directors shall have the power to determine whether any, and if
so, what part, of the funds legally available for the payment of dividends shall
be declared in dividends, and to declare and pay dividends or make other
distributions in cash property or other assets of the Corporation, including
securities of other corporations and of the Corporation, upon outstanding shares
of the capital stock of the Corporation, but only as provided by law.
Subject to the Articles of Incorporation, any dividends declared upon
the capital stock of the Corporation shall be payable on such date or dates as
the Board of Directors shall determine. If the date fixed for the payment of
any dividend shall in any year fall upon a legal holiday, then the dividend
payable on such date shall be paid on the next day not a legal holiday.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall
be in the charge of the Secretary. If and when so directed by the Board of
Directors, a duplicate of the seal may be kept and be used by any officer of the
Corporation designated by the Board of Directors.
SECTION 2. CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, acceptances, notes, bonds or other obligations or orders for
the payment of money shall be signed and if so required countersigned by such
officer or officers of the Corporation or other persons as the Board of
Directors shall from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
determined from time to time by the Board of Directors.
SECTION 4. LOANS, CONTRACTS AND CONVEYANCES. No loans and no
renewals of any loans shall be contracted on behalf of the Corporation
except as authorized by the Board of Directors, or as otherwise provided by
these Bylaws. When so authorized, any officer or agent of the Corporation may
obtain loans and advances for the Corporation from any bank, trust company or
other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory
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<PAGE> 15
notes, bonds or other evidences of indebtedness of the Corporation. When so
authorized, any officer or agent of the Corporation may pledge, mortgage,
hypothecate or transfer, as security for the payment of any and all loans,
advances, indebtedness and liabilities of the Corporation, any and all stocks,
securities and other personal or real property at any time held by the
Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances. The Board of
Directors may from time to time designate the officer or agent who shall have
authority to execute any contract, conveyance, mortgage or other instrument on
behalf of the Corporation. When the execution of an instrument has been
authorized without specification of the executing officer or agent, the
Chairman of the Board (if such office is filled), the President, any Vice
President or the Secretary may execute the same in the name and on behalf of
the Corporation.
SECTION 5. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the Bylaws to any person or persons, a
waiver of such notice in writing signed by the person or persons entitled to the
notice, whether signed before or after the time stated in the notice, shall be
deemed equivalent to such notice. Attendance at any meeting, in person or, in
the case of a shareholder, by proxy, without objection to the manner in which
notice of the meeting has been given, shall be deemed a waiver of notice
thereof; except that where such attendance is for the express purpose of
objecting at the beginning of such meeting to the transaction of any business
because the meeting is not lawfully called or convened, then such attendance
shall not constitute a waiver of notice.
SECTION 6. ACTION WITHOUT MEETING. Any action required or permitted
to be taken pursuant to authorization voted at a meeting of the Board of
Directors or a committee thereof may be taken without a meeting if, before or
after the action, all members of the Board of Directors or of the committee
consent thereto in writing. The consent has the same effect as a vote of the
Board of Directors or of the committee for all purposes.
All written consents shall be promptly filed with the Corporation.
Failure to so file any such written consent shall not affect the validity of
the action authorized or taken thereby.
SECTION 7. PARTICIPATION BY COMMUNICATION EQUIPMENT. A shareholder
or Director may participate in a meeting of shareholders or Directors
(or a committee thereof), respectively, by conference telephone or similar
communications equipment by means of which all persons participating in the
meeting may hear each other, if all participants are advised of the
communications equipment and the names of the participants in the conference are
divulged to all participants.
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<PAGE> 16
Participation in a meeting pursuant to this Section 7 constitutes
presence in person at the meeting.
SECTION 8. INDEMNIFICATION BY THE CORPORATION.
(a) The Corporation shall indemnify to the full extent permitted
by law, as the same exists or may hereafter be amended, every person who was or
is a party, or is threatened to be made a party, to a threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and whether formal or informal, including actions by or in the
right of the Corporation, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or not, against
expenses, including attorneys' fees, judgments, penalties, fines and amounts
paid in settlement incurred by such person in connection with the action, suit
or proceeding; provided, however, that, except as provided in paragraph (b)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred in this Section
shall be a contract right and, subject to the limitations set forth above,
shall include the right, to the fullest extent permitted by law, as the same
exists or may hereafter be amended, to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
(b) If a claim under paragraph (a) of this Section is not paid in
full by the Corporation within 30 days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under applicable law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of
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<PAGE> 17
conduct set forth by applicable law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Notwithstanding anything contained in these Bylaws to the
contrary, the affirmative vote of the holders of at least two thirds of the
voting power of all of the shares of the Corporation entitled to vote generally
in the election of directors, voting together as a single class, shall be
required to alter, amend, adopt any provision inconsistent with or repeal this
Section 8.
SECTION 9. INSURANCE. The Corporation shall have power, to the
extent now or hereafter provided by law, to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such.
SECTION 10. DEALING WITH CORPORATION. A contract or other
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and a domestic or foreign corporation,
firm or association of any type or kind in which one or more of the
Corporation's Directors or officers are directors or officers, or are otherwise
interested, is not void or voidable solely because of such common directorship,
officership or interest, or solely because such Directors are present at the
meeting of the Board of Directors or committee thereof at which such contract
or transaction is acted upon or solely because their votes are counted for such
purpose if any of the following conditions is satisfied:
(a) The contract or other transaction is fair and
reasonable to the Corporation when it is authorized, approved or
ratified;
(b) The material facts as to such Director's
relationship or interest and as to the contract or transaction are
disclosed or known to the Board of Directors or committee thereof
and the Board of Directors or committee thereof authorizes,
approves or ratifies the contract or transaction by a vote
sufficient for the purpose without counting the vote of any common
or interested Director; or
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<PAGE> 18
(c) The material facts as to such Director's
relationship or interest and as to the contract or transaction are
disclosed or known to the shareholders, and they authorize approve
or ratify the contract or transaction.
ARTICLE VII
AMENDMENTS
SECTION 1. AMENDMENT. The shareholders or the Board of Directors
may from time to time amend or repeal the Bylaws or adopt new Bylaws.
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<PAGE> 1
<TABLE>
<S><C>
EXHIBIT 4.2
- ------------------------------------------------------------------------------------------------------------------------------------
See legend on reverse side
INCORPORATED UNDER THE LAWS OF THE STATE OF
MICHIGAN
-------------------------
NUMBER SHARES
* 000 * * 000 *
COMPLETE BUSINESS SOLUTIONS, INC.
AUTHORIZED CAPITAL 30,000,000 SHARES COMMON WITHOUT PAR VALUE
---------- -------------
1,000,000 SHARES PREFERRED WITHOUT PAR VALUE
THIS CERTIFIES THAT * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * is the owner of
-------------------------------------------------------------------------------
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * full paid and non-
- ---------------------------------------------------------------------------------------------------------
assessable SHARES OF THE CAPITAL STOCK OF Complete Business Solutions, Inc.
------------------------------------------------------------------------------------
transferable on the books of the Corporation in person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed.
IN WITNESS WHEREOF the said Corporation has caused this Certificate to be signed by its duly authorized officers and sealed
with the Seal of the Corporation,
this________________________________________day of_______________________________________ A.D. 19_____________
_______________________________________________ ____________________________________________________________
SECRETARY PRESIDENT
</TABLE>
<PAGE> 2
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
FOR VALUE RECEIVED,____ hereby sell, assign and transfer unto ________
____________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably
constitute and appoint _______________________________________ Attorney
to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated ______________________ 19____
In presence of
___________________________ _______________________________________
The Corporation will furnish to a shareholder upon request and without
charge a full statement of the designation, relative rights, preferences
and limitations of the shares of each class authorized to be issued,
and of each series so far as the same have been prescribed. The Board of
Directors has authority to fix, before the issuance of any shares of a
particular series, the rights, preferences and limitations pertaining to
such series.
THIS SPACE IS NOT TO BE
COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 5.1
[CAMHY KARLINSKY & STEIN LLP LETTERHEAD]
December , 1996
Complete Business Solutions, Inc.
32605 West Twelve Road
Suite 250
Farmington Hills, Michigan 48334
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
You have requested our opinion in connection with the above-captioned
Registration Statement on Form S-1 to be filed by Complete Business Solutions,
Inc., a Michigan corporation (the "Company"), with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder (the "Rules"). The
Registration Statement relates to the offering of up to shares
(the "Shares") of common stock (the "Common Stock").
We have examined such records and documents and have made such
examination of law as we considered necessary to form a basis for the opinions
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon such examination, it is our opinion that when there has been
compliance with the Act and applicable state securities laws and when the
Underwriting Agreement, a form of which will be filed as an exhibit to the
Registration Statement, is duly and validly executed and delivered, the Common
Stock, when issued, delivered and paid for in the manner described in such
Underwriting Agreement, will be validly issued, fully paid and nonassessable.
<PAGE> 2
[CAMHY KARLINSKY & STEIN LLP LETTERHEAD]
Complete Business Solutions, Inc.
December 20, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or under the Rules.
Very truly yours,
/s/ Camhy Karlinsky & Stein LLP
--------------------------------
Camhy Karlinsky & Stein LLP
WED:dg
Enclosure
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 12th day of December, 1996, between
COMPLETE BUSINESS SOLUTIONS, INC., a Michigan corporation, having its principal
office at 32605 W. Twelve Mile Road, Suite 250, Farmington Hills,
Michigan 48334 (the "Employer"), and Raj B. Vattikuti, residing at 4692 West
Wickford, Bloomfield Hills, Michigan 48032 (the "Employee").
WITNESSETH:
WHEREAS, the Employer wishes to employ the Employee on the terms and
conditions contained in this Agreement; and
WHEREAS, the Employee is willing to accept such employment.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. EMPLOYMENT
The Employer hereby employs the Employee and the Employee hereby accepts
such employment, on the terms and conditions set forth in this Agreement.
SECTION 2. NATURE AND EXTENT OF DUTIES
2.1 NATURE OF DUTIES. The Employee is engaged as the President and Chief
Executive Officer of the Employer (the "President") and, in addition, the
Employee shall perform such services consistent with his position as shall be
assigned to him from time to time by the Employer.
2.2 EXTENT OF DUTIES. During the term of his employment as President, the
Employee shall devote his full time and attention to the service of the Employer
and shall do all in his power to promote, develop and extend the business of the
Employer and its interests and welfare and, except with the permission of the
Board of Directors of the Employer, shall not engage in any other business
activity whatsoever during that time, except that he may devote a portion of
his time to personal or philanthropic affairs and interests if these do not
interfere with the performance of his duties and
<PAGE> 2
obligations to the Employer under this Agreement. Notwithstanding the
foregoing, if the Employer shall give the Employee a notice under Section 5.1
of its refusal to extend or renew this Agreement, the duties of the Employee
shall be reduced to allow him a reasonable amount of time during business hours
to pursue alternative employment opportunities.
SECTION 3. COMPENSATION
3.1 COMPENSATION. As full compensation for the services to be
rendered by the Employee as President under this Agreement, the Employer shall
pay to the Employee, and the Employee shall accept, an annual salary of
$350,000, payable in equal bi-weekly installments, plus the bonus described in
Section 3.2 and the fringe benefits described in Section 4. The salary payable
to the Employee under this Agreement shall be reviewed by the Compensation
Committee of the Board of Directors of the Employer annually and the Employer
may, in its sole discretion, increase such salary from time to time, but in no
event shall such salary be reduced without the written consent of the Employee.
3.2 BONUS. In addition to the salary provided in Section 3.1, the
Employer shall pay the Employee an annual bonus in an amount determined by the
Compensation Committee of the Board of Directors up to a maximum amount equal
to the salary provided in Section 3.1.
3.3 COMPENSATION AFTER CHANGE IN CONTROL. If, after a Change in
Control (as defined in Section 5.3), the Employee does not terminate his
employment as President, he shall receive as full compensation for the services
to be rendered as President for the remainder of the then current term of this
Agreement: (1) a salary not less than his salary in effect immediately prior to
the Change in Control; (2) an annual bonus equal to the greater of his most
recent annual bonus or the annual bonus received immediately prior to his most
recent annual bonus; and (3) the fringe benefits provided in Section 4.
3.4 COMPENSATION AND BENEFITS ON AND AFTER TERMINATION.
Notwithstanding the limitations contained in Section 5.2, upon termination of
the employment of the Employee as President for any reason other than Willful
Misconduct (as defined in Section 5.3), he shall receive payment of his
compensation described in this Section 3 (including salary, bonus and fringe
benefits) accrued to the
2
<PAGE> 3
date of such termination in addition to the compensation provided for in
Section 5.2.3. In addition, at any time during the five year period following
any such termination that the Employee shall not be a full time employee of
another employer, the Employer shall provide the Employee with the use of a
suitable office, appropriate secretarial services, the health, sickness and
accident benefits provided in Section 4.2, and the automobile provided for in
Section 4.6. The amount of the Employee's annual bonus which shall be deemed
to be accrued in the event of such termination shall be the amount computed as
if the Employee had remained employed for an entire year, prorated to the date
of termination. Upon termination of the employment of the Employee for
Willful Misconduct, he shall receive payment of his compensation described in
this Section 3 (but not including any bonus) accrued to the date of such
termination.
SECTION 4. FRINGE BENEFITS
4.1 VACATIONS. The Employee shall be entitled each year to a paid
vacation of not less than four weeks or such greater amount as shall be
determined in accordance with the policy of the Employer established from time
to time.
4.2 BENEFIT PLANS. The Employee shall be entitled to receive
health, sickness and accident benefits for himself and his family not less
favorable than those currently provided and under such retirement or other
plans or policies as the Employer shall provide from time to time.
4.3 DEATH BENEFITS AND LIFE INSURANCE. If the employment of the
Employee as President under Section 2 shall terminate because of the death of
the Employee, the Employer shall continue to pay the Employee's then current
salary to a beneficiary designated by the Employee for a period of 180 days
after his death. The Employer may, in its discretion and its expense, obtain
insurance upon the life of the Employee, the proceeds of which shall be payable
to the Employer. The Employee hereby consents to the issuance of any such
insurance.
4.4 DISABILITY. If the employment of the Employee as President is
terminated because of the Disability (as defined in Section 5.3) of the
Employee, he shall receive Disability benefits equal to two year's salary plus
the amount of the most recent annual bonus paid to the Employee. Such benefits
shall be paid in 24 equal monthly amounts at the end of each month after such
Disability commences
3
<PAGE> 4
4.5 EXPENSES. Upon presentation of appropriate documentation, the
Employer shall reimburse the Employee for travel, entertainment and other
expenses necessarily incurred by the Employee in connection with the
performance of his duties under this Agreement.
4.6 AUTOMOBILE. The Employer shall provide the Employee with an
automobile suitable for the chief executive officer of a company such as the
Employer and the Employer shall pay the cost of acquiring, insuring and
maintaining such vehicle.
SECTION 5. TERM, TERMINATION AND BENEFITS PAYABLE UPON TERMINATION
5.1 TERM. Subject to the provisions for termination contained in
Sections 5.2, the term of this Agreement shall begin upon the effective date of
the first registration statement under the Securities Act of 1933, as amended,
covering the offer and sale by the Employer of its Common Stock to the public
and shall end on December 31, 2001, provided that, such registration statement
shall become effective no later than June 30, 1997 and further provided that,
unless either party shall notify the other in writing of such party's refusal
to extend or renew this Agreement, effective January 1, 1998 and the first day
of January each year thereafter, the term of this Agreement shall be extended
and renewed automatically for one additional year, so that the term of this
Agreement upon such renewal shall always be five years.
5.2 GROUNDS FOR TERMINATION. This Agreement shall continue in
effect as provided in Section 5.1 hereof, provided that (a) the Employee's
employment as President shall automatically terminate upon the death,
resignation or retirement of the Employee; (b) the Employee's employment as
President may be terminated at the option of the Employer because of the
Disability (as defined in Section 5.3) or Willful Misconduct (as defined in
Section 5.3) of the Employee; (c) the Employee's employment as President may be
terminated at the option of the Employer for such other cause (including
without limitation a Change in Control), or without cause, without breach of
this Agreement; (d) if the Employer shall make any material changes in the
duties of the Employee without his consent, or if the Employer shall relocate
its principal office more than 30 miles from its current location, the
Employee shall have the right by
4
<PAGE> 5
giving written notice to the Employer within 30 days after the occurrence of
either of such events, to terminate his employment as President; and (e) upon
consummation of a Change in Control (as defined in Section 5.3), the Employee
shall have the right, in his sole discretion, for a period of 12 months after
such Change in Control shall have occurred, to terminate his employment as
President or continue his employment as President for the remainder of the then
current term of this Agreement subject to the terms and conditions of this
Agreement (without prejudice to the right of the Employer to terminate his
employment as President pursuant to the foregoing clause (c)) No termination of
employment by the Employee pursuant to the foregoing clauses (d) or (e) shall be
deemed to be a resignation or retirement.
5.2.1 DEATH, RESIGNATION OR RETIREMENT. If the employment of the
Employee as President is automatically terminated under Section 5.2(a) because
of the death, resignation or voluntary retirement of the Employee, he, his
beneficiaries, his estate or his personal representative shall be entitled to
receive (1) in any of the foregoing events, the benefits, if any, provided under
the plans described in Section 4.2 or by law and the accrued compensation
described in Section 3.4; and (2) in the case of the death of the Employee, the
death benefits and life insurance described under Section 4.3. Except as
provided in this Section 5.2.1 in any of such events, no further payments shall
be due or made and no further obligations of the Employer shall exist under this
Agreement.
5.2.2 DISABILITY OR WILLFUL MISCONDUCT. If the employment of the
Employee as President is terminated at the option of the Employer under Section
5.2(b) because of the Disability or Willful Misconduct of the Employee, he shall
be entitled to receive: (1) in the case of Disability, all of the benefits
described under Sections 3 and 4 prior to the determination of Disability and
the disability benefits described under Section 4.4 after the determination of
Disability; and (2) in the case of Willful Misconduct, no further payments shall
be due or made and no further obligations of the Employer shall exist under this
Agreement.
5.2.3 BENEFITS PAYABLE FOR TERMINATION WITHOUT CAUSE, CHANGE IN
DUTIES OR OFFICE LOCATION, OR CHANGE IN CONTROL. If the employment of the
Employee as President is terminated by the Employer for any cause or
5
<PAGE> 6
without cause under Section 5.2(c), or if the employment of the Employee is
terminated by the Employee under Section 5.2(d) because of a change in his
duties or the location of Employer's principal office or a Change in Control:
5.2.3.1 the Employee shall receive in a lump sum an amount equal
to 2.99 times (1) his salary in effect immediately prior to such termination,
plus (2) a bonus equal to the greater of his most recent annual bonus or the
annual bonus received immediately prior to his most recent annual bonus;
5.2.3.2 the right of the Employee to exercise any outstanding
options or other rights to acquire any capital stock of the Employer, shall be
accelerated and become immediately exercisable; and
5.2.3.3 the right of the Employee to receive any compensation
measured by the price of any capital stock of the Employer, and any other rights
to compensation or benefits under this Agreement which are contingent upon the
continued employment of the Employee shall become immediately exercisable or
receivable by the Employee to the extent they would have become exercisable or
receivable by the Employee if he had remained employed by the Employer for the
balance of the then current term of this Agreement.
5.3 CERTAIN DEFINITIONS. For the purposes of this Agreement, the
following capitalized terms shall have the meanings given to them below:
5.3.1 "DISABILITY" shall mean the Employee's physical or mental
incapacity, for a cumulative period of 180 days in any consecutive 12 month
period during the term of this Agreement, to render the services to be performed
by him under this Agreement; provided however, that if, at the expiration of a
cumulative period of 90 days during which the Employee has been so physically or
mentally incapacitated, the certificate of a qualified physician of good
standing acceptable to both parties shall have been obtained by the Employer
certifying that in the opinion of such physician such physical or mental
incapacity is permanent, such incapacity also shall be deemed to be
"Disability".
5.3.2 A "CHANGE IN CONTROL" shall have occurred:
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(1) if the Employer shall sell all or substantially all of its assets
to a third party;
(2) if the Employer shall merge or consolidate into or with another
corporation and the Employer shall not be the surviving corporation or persons
owning a majority of the voting securities of the Employer prior to such
transaction shall not continue to own a majority of the voting securities of the
corporation surviving such transaction; or
(3) if any "person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as modified in
Sections 13(d) and 14(d) of the Exchange Act), other than the Employer or any of
its subsidiaries, any employee benefit plan of the Employer or the Employee or
any of his affiliates (a "Person") becomes the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Employer representing more than 20% of the outstanding shares of common stock of
the Employer and such Person's beneficial ownership level then exceeds the
percentage of the Employer's outstanding shares then owned by the Employee and
any of his affiliates.
5.3.3 "WILLFUL MISCONDUCT" shall mean the habitual neglect or habitual
failure by the Employee to perform his duties under this Agreement, the
dishonesty of the Employee in any material respect in connection with the
performance of his duties or if the Employee shall be convicted of a felony.
SECTION 6. CONFIDENTIAL INFORMATION
The Employee acknowledges that as an employee of the Employer
he occupies a position of trust and confidence and agrees that, during and after
the term of this Agreement, he will treat as confidential and will not, without
written authorization from the Employer, directly or indirectly disclose to any
person, firm association or corporation or use for his own benefit or gain, any
information, plans, products, or customer or supplier lists, which are
confidential to the Employer, or any trade secrets or confidential material or
information of the Employer or any corporation or other entity controlled by,
controlling or under common control with the Employer (an "Affiliate"). The
Employee agrees to deliver to return to the Employer, upon termination or
expiration
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of the term of this Agreement or as soon thereafter as possible, all
confidential documents or confidential written information prepared by the
Employee or furnished to him by the Employer or any Affiliate during the term
of this Agreement.
SECTION 7. RESTRICTIVE COVENANT
The Employee agrees that, during any period in which he is employed as an
employee of or during any period in which he is receiving compensation from the
Employer under this Agreement and for a period of one year after the cessation
of such compensation, he shall not compete in any way anywhere in the world with
the Employer's business, including but not limited to acting as an agent,
employee, sole proprietor, partner, creditor, investor or consultant of, or
otherwise participating in, directly or indirectly, an enterprise, organization
or entity which is, or which become within any such period, competitive with the
business of the Employer. The ownership by the Employee of up to 1% of the
publicly traded debt or equity securities of a corporation shall not by itself
be deemed to be a violation of the foregoing prohibition.
SECTION 8. GENERAL PROVISIONS
8.1 EQUITABLE RELIEF. The Employee acknowledges and agrees that a breach
by him of the provisions of Section 6 or 7 will cause the Employer irreparable
injury and harm which cannot be compensated by money damages. The Employee,
therefore, expressly agrees that the Employer shall be entitled to injunctive or
other equitable relief to prevent a breach of any provision of Section 7 or 8 of
this Agreement and to secure their enforcement in addition to any other remedies
which may be available to the Employer.
8.2 SEVERABILITY. In case any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained in
this Agreement shall not in any way be affected or impaired thereby.
8.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of Michigan without giving effect to any conflicts of
laws rules.
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<PAGE> 9
8.4 ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party, whether by operation of law or otherwise unless such
assignment shall be consented to by the other party in writing.
8.5 NOTICES. Any notices or other communications required or permitted
under this Agreement shall sufficiently be given if sent by registered or
certified mail to the parties at their respective addresses listed in the
preambles of this Agreement, or other such address as shall be furnished in
writing by either party to the other. Any such notice or communication shall be
deemed to have been given as of the date so mailed.
8.6 AMENDMENT: ENTIRE AGREEMENT. This Agreement may not be amended,
modified or superseded except by an agreement in writing signed by both the
Employer and the Employee. This Agreement contains the entire agreement of the
parties with respect to its subject matter and supersedes any prior
negotiations, agreement or understanding between the parties with respect to
such subject matter.
8.7 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8.9 LEGAL EXPENSES. The Employer shall pay the reasonable legal expenses
of the Employee incurred in connection with any dispute under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed with effect from the day and year first above written.
COMPLETE BUSINESS SOLUTIONS, INC.
By_______________________________________
Timothy Manney, Executive Vice President
Finance and Administration
EMPLOYEE
_________________________________________
Raj B Vattikuti
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<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 12th day of December, 1996, between
COMPLETE BUSINESS SOLUTIONS, INC., a Michigan corporation, having its principal
office at 32605 W. Twelve Mile Road, Suite 250, Farmington Hills, Michigan
48334 (the "Employer"), and Timothy S Manney, residing at 44749 Ford Way,
Novi, Michigan 48032 (the "Employee").
WITNESSETH:
WHEREAS, the Employer wishes to employ the Employee on the terms and
conditions contained in this Agreement, and
WHEREAS, the Employee is willing to accept such employment.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows.
SECTION 1. EMPLOYMENT
The Employer hereby employs the Employee and the Employee hereby
accepts such employment, on the terms and conditions set forth in this
Agreement.
SECTION 2. NATURE AND EXTENT OF DUTIES
2.1 NATURE OF DUTIES. The Employee is engaged as the Executive Vice
President Finance and Administration of the Employer (the "Executive Vice
President") and, in addition, the Employee shall perform such services
consistent with his position as shall be assigned to him from time to time by
the Employer
2.2 EXTENT OF DUTIES. During the term of his employment as
Executive Vice President, the Employee shall devote his full time and attention
to the service of the Employer and shall do all in his power to promote,
develop and extend the business of the Employer and its interests and welfare
and, except with the permission of the Board of Directors of the Employer,
shall not engage in any other business activity whatsoever during that time,
except that he may devote a portion of his time to personal or
<PAGE> 2
philanthropic affairs and interests if these do not interfere with the
performance of his duties and obligations to the Employer under this Agreement.
Notwithstanding the foregoing, if the Employer shall give the Employee a notice
under Section 5.1 of its refusal to extend or renew this Agreement, the duties
of the Employee shall be reduced to allow him a reasonable amount of time
during business hours to pursue alternative employment opportunities.
SECTION 3. COMPENSATION
3.1 COMPENSATION. As full compensation for the services to be
rendered by the Employee as Executive Vice President under this Agreement, the
Employer shall pay to the Employee, and the Employee shall accept, an annual
salary of $180,000, payable in equal bi-weekly installments, plus the bonus
described in Section 3.2 and the fringe benefits described in Section 4. The
salary payable to the Employee under this Agreement shall be reviewed by the
Compensation Committee of the Board of Directors of the Employer annually and
the Employer may, in its sole discretion, increase such salary from time to
time, but in no event shall such salary be reduced, without the written consent
of the Employee.
3.2 BONUS. In addition to the salary provided in Section 3.1, the
Employer shall pay the Employee an annual bonus, in an amount determined by the
Compensation Committee of the Board of Directors up to a maximum amount equal
to 60% of the salary provided in Section 3.1.
3.3 COMPENSATION AFTER CHANGE IN CONTROL. If, after a Change in
Control (as defined in Section 5.3), the Employee does not terminate his
employment as Executive Vice President, he shall receive as full compensation
for the services to be rendered as Executive Vice President for the remainder
of the then current term of this Agreement (1) a salary not less than his
salary in effect immediately prior to the Change in Control; (2) an annual
bonus equal to the greater of his most recent annual bonus or the annual bonus
received immediately prior to his most recent annual bonus; and (3) the fringe
benefits provided in Section 4.
3.4 COMPENSATION AND BENEFITS ON AND AFTER TERMINATION.
Notwithstanding the limitations contained in Section 5.2, upon termination of
the employment of the Employee as Executive
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<PAGE> 3
Vice President for any reason other than Willful Misconduct (as defined in
Section 5.3), he shall receive payment of his compensation described in this
Section 3 (including salary, bonus and fringe benefits) accrued to the date of
such termination in addition to the compensation provided for in Section 5.2.3.
In addition, at any time during the five year period following any such
termination that the Employee shall not be a full time employee of another
employer, the Employer shall provide the Employee the health, sickness and
accident benefits provided in Section 4.2. The amount of the Employee's annual
bonus which shall be deemed to be accrued in the event of such termination
shall be the amount computed as if the Employee had remained employed for an
entire year, prorated to the date of termination. Upon termination of the
employment of the Employee for Willful Misconduct, he shall receive payment of
his compensation described in this Section 3 (but not including any bonus)
accrued to the date of such termination.
SECTION 4. FRINGE BENEFITS
4.1 VACATIONS. The Employee shall be entitled each year to a paid
vacation of not less than four weeks or such greater amount as shall be
determined in accordance with the policy of the Employer established from time
to time.
4.2 BENEFIT PLANS. The Employee shall be entitled to receive
health, sickness and accident benefits for himself and his family not less
favorable than those currently provided and under such retirement or other
plans or policies as the Employer shall provide from time to time.
4.3 DEATH BENEFITS AND LIFE INSURANCE. If the employment of the
Employee as Executive Vice President under Section 2 shall terminate because
of the death of the Employee, the Employer shall continue to pay the Employee's
then current salary to a beneficiary designated by the Employee for a period of
180 days after his death. The Employer may, in its discretion and at its
expense, obtain insurance upon the life of the Employee, the proceeds of which
shall be payable to the Employer. The Employee hereby consents to the issuance
of any such insurance.
4.4 DISABILITY. If the employment of the Employee as Executive Vice
President is terminated because of the Disability (as defined in Section 5.3)
of the Employee, he shall receive Disability benefits equal to two year's
salary plus the amount of the most recent annual bonus paid to
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<PAGE> 4
the Employee. Such benefits shall be paid in 24 equal monthly amounts at the
end of each month after such Disability commences.
4.5 EXPENSES. Upon presentation of appropriate documentation, the
Employer shall reimburse the Employee for travel, entertainment and other
expenses necessarily incurred by the Employee in connection with the performance
of his duties under this Agreement.
SECTION 5. TERM, TERMINATION AND BENEFITS PAYABLE UPON TERMINATION
5.1 TERM. Subject to the provisions for termination contained in Sections
5.2, the term of this Agreement shall begin upon the date of this Agreement and
shall end on December 31, 1999, provided that unless either party shall notify
the other in writing of such party's refusal to extend or renew this Agreement,
effective January 1, 1998 and the first day of January each year thereafter, the
term of this Agreement shall be extended and renewed automatically for one
additional year, so that the term of this Agreement upon such renewal shall
always be three years.
5.2 GROUNDS FOR TERMINATION. This Agreement shall continue in effect as
provided in Section 5.1 hereof, provided that: (a) the Employee's employment
as Executive Vice President shall automatically terminate upon the death,
resignation or retirement of the Employee; (b) the Employee's employment as
Executive Vice President may be terminated at the option of
the Employer because of the Disability (as defined in Section 5.3) or Willful
Misconduct (as defined in Section 5.3) of the Employee, (c) the Employee's
employment as Executive Vice President may be terminated at the option of the
Employer for such other cause (including without limitation a Change in
Control), or without cause, without breach of this Agreement; (d) if the
Employer shall make any material changes in the duties of the Employee without
his consent, or if the Employer shall relocate its principal office more than
30 miles from its current location, the Employee shall have the right, by
giving written notice to the Employer within 30 days after the occurrence of
either of such events, to terminate his employment as Executive Vice President;
and (e) upon consummation of a Change in Control (as defined in Section 5.3),
the Employee shall have the right, in his sole discretion, for a period of 12
months after such Change in Control shall have
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occurred, to terminate his employment as Executive Vice President or continue
his employment as Executive Vice President for the remainder of the then
current term of this Agreement subject to the terms and conditions of this
Agreement (without prejudice to the right of the Employer to terminate his
employment as Executive Vice President pursuant to the foregoing clause (c)). No
termination of employment by the Employee pursuant to the foregoing clauses (d)
or (e) shall be deemed to be a resignation or retirement.
5.2.1 DEATH, RESIGNATION OR RETIREMENT. If the employment of the
Employee as Executive Vice President is automatically terminated under Section
5.2(a) because of the death, resignation or voluntary retirement of the
Employee, he, his beneficiaries, his estate or his personal representative shall
be entitled to receive: (1) in any of the foregoing events, the benefits, if
any, provided under the plans described in Section 4.2 or by law and the
accrued compensation described in Section 3.4; and (2) in the case of the death
of the Employee, the death benefits and life insurance described under Section
4.3. Except as provided in this Section 5.2.1. in any of such events; no
further payments shall be due or made and no further obligations of the
Employer shall exist under this Agreement,
5.2.2 DISABILITY OR WILLFUL MISCONDUCT. If the employment of the
Employee as Executive Vice President is terminated at the option of the
Employer under Section 5.2(b) because of the Disability or Willful Misconduct
of the Employee, he shall be entitled to receive: (1) in the case of Disability,
all of the benefits described under Sections 3 and 4 prior to the determination
of Disability and the disability benefits described under Section 4.4 after the
determination of Disability; and (2) in the case of Willful Misconduct, no
further payments shall be due or made and no further obligations of the
Employer shall exist under this Agreement.
5.2.3 BENEFITS PAYABLE FOR TERMINATION WITHOUT CAUSE, CHANGE IN
DUTIES OR OFFICE LOCATION, OR CHANGE IN CONTROL. If the employment of the
Employee as Executive Vice President is terminated by the Employer for any
cause or without cause under Section 5.2(c), or if the employment of the
Employee is terminated
5
<PAGE> 6
by the Employee under Section 5.2(d) because of a change in his duties or the
location of the Employer's principal office or a Change in Control:
5.2.3.1 the Employee shall receive in a lump sum an amount equal to 2.50
times (1) his salary in effect immediately prior to such termination, plus (2)
a bonus equal to the greater of his most recent annual bonus or the
annual bonus received immediately prior to his most recent annual bonus;
5.2.3.2 the right of the Employee to exercise any outstanding options or
other rights to acquire any capital stock of the Employer, shall be accelerated
and become immediately exercisable; and
5.2.3.3 the right of the Employee to receive any compensation measured by
the price of any capital stock of the Employer, and any other rights to
compensation or benefits under this Agreement which are contingent upon the
continued employment of the Employee shall become immediately exercisable or
receivable by the Employee to the extent they would have become exercisable or
receivable by the Employee if he had remained employed by the Employer for the
balance of the then current term of this Agreement.
5.3 CERTAIN DEFINITIONS. For the purposes of this Agreement, the
following capitalized terms shall have the meanings given to them below:
5.3.1 "DISABILITY" shall mean the Employee's physical or mental
incapacity, for a cumulative period of 180 days in any consecutive 12 month
period during the term of this Agreement, to render the services to be performed
by him under this Agreement; provided however, that if, at the expiration of a
cumulative period of 90 days during which the Employee has been so physically or
mentally incapacitated, the certificate of a qualified physician of good
standing acceptable to both parties shall have been obtained by the Employer
certifying that in the opinion of such physician such physical or mental
incapacity is permanent, such incapacity also shall be deemed to be
"Disability".
6
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5.3.2 A "CHANGE IN CONTROL" shall have occurred:
(1) if the Employer shall sell all or substantially all of its
assets to a third party;
(2) if the Employer shall merge or consolidate into or with another
corporation and the Employer shall not be the surviving corporation or persons
owning a majority of the voting securities of the Employer prior to such
transaction shall not continue to own a majority of the voting securities of
the corporation surviving such transaction; or
(3) if any "person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as modified in
Sections 13(d) and 14(d) of the Exchange Act), other than the Employer or any
of its subsidiaries, any employee benefit plan of the Employer or Raj Vattikuti
or any of his affiliates (a "Person") becomes the "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of
securities of the Employer representing more than 20% of the outstanding shares
of common stock of the Employer and such Person's beneficial ownership level
then exceeds the percentage of the Employer's outstanding shares then owned by
Raj Vattikuti and any of his affiliates.
5.3.3 "WILLFUL MISCONDUCT" shall mean the habitual neglect or
habitual failure by the Employee to perform his duties under this Agreement,
the dishonesty of the Employee in any material respect in connection with the
performance of his duties or if the Employee shall be convicted of a felony.
SECTION 6. CONFIDENTIAL INFORMATION
The Employee acknowledges that as an employee of the Employer he occupies a
position of trust and confidence and agrees that, during and after the term of
this Agreement, he will treat as confidential and will not, without written
authorization from the Employer, directly or indirectly disclose to any person,
firm, association or corporation or use for his own benefit or gain, any
information, plans, products, or customer or supplier lists, which are
confidential to the Employer, or any trade secrets or confidential material or
information of the Employer or any corporation or other entity controlled by,
controlling or under common control with the Employer (an
7
<PAGE> 8
"Affiliate"). The Employee agrees to deliver or return to the Employer, upon
termination or expiration of the term of this Agreement or as soon thereafter
as possible, all confidential documents or confidential written information
prepared by the Employee or furnished to him by the Employer or any Affiliate
during the term of this Agreement.
SECTION 7. RESTRICTIVE COVENANT
The Employee agrees that, during any period in which he is employed as an
employee of or during any period in which he is receiving compensation from the
Employer under this Agreement and for a period of one year after the cessation
of such compensation, he shall not compete in any way anywhere in the world with
the Employer's business, including but not limited to acting as an agent,
employee, sole proprietor, partner, creditor, investor or consultant of, or
otherwise participating in, directly or indirectly, an enterprise, organization
or entity which is, or which becomes within any such period, competitive with
the business of the Employer. The ownership by the Employee of up to 1% of the
publicly traded debt or equity securities of a corporation shall not by itself
be deemed to be a violation of the foregoing prohibition.
SECTION 8. GENERAL PROVISIONS
8.1 EQUITABLE RELIEF. The Employee acknowledges and agrees that a breach
by him of the provisions of Section 6 or 7 will cause the Employer irreparable
injury and harm which cannot be compensated by money damages. The Employee,
therefore, expressly agrees that the Employer shall be entitled to injunctive
or other equitable relief to prevent a breach of any provision of Section 7 or
8 of this Agreement and to secure their enforcement in addition to any other
remedies which may be available to the Employer.
8.2 SEVERABILITY. In case any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained in
this Agreement shall not in any way be affected or impaired thereby.
8.3 GOVERNING LAW. This Agreement shall be construed under and governed
by the laws of the State of Michigan without giving effect to any conflicts of
laws rules.
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8.1 ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party, whether by operation of law or otherwise, unless such
assignment shall be consented to by the other party in writing.
8.5 NOTICES. Any notices or other communications required or permitted
under this Agreement shall sufficiently be given if sent by registered or
certified mail to the parties at their respective addresses listed in the
preambles of this Agreement, or other such address as shall be furnished in
writing by either party to the other. Any such notice or communication shall
be deemed to have been given as of the date so mailed.
8.6 AMENDMENT; ENTIRE AGREEMENT. This Agreement may not be amended,
modified or superseded except by an agreement in writing signed by both the
Employer and the Employee. This Agreement contains the entire agreement of
the parties with respect to its subject matter and supersedes any prior
negotiations, agreement or understanding between the parties with respect to
such subject matter.
8.7 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
8.9 LEGAL EXPENSES. The Employer shall pay the reasonable legal expenses
of the Employee incurred in connection with any dispute under this Agreement.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed with effect from the day and year first above written
COMPLETE BUSINESS SOLUTIONS, INC.
By
---------------------------------
Raj B. Vattikuti, President
and Chief Executive Officer
EMPLOYEE
---------------------------------
Timothy S. Manney
10
<PAGE> 1
EXHIBIT 10.3
LEASE
THIS LEASE (the "Lease"), is made this 22nd day of October, 1992 by and
between ORCHARD RIDGE OFFICE PARK LIMITED PARTNERSHIP, a Michigan Limited
Partnership, whose address is 32605 W. 12 Mile Rd., Suite 290, Farmington
Hills, Michigan 48334 ("Landlord") and COMPLETE BUSINESS SOLUTIONS, INC., a
Michigan Corporation, whose address is 30500 Northwestern Highway, Farmington
Hills, Michigan 48334 ("Tenant").
WITNESSETH
1. Leased Premises. Landlord, in consideration of the rents to be paid
and the covenants and agreements to be performed by Tenant, does hereby lease
unto Tenant, and Tenant hereby rents from Landlord, certain premises (the
"Leased Premises") situated in the City of Farmington Hills, Oakland County,
Michigan, more particularly described as he 2nd floor of the West-wing of the
office building (the "Building") located at 32605 W. 12 Mile, Farmington Hills,
Michigan as shown on the floor plan attached as Exhibit A to this Lease,
together with a non-exclusive right to the use of the parking and common
facilities, which shall be furnished by Landlord in substantial accordance with
Exhibit B attached to this Lease, in common with Landlord and the other tenants
and occupants of the Building, and their agents, employees, customers,
licensees, and invites. Landlord expressly reserves the right to build an
additional structure or structures on the parking areas presently surrounding
the Building, subject to furnishing sufficient parking, as required by
applicable building ordinances, through parking structure or otherwise. Tenant
hereby agrees not to interfere with such construction in any manner whatsoever.
Landlord shall have the right to make reasonable rules and regulations governing
the use of the parking and common facilities. It is acknowledged and agreed
between the parties to this Lease that the Leased Premises consists of 18,901
square feet which constitutes sixteen percent (16%) percent of the Building. As
used in this Lease, "Tenant's Share" means the percentage equal to the
percentage of square feet that the Leased Premises occupies in the Building, as
set in the preceding sentence.
2. Term. The Leased Premises are leased for a term (the "Lease Term") to
commence on December 14, 1992 and to end on May 13, 1998 unless the Lease Term
is terminated sooner as provided in this Lease. Except as otherwise provided in
Paragraph 2.B., if the Landlord fails to deliver the Leased Premises on the
Commencement Date (as defined below) because the Leased Premises are not then
ready for occupancy, or because the previous occupant of the Leased Premises is
holding over, or for any other cause beyond Landlord's control, Landlord shall
not be liable to Tenant for any damages as a result of Landlord's delay in
delivering the Leased Premises, and the Commencement Date and the Expiration
Date of the Lease Term shall be postponed by that period of time equal to the
difference between the date set forth above as being the Commencement Date and
<PAGE> 2
the date that the Leased Premises are ready for Tenants occupancy. The dates
upon which the Lease Term shall commence and end pursuant to this Paragraph 2.
are referred to in this Lease as the "Commencement Date" and the "Expiration
Date", respectively.
2B. Delivery Date. Landlord hereby agrees to deliver to Tenant that
portion of the Leased Premises described in Exhibit A-2, said Exhibit being
hereby made a part hereof, on or before January 5, 1993. In the event Landlord
fails to deliver possession as defined herein of that portion of the Leased
Premises shown in Exhibit A-2 hereof by January 5, 1993, and such delay in
delivery is not caused or occasioned by any acts or interference by Tenant or
anyone acting on Tenants behalf or any change in scope in the Tenant's
improvements as set forth in Exhibit A attached hereto, then and in such event,
Landlord agrees to make available to Tenant, at no charge, approximately 1,000
square feet of contiguous space located in the Building with at lease one (1)
220 volt outlet. Landlord further agrees that it shall deliver substantially
complete to Tenant, as defined herein, the balance of the Leased Premises on or
before February 15, 1993. In the event Landlord fails to deliver the balance
of the Leased Premises by February 15, 1993 and provided any delay in delivery
of possession, as required herein is not caused or occasioned by any acts or
interference by Tenant, or anyone acting on Tenants behalf, Tenant shall be
entitled, to liquidated damages, the sum of Seventy Five ($75.00) Dollars per
day until such time as Landlord delivers possession of the Leased Premises.
This shall be Tenants sole remedy for any breach under the provisions of this
Paragraph.
For purposes of this provision, said premises shall be deemed
substantially complete and Landlord shall have satisfied his obligations
hereunder when Landlord has, in accordance with Exhibit A, completed
construction of interior walls, installed carpeting, provided adequate
electrical and lighting, installed ceiling tiles, painted walls, and provided
heating and cooling.
3. Rent. Tenant shall pay to the Landlord as rent (the "Rent") for
the Leased Premises during the Lease Term the sum of $1,240,989.75, payable in
advance in monthly installments in the respective amounts set forth in the
Schedule of Rents attached to this Lease, on or before the first day of each
and every month. Such payments shall be made at the office of the Landlord as
designated in this Lease or at such other place as Landlord may designate in a
notice to Tenant. If the Lease Term commences on a day other than the first
day of a calendar month or ends on a day other than the last day of a calendar
month, the Rent for such first or last fractional month shall be the percentage
of the monthly Rent equal to the percentage that the number of days in such
fractional month bears to the total number of days in the calendar month. If
Tenant takes possession of the Leased Premises prior to the Commencement Date,
Tenant shall pay Landlord Rent at
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<PAGE> 3
the monthly rate specified in this Paragraph 3 for each full month it is in
possession of the Leased Premises prior to the Commencement Date and pro-rata
for any such fractional month.
Rent and all other charges due under this Lease shall promptly be paid
without prior demand therefor. Tenant shall pay to Landlord a late charge
equal to Four (4%) percent of each Rent payment and other charge which is not
received by Landlord on the date when due; provided, however, Tenant shall be
allowed to pay rent without penalty by the tenth (10th) of the month two (2)
times per calendar year. In addition, Tenant shall pay to Landlord interest on
such overdue amount at the rate of nine (9%) percent per annum from the date
such payment is due to the date such payment is made in full, unless the
charging of such rate of interest shall then be illegal under applicable law,
in which case, such overdue amounts shall bear interest at the highest rate
then permitted by law from the date such payment is due to the date such
payment is made in full. Landlord shall have no obligation to accept less than
the full amount of any installment of Rent, late charges and other charges
which are due and owing by Tenant to Landlord, and if Landlord accepts less
than the full amounts due and owing, Landlord may apply the sums received
toward any of Tenant's delinquent obligations in Landlord's discretion. No
endorsement or statement on any check, no statement contained in any letter
accompanying any check or payment, nor any acceptance of any check or payment
by Landlord of less than the full amount due and owing to Landlord, under this
Lease, shall constitute an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to its right to recover the balance of
such amount or to pursue any other legal remedy. Notwithstanding anything
contained herein to the contrary, Tenant's obligation to pay rent herein shall
not commence until such time as the entire Leased Premises are substantially
complete as defined in Paragraph 2.B. hereof.
4. Use and Occupancy. The Leased Premises shall be used and occupied
for office and incidental purposes, and for no other purpose without the
written consent of Landlord, which consent shall not be unreasonably withheld.
Tenant shall not commit or suffer to be committed any material waste upon the
Leased Premises, nor shall Tenant use the Leased Premises for any purpose in
violation of any law, municipal ordnance, or regulation, nor shall Tenant
perform any acts or carry on any practices which may injure the Leased Premises
or the Building or be a nuisance, disturbance or menace to the other tenants
of the Building. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business or any other activity
carried on by or through Tenant in the leased Premises, then Tenant, at its
sole cost and expense, shall procure and thereafter maintain such license or
permit, and submit the same to Landlord upon request, and, at its sole cost and
expense, Tenant shall at all times comply
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with the requirements of each such license or permit. Notwithstanding any
provision of this Lease to the contrary, Tenant shall not be required to comply
with any applicable law that requires any alteration, maintenance, restoration,
repair, remediation, or cleanup of the Leased Premises unless required as a
result of the Tenant's acts or specific and particular use of the Leased
Premises.
5. Repairs and Maintenance. At the Expiration Date, Tenant shall
surrender the Leased Premises in good condition, reasonable wear and tear and
repairs required to be made of Landlord excepted. Except as otherwise provided
in this Lease, Landlord shall promptly make all necessary repairs and
replacements to the Building and the Leased Premises, including all repairs and
replacements to the Building and the Leased Premises required as a result of
damages caused by fire, casualty, or other acts of God; provided, however, and
notwithstanding anything to the contrary contained in this Lease, that Tenant
shall make all repairs and replacements to the Leased Premises, at its sole
cost and expense (except to the extent that insurance proceeds are recovered
therefor), to the extent such damage was caused by its willful act or
negligence or the willful act or negligence of its employees, servants, agents,
licensees, or invites. Tenant shall, within ten (10) business days, give
written notice to Landlord in case of fire or accidents (whether to person or
property) in or to the Leased Premises or in the Building.
All repairs to the Leased Premises or to the Building required to be
made by Tenant under this Lease shall be made at Tenant's sole cost and
expense, at such times and in such manners as Landlord may reasonably
designate, and only by such contractors or mechanics as approved by Landlord
and only in accordance with such plans as are mutually agreed upon by the
parties hereto. If Tenant refuses or neglects to commence or complete such
repairs promptly and adequately, Landlord may, but shall not be required to do
so, make and complete said repairs and Tenant shall pay the cost thereof to
Landlord upon demand. Tenant shall keep the building free from any liens
arising out of any work performed, materials provided or other obligations
incurred with relation to any construction, improvements or repairs by Tenant.
Tenant agrees to bond against or discharge any such lien (including without
limitation any construction, mechanic's or materialman's lien) within ten (10)
days after a written request therefore by Landlord. Tenant shall give Landlord
at least two (2) days written notice prior to commencing or causing to commence
any work on the Leased Premises. Tenant shall, within ten (10) days of demand
therefor, reimburse Landlord any and all costs and expenses, including
reasonable attorney fees, which may be incurred by Landlord by reason of the
filing of any such lien and/or the removal of same.
If the Landlord, in its reasonable discretion, deems it
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necessary, or if the Landlord shall be required by any governmental authority
to repair, alter, remove, reconstruct or improve any part of the Building which
might in any way substantially affect Tenants use or enjoyment of the Building,
(unless the same results from Tenant's willful and/or negligent acts or change
from current mode of operation, in which event Tenant shall make all such
repairs, alterations and improvements), then the same shall be made by Landlord
with reasonable and prompt dispatch, and, except as otherwise provided in this
Lease, absent substantial interference, should the making of such repairs,
alterations or improvements cause any interference with Tenant's use of the
Leased Premises, such interference shall not relieve Tenant from the
performance of its obligations under this Lease.
If the parties hereto shall deem it reasonably necessary, or if the
Landlord shall be required by any governmental authority to repair, alter,
remove, reconstruct or improve any part of the Leased Premises (unless the same
results from Tenant's negligent and/or willful acts or damage of mode of
operation, in which event Tenant shall make all such repairs, alterations and
improvements), then the same shall be made by Landlord with reasonable and
prompt dispatch, and, except as otherwise provided in this Lease, absent
substantial interference, should the making of such repairs, alterations or
improvements interfere with Tenant's use of the Leased Premises, such
interference shall not relieve Tenant from the performance of its obligations
under this Lease.
5A. Right of Offset. Landlord's right to Rent and other charges are
due from Tenant on time without any right to offset except that in the event the
Leased Premises suffer material physical damage caused by water in the Leased
Premises, unless the same results from Tenant's willful and/or negligent acts,
and after Tenant's reasonable determination that such a condition exists, Tenant
will promptly notify Landlord, in writing, that such a condition exists and will
allow Landlord access to the Leased Premises to make any repairs which Landlord,
in its sole discretion deems necessary. In the event that the Landlord shall
fail to make such repairs promptly after receiving written notice of the
occurrence of such damages, then Tenant shall have the option to make reasonable
repairs to the Leased Premises and may, upon submission of proof of payment of
same, deduct the cost of such repairs from rent due Landlord hereunder. In
the event Tenant exercises its option hereunder Tenant specifically agrees that
it will use only reputable contractors, reasonably acceptable to Landlord, that
it will obtain three bids from contractors and will accept the most beneficial
bid, and that any repair work will be completed to the reasonable satisfaction
of the landlord. Tenant further agrees that it will promptly pay for such
repairs and keep the building free from any liens arising out of any work
performed, materials provided or other obligations incurred with relation to
any construction, improvements or repairs as provided in Paragraph
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5 hereinabove.
6. Alterations. Tenant shall not make any alterations, additions or
improvements to the Leased Premises (whether or not the same may be structural
in nature) without Landlord's prior written consent, which consent shall not be
unreasonably withheld, and all alterations, additions or improvements made by
either Landlord or Tenant to the Leased Premises, except movable office
furniture, equipment and trade fixtures installed at Tenant's expense, shall be
the property of Landlord and remain upon and be surrendered with the Leased
Premises at the expiration of the Lease Term. All alterations shall be done
only at such times and in such manner as Landlord may reasonably designate, and
only by such contractors or mechanics as are approved by Landlord, which
approval shall not be unreasonably withheld.
7. Assignment and Subletting. Tenant shall not assign, transfer,
mortgage or in any other way transfer any interest in this Lease or sublet all
or any part of the Leased Premises without the prior consent of Landlord, which
consent shall not be unreasonably withheld. Any assignment, transfer (including
transfers by operation of law or otherwise), hypothecation, mortgage or
subletting without such written consent shall give Landlord the right to
terminate this Lease and to re-enter and repossess the Leased Premises. No
permissible assignment; sublease, mortgages or other transfer of any interest in
this Lease shall (i) release Tenant from any of its obligations under this
Lease, (ii) be valid unless each such assignee, sublessee, mortgagee, or other
transferee agrees in writing to be bound to, and assume, all of the terms,
covenants and conditions of this Lease, a copy of which shall be delivered to
Landlord, or (iii) be valid unless and until Landlord receives written notice
that the assignment, sublease, mortgage or other transfer has occurred. Any
change in the control of fifty (50%) percent or more of the capital or voting
stock of Tenant, unless such an exchange is a result of a public offering of
common stock or other voting securities or instruments, after the date of this
Lease, irrespective of whether such change is the result of one or more sale or
other transfer of issued and outstanding shares of such stock and/or the
issuance of new shares of such stock, or any change in the control of fifty
(50%) percent or more of Tenant's partnership interests, if Tenant is a
co-partnership or a limited partnership, irrespective of whether such change in
control is the result of one or more sale or other transfer of partnership
interests, shall be deemed to be an assignment of this Lease within the meaning
of this Paragraph. As used in this Paragraph, the word "Tenant" shall also mean
any entity which is a guarantor of Tenant's obligations under this Lease, and
the prohibition hereof shall be applicable to any sales or transfers of the
stock or partnership interest of said guarantee.
8. Insurance and Indemnification.
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a. Landlord, and its agents and employees, shall not be responsible for or
liable to Tenant, or any of Tenant's employees, agents, invites or licensees,
for any loss or damage that may be occasioned by or through acts or omissions of
any other tenant in the Building or such tenant's agents, employees,
invites or licensees.
b. Tenant shall indemnify and hold Landlord, and every Mortgagee of
Landlord, harmless from any liability for damages to any person or property in,
on or about the Leased Premises from any cause whatsoever, except for damages
which are the result of the willful act or negligence of the Landlord or its
employees, invitees, agents or licensees, and Tenant shall procure and keep in
effect during the entirety of the Lease Term public liability and property
damage insurance protecting Landlord, every Mortgagee of Landlord, and Tenant,
having minimum limits of liability, set forth in the Schedule of Rents attached
to this Lease. Landlord, and any other party designated by Landlord, shall be
named as an additional insured in all policies of insurance required of Tenant
pursuant to this Lease, and all such policies shall contain a clause that the
insurer will not cancel or change the insurance without first giving Landlord
thirty (30) days prior written notice. The insurance required under this
Paragraph shall be with an insurance company or companies approved by Landlord,
which approval shall not be unreasonably withheld, delayed or conditioned, and a
copy of the paid-up policy evidencing such insurance shall be delivered to
Landlord within ten (10) days after request by Landlord. If Tenant fails to
procure such insurance, or any renewals thereof, Landlord may, at its option,
procure the same for the account of Tenant, and the cost thereof shall be paid
to Landlord as additional Rent upon receipt by Tenant of bills therefor.
c. It is understood and agreed that all personal property of any kind and
nature whatsoever stored or maintained upon or in the Leased Premises shall be
stored or maintained at the sole risk, expense, and responsibility of Tenant,
unless such damage is cause by willful or negligent acts of Landlord, licensees
agents or employees.
d. Landlord and Tenant hereby release each other and their respective
agents and employees from any and all liability to each other or anyone claiming
through or under them by way of subrogation or otherwise, for any loss or damage
to property caused by or resulting from risks insured against under fire or
extended coverage casualty insurance carried by the parties to this Lease and in
force at the time of any such loss or damage; provided, however, that this
release shall be applicable and in force and effect only with respect to loss or
damage occurring during such time as the releaser's policies contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair such policies or prejudice the right of the releaser to
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recover thereunder. Landlord and Tenant each agree that it will require its
insurance carriers to include in its policies such a clause or endorsement, and
will include such a clause only so long as it is included without additional
cost, or if additional cost is chargeable therefor, only so long as Landlord
and Tenant pays their own such additional costs. Each party will notify the
other of any such additional cost, and such other party at its election may pay
the same, but shall not be obligated to do so.
9. Destruction. If the Leased Premises are damaged or destroyed in
whole or in part by fire or other casualty during the Lease Term, Landlord
shall, at its cost and expense (unless such damage or destruction is caused by
the willful act or negligence of the Tenant or any of its employees, agents, or
invitees, which in such case, and notwithstanding anything to the contrary
contained in this Lease, all such repair or restoration shall be done at
Tenant's sole cost and expense), repair and restore the same to tenantable
condition with reasonable dispatch, unless Landlord, pursuant to this
Paragraph, shall elect not to rebuild the Building or elect to terminate this
Lease, and Rent shall abate entirely if the entire Leased Premises are
untenantable, and proportionately for the portion rendered untenantable, in the
case of partial untenantability, until such time as the Leased Premises are
restored to tenantable condition. If the Leased Premises cannot be restored to
tenantable condition within a period of one hundred fifty (150) days, Landlord
and Tenant shall each have the right to terminate this Lease upon written
notice to the other and any Rent paid for any period subsequent to the date of
such termination shall be refunded to Tenant. If the Leased Premises are
damaged due to fire or other casualty, Landlord shall remove such of Tenant's
furniture and other belongings from the Leased Premises as may be required in
order to repair and restore the Leased Premises. Landlord and Tenant shall
mutually agree to judge the extent of the untenantability of the Leased
Premises and of the time required for the repair and restoration of the same.
Notwithstanding any other provisions of this section, if more than
thirty-five (35%) percent of the Building is destroyed by fire or other
casualty, Landlord shall have the right to terminate this Lease upon written
notice to Tenant, in which event any Rent paid for any period subsequent to the
date of such destruction shall be refunded to Tenant. If Landlord elects
not to terminate this Lease, Landlord agrees to proceed in a diligent manner to
repair any damage caused by such fire or casualty.
Any repair or restoration of the Leased Premises pursuant to this
Paragraph shall be effected in accordance with the working drawings originally
approved by Landlord. Unless otherwise provided herein, Landlord shall
not be required to repair or replace any of Tenants' trade fixtures,
furnishings, equipment or other property or improvements.
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10. Eminent Domain. If the whole or any substantial part of the Lease
Premises or the Building shall be taken by any public authority under the power
of eminent domain, then the Lease Term shall cease with respect to the part so
taken on the date that possession of such part shall be required for public use,
and any Rent paid for any period subsequent to such date shall be refunded to
Tenant, and Landlord and Tenant shall each have the right to terminate this
Lease upon written notice to the other, which notice shall be delivered within
sixty (60) days following the date notice is received of such taking. If neither
Landlord nor Tenant terminates this Lease as provided in this Paragraph,
Landlord shall make the necessary repairs to the Leased Premises and the
Building to render and restore the same to a complete architectural unit, and
Tenant shall continue in possession of the portion of the Leased Premises not
taken under the power of eminent domain under the same terms and conditions of
this Lease, except that the Rent shall be reduced in direct proportion to the
amount of the Leased Premises so taken. All damages awarded for any such taking
shall belong to, and be the property of, Landlord, whether such damages be
awarded as compensation for diminution in value of the leasehold or to the fee
of the premises; provided, however, Landlord shall not be entitled to any
portion of the award made to Tenant for loss of business, removal and
reinstallation of fixtures, or moving expenses.
11. Rules and Regulations. Tenant agrees to comply with and observe all
rules and regulations set forth on Exhibit E attached to this Lease. Tenant's
failure to keep and observe any such rules and regulations shall constitute a
breach of the terms of this Lease in the same manner as if they were contained
in this Lease as covenants.
12. Quiet Enjoyment. Landlord warrants that Tenant, upon paying Rent,
and all other charges under this Lease and in observing and in performing each
and every material covenant, term and condition of this Lease, shall peacefully
and quietly hold, occupy and enjoy the Leased Premises through the Lease Term,
without molestation or hindrance by Landlord or any person whomsoever, subject,
nevertheless, to the terms and conditions of this Lease and any mortgages to
which this Lease is subordinate. Landlord hereby agrees to use its best
efforts to obtain a non-disturbance agreement from its lender, whereby if its
lender forecloses on the building, it shall not disturb the tenants use of such
space.
13. Estoppel Certificate, Attornment and Subordination. Tenant agrees to
execute in recordable form and deliver to Landlord, or any person designated by
Landlord, an Estoppel Certificate in the form attached hereto as Exhibit F.
If any proceedings are brought for the foreclosure of, or in
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the event of the conveyance by deed in lieu of foreclosure of, or in the event
of exercise of the power of sale under any mortgage made by Landlord covering
the Leased Premises, Tenant hereby attorns to, and covenants and agrees to
execute an instrument in writing reasonably satisfactory to the new owner
whereby Tenant attorns to, such successor in interest and recognizes such
successor as the Landlord under this Lease.
Tenant agrees that this Lease shall, at the request of the Landlord, be
subordinate to any first mortgages or deeds of trust that may hereafter be
placed upon the Building and to any and all advances to be made thereunder, and
to the interest thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in said mortgages or trust deeds shall
agree to recognize the Lease of Tenant in the event of foreclosure if Tenant is
not in default. Tenant also agrees that any mortgagee or trustee may elect to
have this Lease a prior lien to its mortgage or deed of trust, and in the event
of such election and upon notification by such mortgagee or trustee to Tenant to
that effect, this Lease shall be deemed prior to lien to the said mortgage or
deed of trust, whether this Lease is dated prior to or subsequent to the date of
said mortgage or deed of trust. Tenant agrees, that upon the request of
Landlord, or any mortgagee or any trustee, it shall execute whatever instruments
may be required to carry out the intent of this Paragraph.
Failure of Tenant to execute any statement or instrument necessary or
desirable to effectuate the foregoing provisions of this Paragraph within ten
(10) days' written notice to Tenant by Landlord shall constitute a breach of
this Lease by Tenant, and Tenant hereby irrevocably appoints Landlord its
attorney-in-fact with full power and authority to execute and deliver in
Tenant's name any such statements or instruments.
14. Non-Liability. Notwithstanding any provision of this Lease to the
contrary, and except to the extent that insurance proceeds are recovered
therefor, Landlord shall not be responsible or liable to Tenant for any loss or
damage resulting to Tenant or its property from burst, stopped or leaking water,
gas, sewer or steam pipes, or for any damage or loss of property within the
Leased Premises from any cause whatsoever, unless such loss or damage is caused
by the negligent or intentional act of Landlord or its employees, agents or
licensees. In the event of any sale or transfer including any transfer by
operation of law) of the Leased Premises by Landlord, Landlord (and any
subsequent owner of the Leased Premises making such a transfer) shall be
automatically relieved from any and all obligations and liabilities under this
Lease, except for such obligations and liabilities as shall have arisen during
Landlord's (or such subsequent owner's) respective period of ownership.
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15. Default.
a. Upon the occurrence at any time prior to the Commencement Date or
during the Lease Term of any one or more of the following events ("Events of
Default"), to-wit:
(i) if Tenant shall default in the payment when due of any
installment of Rent or in the payment when due of any additional charges
and such default shall continue for a period of ten (10) days after the
date when due; or
(ii) if Tenant shall default in the observance or performance of any
material term, covenant or condition of this Lease on Tenant's part to be
observed or performed (other than the covenants for the payment of Rent
and additional charges) and Tenant shall fail to remedy such default
within thirty (30) days after notice by Landlord to Tenant of such
default, or if such default is of such a nature that it cannot be
completely remedied within said period of thirty (30) days and Tenant
shall not commence within said period of thirty (30) days, or shall not
thereafter diligently prosecute to completion, all steps necessary to
remedy such default; or
(iii) if Tenant shall file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under the present or any present or
future applicable state insolvency or other state statute or law, or shall
make an assignment for the benefit or creditors or shall seek or consent
to or acquiescence in the appointment of any trustee, receiver or
liquidator of Tenant or of all or any part of the property of Tenant; or
(iv) if, within sixty (60) days after the commencement of any
proceeding against Tenant, whether by filing of a petition or otherwise
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under the present or any
future federal bankruptcy act or any other present or future applicable
federal, state or other statute or law, such proceeding shall not have
been dismissed, or if, within sixty (60) days after appointment of
any trustee, receiver or liquidator of Tenant, or of all or any part of
the property of Tenant, without the consent or acquiescence of Tenant,
such appointment shall not have been vacated or otherwise discharged, or
if any execution or attachment shall be issued against Tenant or any of
property of Tenant pursuant to which the Leased Premised shall be taken or
occupied or attempted to be taken or occupied; or
(v) if Tenant shall default in the observance or
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performance of any material term, covenant or condition on Tenant's part
to be observed or performed under any other lease with Landlord of
space in the Building, and such default shall continue beyond the greater
of any grace period set forth in such other lease for the remedying of
such default or thirty (30) days; or
(vi) if the Leased Premises shall become vacant, deserted or
abandoned for a period of thirty (30) consecutive days or more; or
(vii) if all or any part of Tenant's interest in this Lease, shall
devolve upon or otherwise be transferred to any person, whether by
operation of law or otherwise, except as expressly permitted under
Paragraph 7;
then, upon any such occurrence, Landlord shall have the remedies
provided for in Paragraph 16 of this Lease.
b. If at any time:
(i) Tenant shall be comprised of two or more persons; or
(ii) Tenant's obligations under this Lease shall have been
guaranteed by any person other than Tenant; or
(iii) Tenant's interest in this Lease shall have been
assigned,
the word "Tenant," as used in subsection 15 a. (iii) and (iv) hereof, shall be
deemed to mean any one or more of the persons primarily or secondarily liable
for Tenant's obligations under this Lease.
Any monies received by Landlord from or on behalf of Tenant during the
pendency of any proceeding of the types referred to in such subsections 15 a.
(iii) and (iv) shall be deemed paid as compensation for the use and occupation
of the Leased Premises and the acceptance of any such compensation by Landlord
shall not be deemed an acceptance of Rent or a waiver on the part of Landlord
of any rights under Paragraph 16 of this Lease.
16. Remedies.
a. To the extent permitted by law, if any of the Events of Default
described in Paragraph 15 a. of this Lease occur, Landlord, in addition to
any other right or remedy it may have at law, in equity, or under this Lease,
shall have the following remedies:
(i) Landlord at any time after such Event of Default, at
Landlord's option, may give to Tenant a seven (7) days notice
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of termination of this Lease, and if such notice is given, this Lease and the
Lease Term shall come to an end and expire (whether or not the Lease Term shall
have commenced) upon the expiration of such seven (7) days with the same effect
as if the date of expiration of such seven (7) days were the Expiration Date,
but Tenant shall remain liable for damages as provided in Paragraph 17;
(ii) Either with or without terminating this Lease, Landlord and its
agents and servants may immediately, or at any time after such Event of Default
or after the date upon which this Lease and the term shall expire and come to
an end, re-enter the Leased Premises or any part thereof, without notice,
either by summary proceedings or by any other applicable action or proceeding
or otherwise by peaceful means, and may repossess the Leased Premises after 30
days written notice, dispose of any and all of Tenant's property and effects
from the Leased Premises; and
(iii) Either with or without terminating this Lease, Landlord may
relet the whole or any part or parts of the Leased Premises from time to time,
either in the name of Landlord or otherwise, to such tenant or tenants, for
such term or terms ending before, on or after the Expiration Date, at such
rental or rentals and upon such other conditions, which may include concessions
and free rent periods, as Landlord may reasonably determine. Landlord agrees to
do all things reasonably necessary to mitigate its damages; however, Landlord
shall not be deemed to have breached this obligation if it shall lease to a
third-party other space in the Building, or any other office building in which
it may have an interest, before or instead of the Leased Premises, or, if it
shall relet the Leased Premises, for the failure to collect any rent due upon
any such reletting, and no such failure shall operate to relieve Tenant of any
liability under this Lease or otherwise affect any such liability; and Landlord
may make such repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Leased Premises as
Landlord, in its sole discretion, considers advisable or necessary in
connection with any such reletting or proposed reletting, without relieving
Tenant of any liability under this Lease or otherwise affecting such liability.
Upon any reletting of the Leased Premises, all rental and other sums
received by Landlord from such reletting shall be applied, first to the payment
of any indebtedness other than Rent due under this Lease from Tenant to
Landlord; second, to the payment of any costs and expenses such
reletting, including reasonable brokerage fees and repairs to the Leased
Premises; third, to the payment of Rent and other charges due
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and unpaid under this Lease; and the residue, if any, shall be the property
of the Landlord.
b. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any material term, covenant or
condition of this Lease on Tenant's part to be observed or performed, Landlord
shall have the right to enjoin such breach and the right to invoke any other
remedy allowed by law or in equity as if re-entry, summary proceedings and
other special remedies were not provided in this Lease for such breach.
The remedies hereinbefore set forth are cumulative and shall not preclude
Landlord from invoking any other remedy allowed at law or in equity, nor shall
the election of any remedy specifically provided in this Lease be deemed an
election of remedies so as to preclude the invoking of any other remedy
provided in this Lease.
17. Damages. If this Lease and the Lease Term expire and come to an end,
or if Landlord re-enters the Leased Premises as permitted in this Lease or as
otherwise permitted by law, then:
a. Tenant shall pay to Landlord all Rent and other charges payable by
Tenant to Landlord under this Lease to the date upon which this Lease and the
Lease Term shall have expired or to the date of re-entry upon the Leased
Premises by Landlord, as the case may be; and
b. Tenant shall also be liable for and shall pay to Landlord, as
damages, any deficiency (the "Deficiency") between the Rent for the period
which otherwise would have constituted the unexpired portion of the Lease Term
and the net amount, if any, of rents collected under any reletting effected
pursuant to the provisions of Paragraph 16 (after first applying the proceeds
of such rent as set forth in Paragraph 16 a. (iii) for any part of such period.
Any such Deficiency shall be paid in monthly installments by Tenant on the day
specified in this Lease for payment of installments of Rent, and Landlord shall
be entitled to recover from Tenant each monthly Deficiency as the same shall
arise, and no suit to collect the amount of the deficiency for any month shall
prejudice Landlord's right to collect the Deficiency or any month for any
subsequent month by a similar proceeding.
18. Tenant's Interest Not Transferable. Neither Tenant's interest in this
Lease, nor any interest therein of Tenant nor any estate hereby created in
Tenant shall pass to any trustee or receiver or assignee for the benefit of
creditors or otherwise by operation of law.
19. Deleted.
20. Conditions to the Assumption and Assignment of the Lease under Chapter
7 of the Bankruptcy Code. In the event that Tenant shall become a Debtor under
Chapter 7 of the Bankruptcy Code, and
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the Trustee or Tenant shall elect to assume this Lease for the purpose of
assigning the same or otherwise, such election and assignment may only be made
if all of the terms and conditions of Paragraph 21 and Paragraph 22 hereof
are satisfied. If such Trustee shall fail to elect to assume this
Lease within sixty (60) days after the filing of the Petition, this Lease shall
be deemed to have been rejected. Landlord shall be thereupon immediately
entitled to possession of the Premises without further obligation to Tenant or
Trustee, and this Lease shall be canceled, but Landlord's right to be
compensated for damages in such liquidation proceeding shall survive.
21. Conditions to the Assumption of the Lease in Bankruptcy Proceedings.
a. In the event that a Petition for reorganization or adjustment of
debts is filed concerning Tenant under Chapter 11 or 13 of the Bankruptcy Code,
or a proceeding is filed under Chapter 7 under the Bankruptcy Code and is
transferred to Chapter 11 or 13, the Trustee or the Tenant, as
Debtor-In-Possession, must elect to assume the Lease within sixty (60) days
from the date of the filing of the Petition under Chapter 11 or 13, or the
Trustee or Debtor-In-Possession shall be deemed to have rejected this Lease.
No election by the Trustee or Debtor-In-Possession to assume this Lease,
whether under Chapter 7, 11 or 13, shall be effective unless each of the
following conditions, which Landlord and Tenant acknowledge are commercially
reasonable in the context of a bankruptcy proceeding of Tenant, have been
satisfied, and Landlord has so acknowledged in writing:
(i) The Trustee or the Debtor-In-Possession has provided Landlord with
adequate assurance of the future performance of each of Tenant's,
Trustee's or Debtor-In-Possession's obligations under the Lease,
which shall include without limitation, that the Trustee or
Debtor-In-Possession shall also deposit with Landlord, as security for the
timely payment of rent, an amount equal to three (3) months' rent and
other monetary charges accruing under this Lease.
(ii) The assumption of the Lease will not breach any provision in any
other lease, mortgage, financing agreement or other agreement by which
Landlord is bound relating to the Building.
b. For purposes of this Paragraph, Landlord and Tenant acknowledge
that, in the context of a bankruptcy proceeding of Tenant, at a minimum
"adequate assurance" shall mean that the Trustee or the Debtor-In-Possession
has and will continue to have sufficient unencumbered assets after the payment
of all secured obligations and administrative expenses to assure Landlord that
the Trustee or Debtor-In-Possession will have sufficient funds to
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fulfill the obligations of Tenant under this Lease, properly staffed with
sufficient employees to conduct a fully-operational, actively promoted business
on the Premises.
22. Conditions To the Assignment Of The Lease In Bankruptcy Proceedings.
If the Trustee or Debtor-In-Possession has assumed the Lease pursuant to the
terms and provisions of Paragraphs 20 or 21 herein, for the purpose of
assigning (or elects to assign) the Tenant's interest under this Lease or the
estate created thereby, to any other person, such interest or estate may be so
assigned only if Landlord shall acknowledge in writing that the intended
assignee has provided adequate assurance as defined in this Paragraph 22 of
future performance of all of the terms, covenants and conditions of this Lease
to be performed by Tenant.
For purposes of this Paragraph, Landlord and Tenant acknowledge that, in
the context of a bankruptcy proceeding of Tenant, at a minimum "adequate
assurance of future performance" shall mean that each of the following
conditions have been satisfied, and Landlord has so acknowledged in writing:
a . The assignee has submitted a current financial statement audited by a
Certified Public Accountant which shows a net worth and working capital in
amounts determined to be sufficient by Landlord to assure the future
performance by such assignee of the Tenant's obligations under this Lease;
b . The assignee, if requested by Landlord, shall have obtained
guarantees in form and substance satisfactory to Landlord from one or more
persons who satisfy Landlord's standards of credit worthiness;
c. The assignee has submitted in writing evidence,
satisfactory to Landlord, of substantial experience in the business affairs
which it intends to engage in;
d. The Landlord has obtained all consents or waivers from any third
party required under any lease, mortgage, financing arrangement or other
agreement by which Landlord is bound to permit Landlord to consent to such
assignment.
23. Use and Occupancy Charges. When, pursuant to the Bankruptcy
Code, the Trustee or Debtor-In-Possession shall be obligated to pay reasonable
use and occupancy charges for the use of the Leased Premises or any
portion thereof, such charges shall not be less than the minimum rent as
defined in this Lease and other monetary obligations of Tenant for the payment
of maintenance, common area charges, real estate taxes, utilities, insurance
and similar charges.
24 . Preservation of Landlord's Rights. Notwithstanding
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Paragraphs 19 through 23, inclusive, of this Lease, in the event that the
Bankruptcy Code is modified or amended, subsequent to the date hereof, then to
the extent that the Bankruptcy Code, as amended permits, the Landlord shall
have the right and option, to be exercised in its sole discretion, to terminate
this Lease and all rights of Tenant hereunder upon (and after) the occurrence
of either of the following events.
a. Tenant files a voluntary petition under any Chapter of the
Bankruptcy Code or any other federal bankruptcy or insolvency statute; or
b. Any involuntary Petition under any Chapter of the Bankruptcy Code
or any other federal bankruptcy or insolvency statute is filed against Tenant
and is not dismissed within sixty (60) days of such filing.
Further, the terms and provisions of Paragraphs 19 through 23, inclusive,
of this Lease shall not be deemed to be a limitation upon or a waiver of any
other rights and remedies that Landlord may have pursuant to the Bankruptcy
Code, any other applicable laws and/or this Lease.
25. Non-Waiver. No failure by either party to insist upon the strict
performance of any obligation of the other party under this Lease or to exercise
any right, power or remedy consequent upon a breach thereof, no acceptance of
full or partial rent or additional charges during the continuance of any such
breach, and no acceptance of the keys to or possession of the Leased Premises
prior to the termination of the term of this Lease by any employee of Landlord,
shall constitute a waiver of any such breach or of such term, covenant or
condition or operate as a surrender of this Lease.
26. Tenant Improvements. Landlord will build out the Suite, at no
cost to tenant, using building standard materials, as set forth in Exhibit C
attached hereto, according to plans drawn by Poirier & Associates per Exhibit A
attached hereto.
27. Payment for Services Rendered by Landlord and Increased Operating
Expenses. If Landlord at any time shall, at the request of Tenant or on
Tenant's behalf, pursuant to any provision of this Lease, either perform or
cause to be performed any work in connection with Tenant's obligations under
this the Lease or shall supply or cause to be supplied any materials to the
Leased Premises pursuant to this Lease, the cost of such work or materials shall
be borne by Tenant. Landlord shall invoice Tenant for such costs, which sum
shall be payable by Tenant within thirty (30) days after delivery of such
invoice. All such sums shall constitute and be treated as additional Rent under
this Lease, and, if Tenant fails to pay the same in a timely fashion, Landlord,
in addition to any
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other remedies available to it, shall be entitled to exercise all
remedies available to it under this Lease for nonpayment of Rent.
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall pay to Landlord, upon demand, as additional Rent, the amount by
which the Property Taxes applicable to the Leased Premises during each calendar
year exceeds the Property Taxes applicable to the Leased Premises incurred by
Landlord for the calendar year 1993 ("Incremental Property Taxes"). At the
election of Landlord, Tenant shall pay one-twelfth (1/12) of Tenant's Share of
the estimated Incremental Property Taxes for the then current calendar year.
As soon as practicable after January 1 of each year, Landlord shall
furnish Tenant with a statement from the taxing authorities setting forth in
reasonable detail, the Property Taxes and a statement setting forth Incremental
Property Taxes for the preceding calendar year, and a reconciliation of any
overpayment and/or underpayment of same by Tenant.
If the total amount paid by Tenant in any calendar year for such estimated
Incremental Property Taxes exceeds the amount attributable to Tenant for that
year, Landlord shall, within thirty (30) days of delivery of the aforementioned
statements to Tenant, either refund to Tenant the amount of such excess, or
adjust current year estimates for such overpayment.
For purposes of this Paragraph, "Property Taxes" shall mean all costs of
and real property taxes, assessments (special or otherwise).
Tenant's obligations hereunder are based upon a percentage of Tenant's
leased space within the existing Building. For purposes of this Paragraph, in
the event Landlord builds or constructs any additional buildings as provided in
Paragraph 1 hereof, it is understood that Tenant's obligations hereunder will
be adjusted accordingly.
28. Move-In. All activities of Tenant in connection with either its move
into the Leased Premises at the commencement of this Lease or its move out of
the Leased Premises at any time (whether or not upon the termination thereof)
shall be subject to the following:
a. All furniture, equipment and all other items of personal property
being moved or transferred shall enter and leave the Building solely
through and by way of the side entrance doors unless prior written approval
from Landlord is obtained, which approval shall not be unreasonably withheld.
b. Tenant shall be responsible for the active supervision
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(on-site) of all workmen and others performing the move, and shall indemnify
and hold harmless Landlord against and from all liability for damage to
property (whether belonging to Landlord, other tenants or any other person) and
injuries to persons in connection with the move and the actions, or failure to
act, of or by those performing the move.
c. Tenant shall be responsible for any damages to the Building, the
common areas thereof, the Leased Premises, or the premises and property
of other tenants, caused by or incurred in connection with the move or
activities connected therewith. Landlord shall perform such inspection(s) as
Landlord in its sole discretion shall determine to be appropriate, and shall
deliver to Tenant an invoice for the repair of such damage or the replacement,
if necessary, of damaged items, if any. All determinations of the extent of
damage and the costs of repair or replacement shall be made by Landlord in its
sole reasonable discretion.
29. Access to Premises. Tenant shall permit Landlord and its employees
and agents access to the Leased Premises at all reasonable hours for the
purpose of examining the Leased Premises, erecting and maintaining pipes and
conduits in and through the Leased Premises and making any repairs, alterations
or additions which the Landlord may deem reasonably necessary for the safety,
preservation or improvement of the Leased Premises or the Building. Landlord
shall be allowed to take all materials into and upon the Leased Premises that
may be required therefore and to perform such acts as may be reasonably
required and without same constituting an eviction of Tenant in whole or in
part, unless said action significantly impairs Tenant's ability to conduct its
business. Landlord will use its best efforts to insure that any interference
with Tenant's quiet enjoyment to the Leased Premises is minimized. Except as
otherwise expressly provided in this Lease, Rent shall not abate while any such
repairs, alterations, improvements or additions are being made. Nothing
contained in this Paragraph shall be deemed to impose upon Landlord any greater
or additional obligation for the care, supervision or repair of the Building or
of the Leased Premises which is not otherwise provided for in this Lease or is
otherwise imposed by law.
30. No Representations by Landlord. Except as otherwise expressly set
forth in this Lease, Landlord makes no representations or warranties with
respect to the Building or the Leased Premises.
31. Name of Building. Landlord shall have the right from time to time to
name the Building and to change the name and/or address of the Building, and
shall not be responsible for costs or damages, if any, claimed by Tenant as a
consequence thereof.
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32. Definition of Landlords/Liability of Landlord. The term "Landlord" as
used in this Lease so far as covenants, agreements, stipulations or obligations
on the part of the Landlord are concerned shall be limited to mean and include
only the owner or owners at the time in question of the fee of Leased Premises.
If Landlord shall fail to perform any covenant provision, agreement,
stipulation, term or condition of this Lease upon Landlord's part to be
performed, and if as a consequence of such default Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied only out of the
proceeds of sale received upon execution of such judgment and levied thereon
against the right, title and interest of Landlord in the Building and out of
rents or other income from such property receivable by Landlord, and Landlord
shall not be liable for any deficiency.
33. Building Signage. The Tenant hereby acknowledges that as of the date
of this Lease there exists two (2) signs on the exterior of the Building; both
of which face the I-696 freeway. To the extent allowed by the city,
municipality, or other governmental authority with present or future
jurisdiction over the Building (the "City"), Landlord shall, in turn, allow an
additional sign on the Building (the "Sign"); however, Tenant agrees that any
such permission from Landlord shall in no way constitute permission from the
City. The Sign shall be in a location on the Building acceptable to Landlord
in its sole and absolute discretion. The sign shall bear the symbols CBSI and
shall be non-illuminated. The specifications of the Sign must be approved by
Landlord in its sole and absolute discretion. Tenant shall bear all costs
relating to the design and installation of the Sign. To the extent that the
City determines that the Sign be removed from the Building, the Tenant agrees
to do so at its own expense, and to the extent that Tenant fails to remove the
Sign, Landlord shall remove same at Tenant's expense. Unless otherwise
provided herein, Landlord shall be held harmless by Tenant for any loss or
damage with respect to the Sign. To the extent that any beneficiaries elect to
abandon their rights to the existing sign and the city allows the continuance
of said signage, Tenant shall have the right of first refusal to install its
sign in accordance with the provisions hereof; however, in no event shall
Tenant be permitted to have more than one (1) sign on the Building.
34. Security Deposit. As security for the faithful performance by
Tenant of all of the terms and conditions upon the Tenant's part to be
performed, Tenant has this day deposited with Landlord under this Lease the sum
designated as "Security Deposit" on the Schedule of Rents attached to this
Lease, which shall be returned to Tenant, without interest, following the
Expiration Date, provided that Tenant has fully and faithfully performed all of
the material terms, covenants and conditions on its part to be performed.
Landlord shall have the right (but not the obligation)
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to apply and/or offset any part of said deposit to cure any default of Tenant.
Landlord shall not be obligated to keep such security deposit as a separate
fund but may mix such security deposit with Landlord's own funds and utilize
said funds at Landlord's discretion. Tenant may not apply the security deposit
to the last month's rent.
In the event of a sale of the Building or lease of the land on which it
stands, the Landlord shall have the right to transfer the security deposit to
the vendee or lessee and upon such transfer the Landlord shall be released by
the Tenant from all liability for the return of such security deposit, and
Tenant shall look solely to the new Landlord for the return of such security
deposit. Tenant hereby agrees not to look to the Landlord's mortgagee, as
mortgagee, mortgagee in possession, or successor in title to the property on
which the Building is located, for accountability for any security deposit
required by the Landlord hereunder, unless said sums have actually been
received by said mortgagee as security for the Tenant's performance of this
Lease.
The security deposited under this Lease shall not be mortgaged, assigned
or encumbered by the Tenant without the written consent of the Landlord, and
any attempt to do so shall be void. In the event of any rightful and permitted
assignment of this Lease, the said security deposit shall be deemed to be held
by Landlord as a deposit made by the assignor.
35. Holding over. In the event of Tenant holding over the termination of
this Lease, thereafter the tenancy shall be from month to month in the absence
of a written agreement to the contrary, and after three (3) months Tenant shall
pay to Landlord a daily occupancy charge equal to Five (5%) percent of the
monthly rental applicable during the last month of the term hereof (plus all
other charges payable by Tenant under this Lease) for each day from three (3)
months after the expiration or termination of this Lease until the date the
Leased Premises are delivered to Landlord in the condition required herein, and
Landlord's right to damages to such illegal occupancy shall survive.
36. Utilities and Services. Landlord shall, unless otherwise provided
herein, furnish the Leased Premises and the Building with heat, air
conditioning, water and sewer services. Landlord shall not be liable or
responsible for any interruption in such utilities or other services due to
causes beyond Landlord's reasonable control or for interruptions in connection
with the making of repairs or improvements to the Leased Premises or the
Building.
a. Landlord shall redistribute or furnish electrical energy to or for the
use of Tenant in the Leased Premises for the operation of the electrical
facilities installed in the Leased Premises in accordance with the provisions
of this Lease.
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b. The plans and specifications to be submitted by Tenant pursuant to
Paragraph 26 of this Lease shall include electrical circuitry information and
shall specify Tenant's needs with respect thereto. Simultaneously with the
submission of the plans and specifications, Tenant also shall submit a
comprehensive list of the particular electrical and electronic equipment and
appliances Tenant proposes to use in the Leased Premises. Landlord and Tenant
shall mutually determine which of such items constitute ordinary and
extraordinary electrical energy demands hereunder. Landlord reserves the right
to designate which circuits within the Leased Premises may be used solely for
items involving ordinary demands and may separately meter circuits to be used
for items involving extraordinary demands. In any event, Landlord shall be
responsible only for the cost of a mutually agreed upon standard electrical
circuitry, and Tenant shall bear the entire cost of any additional circuitry,
including all additional risers and other equipment, to be used in connection
with items involving extraordinary electrical demands.
c. Tenant's use of electrical energy in the Leased Premises shall not at
any time exceed the capacity of any of the electrical conductors and equipment
in or otherwise serving the Leased Premises. In order to insure that such
capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Tenant shall not, without Landlord's prior written
consent in each instance, connect to the Building electric distribution system,
any fixtures, appliances or equipment other than lamps, typewriters and similar
small office machines which operate on a voltage in excess of one hundred ten
(110) volts (with the exception of four (4) 220 volt outlets as hereby agreed
upon) or make any alteration or addition to the electrical system of the Leased
Premises. Should Landlord grant such consent, all additional risers or other
equipment required therefor shall be paid by Tenant upon Landlord's demand.
d. Deleted.
e. Based upon the information supplied by Tenant under Paragraph 36.b
above, Landlord, in its reasonable discretion, may also determine whether any
electrical and electronic equipment proposed for use in the Leased Premises,
including but not limited to computers and word processing equipment, would
have a BTU output which would require cooling capacity in excess of that
required by a normal business office not using such equipment. If Landlord
reasonably determines that additional cooling is needed, Tenant shall be
required to provide (and pay the entire cost of, including labor and materials)
an additional cooling system for the Leased Premises acceptable to Landlord.
Such system shall be separately metered and billed to tenant.
37. Entire Agreement. This Lease and the exhibits attached
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to this Lease constitute the entire agreement of the parties hereto; all prior
agreements between the parties, whether written or oral, are merged herein and
shall be of no force and effect. This lease cannot be changed, modified or
discharged orally but only by an agreement in writing, signed by the party
against whom enforcement of the change, modification or discharge is sought.
38. Notices. Unless otherwise specified in this Lease, whenever under
this Lease a provision is made for notice of any kind, it shall be deemed
sufficient notice and service thereof if such notice to Tenant is in writing
addressed to Tenant at its last known post office address, or at the Leased
Premises, and deposited in the mail, certified or registered mail, with postage
prepaid, and if such notice to Landlord is in writing, addressed to the last
known post office address of Landlord and deposited in the mail, certified or
registered mail, with postage prepaid, Tenant agrees to send to Landlord's
first Mortgagee a duplicate copy of any notice sent to Landlord under this
Lease, provided Landlord sends Tenant written notice of the name and address of
said first Mortgagee. Notice need be sent to only one Tenant or Landlord where
Tenant or Landlord is more than one person.
39. Assignment of Lease. Tenant acknowledges and agrees that Landlord
may assign, at any time prior, during or subsequent to the Lease Term, all, or
any portion, of Landlord's right, title and interest in this Lease, as
additional security for the purpose of obtaining a mortgage or other financing
for the ownership, construction, improvement and/or operation of the Building.
Tenant agrees to pay all rent required hereunder to any aforesaid Mortgagee
upon receiving notice from such Mortgagee. Any sums paid by Tenant pursuant to
any aforesaid assignment of lease shall be fully credited against Tenant's
obligations under this Lease.
40. Successors. This Lease shall inure to the benefit of and be binding
upon the parties hereto, their respective heirs, administrators, executors,
representatives, successors and assigns.
41. Miscellaneous.
a. Delays. If Landlord is delayed or prevented from performing any act
required under this Lease by reason of strikes, lockouts, labor troubles,
inability to procure materials, failure to power, restrictive governmental laws
or regulations, riots, insurrection, war or other reason of a like nature not
the fault of Landlord, then, unless otherwise provided in Paragraph 2 of this
Lease, the performance of such act shall be excused for the period of the
delay, and the period for the performance of such act shall be extended for a
period equivalent to the delay. The provisions of this Paragraph 41.a. shall
not operate to excuse Tenant from prompt payment of Rent, or any other payments
required by the terms of this Lease.
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b. Recording. Tenant shall not record this Lease without the written
consent of the Landlord. Landlord shall permit Tenant, at Tenant's sole cost
and expense, to record a memorandum of this Lease in a form and content
mutually acceptable to the parties.
c. Liens. In the event mechanic's lien(s) shall be filed against the
Leased Premises or Tenant's interest as a result of the work undertaken by
Tenant, Tenant shall, within ten (10) days after receipt of notice, discharge
such lien(s) by payment of the indebtedness or by filing a bond (as provided by
statute) as security therefor. In the event Tenant shall fail to discharge
such lien, Landlord shall have the right (but is not obligated) to discharge by
filing such bond, and Tenant shall pay the cost of the bond to Landlord as
additional Rent upon the first day that rent shall be next due thereunder, or
if no rent is due, then within five (5) days following Landlord's request
therefor.
d. Legal Expenses. If suit shall be brought for recovery of possession,
for recovery of any Rent, or because of a breach of any term, condition, or
covenant of this Lease by either party hereto, then, the prevailing party shall
be entitled to reasonable attorney's fee.
e. Real Estate Brokers. Each party to this Lease represents that it has
had no dealings with any real estate broker, finder or other person with
respect to this Lease in any manner except as designated on the Schedule of
Rents attached hereto, whose commissions or fees, if any, shall be, unless as
otherwise herein provided, payable by Landlord in accordance with the
provisions of a separate commission contract. Except for such broker, each
party to this Lease shall indemnify and hold the other party harmless from all
damages resulting from any claims which may be asserted against the other party
by any broker, finder or other person with whom the indemnifying party has or
purportedly has dealt.
f. Applicable Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Michigan. The unenforceability,
invalidity or illegality of any term or provision of this Lease shall not
render any other term or provision unenforceable, invalid or illegal.
g. Construction and Interpretation of Agreement and Use of
Pronouns. Nothing contained in this Lease shall be deemed or construed to
create the relationship of principal and agent or of partnership or joint
venture between the parties to this Lease. Nothing contained in this Lease
shall be construed to limit the right of Landlord to rent any portion of the
Building not covered by this Lease upon any terms or conditions whatever, and
for any use or purpose Landlord desires. Whenever the singular number is used
in this Lease, the same shall include the plural and any gender shall include
any other genders, when required by the
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context of this Lease. If any language is stricken or deleted from this Lease,
such language shall be deemed never to have appeared herein, and no other
implication shall be drawn therefrom.
h. Building Fees. Any fees or payments due to any building inspector,
municipality or governmental authority in consideration of the construction of
any Tenant's initial improvements as provided for under this lease, or as a
permit fee for occupancy of the Leased Premises shall be paid by Landlord. Any
similar fees or payments incurred for subsequent construction or improvements
to the Leased Premises shall be paid by Tenant.
i. Lease Guarantee Insurance. If Landlord shall decide to apply for Lease
Guarantee Insurance relating to this Lease, Tenant shall fully cooperate with
Landlord therein and make available any and all information required by
Landlord to make and process such application.
j. Captions and Section Numbers. The captions, section numbers, and
article numbers appearing in this Lease are inserted only as a matter of
convenience and in no way define, limit, construe, or describe the scope or
intent of such sections or articles of this Lease nor in any way affect this
Lease.
k. Required Consent. Wherever in this agreement the Consent of either
party is required, it is specifically agreed, unless otherwise provided, that
such consent shall not be unreasonably withheld.
l. Services. Provided there are no existing material defaults under the
Lease, Landlord agrees to provide Tenant with janitorial services as specified
in Exhibit D and allow Tenant use of elevators, rest rooms and other common
areas and utilities as provided in Paragraph 36. In addition, Landlord shall
furnish heat and air conditioning to the Leased Premises during normal business
hours of 7:00 A.M. to 7:00 P.M. Monday through Friday and 9:00 A.M. through
1:00 P.M. on Saturday.
m. Definition of "Promptly". Wherever either party hereto is required to
act or perform an obligation "promptly," "promptly" shall be determined to be
whatever is commercially reasonable under the relevant circumstances of any
particular situation.
n. Disclosure. Landlord represents and warrants that the owner of the
property is Orchard Ridge Office Park Limited Partnership, a Michigan Limited
Partnership and that the mortgagee is The Travelers Companies. Landlord further
represents that there is only one mortgagee at the time of executing this Lease.
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IN WITNESS WHEREOF, the parties have hereto set their hands as of
the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK
LIMITED PARTNERSHIP
MATT WICK By: Enriko Sasson
- -------------------------- ----------------------------
Its: General Partner
----------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS,
INC., A MICHIGAN CORPORATION
ROBERT B. LABE By: Tim Manney
- -------------------------- ----------------------------
Its: Chief Financial Officer
----------------------------
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SCHEDULE OF RENTS
SCHEDULE OF RENTS attached to and made a part of Lease between
undersigned Landlord and Tenant dated October 22, 1992.
MONTHS MONTHLY RENT
------ ------------
1 $ 0.00
2-12 $14,175.75
13 $ 0.00
14-24 $21,701.13
25 $ 0.00
26-36 $21,701.13
37 $ 0.00
38-65 $21,701.13
Landlord and Tenant agree that the first three (3) monthly Rent payments
shall be assigned to Friedman Real Estate Group, Inc. as commission for this
Lease transaction. As a result of such assignment, it is understood and agreed
that Tenant's rent not be classified as "unpaid" thereby putting the Tenant in
default under the terms and conditions of this Lease.
Minimum insurance limits are $1,000,000 per person, $1,000,000
per casualty, and $1,000,000 per occurrence of property damage.
The security deposit is equivalent to the average of one
month's rent: $19,092.15.
LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
By: Enriko Sasson
------------------------------
Its: General Partner
------------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.,
A MICHIGAN CORPORATION
By: Tim Manney
------------------------------
Its: Chief Financial Officer
------------------------------
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RIDER TO LEASE DATED OCTOBER 22, 1992
32605 W. 12 Mile Rd., Farmington Hills, MI
A. With respect to a transfer, sale, issuance, or other disposition of a
controlling interest in the ownership of Tenant ("Transfers"), the following
Transfers shall be exempted from the definition of an assignment of the Lease
pursuant to Paragraph 7 of the Lease.
1. Direct or indirect Transfers to employees for any reason,
including an Employee Stock Ownership Trust or Plan.
2. Direct or indirect Transfers to family members or trusts or other
entities established for the benefit of family members or
controlled by family members.
3. Direct or indirect Transfers to any controlled entity or entities,
including the consolidation of related or affiliated companies or
entities into one or more parent companies or entities.
4. Direct or indirect Transfers to an entity that is equal to or
greater in financial strength than the Tenant.
Landlord agrees not to withhold its consent to the assignment of the
Lease provided the assignee is credit worthy and has financial strength
which is equal to or greater than Tenants current principal. In the
alternative, Landlord will accept the personal guarantees of the principal
stockholders to secure the prompt and faithful performance of the Tenants
obligations hereunder, financial and otherwise, for the balance of the lease
term including any extensions or renewals thereof.
B. Tenant shall have, to the extent the Landlord is able to grant same,
at the then market rental rates, the right of first refusal to lease
the suite across the corridor from the Leased Premises and located at the
furthest southeast corner of the second floor of the west wing of the Building
and consists of approximately 1,800 square feet. Upon written notice from
Landlord that it has a perspective Tenant for such space Tenant shall have
seven (7) days from receipt of said notice to notify Landlord in writing of its
intent to exercise its option to lease these additional premises. Failure by
Tenant to notify Landlord as provided shall release Landlord of further
obligations to Tenant hereunder. The contiguous space provided by this right
of first refusal shall be co-terminous with the existing space.
C. Provided Tenant is not in arrears for rent or otherwise in default
under the terms of this Lease, Landlord shall grant an option to Tenant to
enter into another lease for an additional term if five (5) years, after the
expiration of this Lease, upon terms and conditions which shall be mutually
agreeable to the parties. Tenant must give Landlord written notice of its
intent to exercise this option within 180 days before the Lease Expiration
Date, and
<PAGE> 29
Landlord and Tenant must arrive at an agreement with respect to the
terms and conditions of the Lease within ninety (90) days of the Lease
Expiration Date. In the event Tenant fails to give proper notice and/or the
parties fail to agree upon terms and conditions of such additional Lease within
the time required hereunder, then, and in such event, this option shall be
null and void and the Tenant shall have no rights hereunder.
D. Tenant shall be allowed 5 reserved parking spaces.
E. The "Schedule of Rents" of this Agreement, shall be modified as
appropriate to reflect the date subject rents are to commence and end once the
actual date of occupancy is established.
F. As long as the Tenant is not in material default on their Lease with
Landlord, Landlord grants to Tenant the right to use the following furniture
and furnishings at no cost to Tenant:
3 - Modular systems with green fabric.
4 - Metal desks with wood tops.
Tenant acknowledges that this furniture is the property of Landlord's and
will return same to Landlord at the end of the Lease Term in as good as
condition as received. Normal wear and tear excepted.
LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
By: Enriko Sasson
---------------------------
Its: General Partner
---------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.,
A MICHIGAN CORPORATION
By: Tim Manney
---------------------------
Its: Chief Financial Officer
---------------------------
<PAGE> 30
EXHIBIT A-8
[FLOOR PLAN]
<PAGE> 31
EXHIBIT B
MAP OF GROUNDS
<PAGE> 32
EXHIBIT C
Building Standard Improvements
PARTITIONING STANDARDS: The allowance for interior partitions is five
percent of the square footage of space leased
(Example: 3,000 sq. ft. = 150 lineal feet of
partitioning.) Partitions to be measured
through doors. The typical wall construction is
steel stud, 1/2" drywall and paint.
INTERIOR OFFICE DOORS: Flush panel, solid core, prefinished, with
Hollow Metal frame. One (1) interior door
provided for every 25 lineal feet of 5% wall
partitioning allowance (Example: 3,000 sq. ft =
150 lineal feet of partitioning allowance - by
25 lineal feet = 6 doors).
CARPET STANDARDS: All areas will be carpeted with carpeting (glued
down) no padding, from the building standard
carpet selections.
SUITE ENTRANCE DOOR: Landlord will provide one solid core oak
entrance door with security lock and side lite.
LIGHTING STANDARDS: Ceiling Fixtures - 2' x 4' recessed fluorescent
fixtures installed in all office areas to
provide a minimum of 80 foot candles of
illumination at and over desks. Fluorescent
fixtures installed in all storage and hallway
areas to provide a minimum illumination of 50
foot candles at desk height. One light per 100
square feet of space leased.
ELECTRIC WALL OUTLETS: One (1) 110 volt duplex outlet per 250 square
feet of leased space.
DESK PHONES: One (1) phone outlet per 300 square feet of
leased space.
CEILING: Landlord will provide a 2' x 4' grid system
(white finish) installed prior to construction
of all partitions. Grid pattern and ceiling
heights established by basic building plans.
FLOOR LOADING: Floors have been designed for a live load of 100
pounds per square foot.
WINDOW COVERING: Landlord shall provide horizontal blinds on all
exterior windows.
SOUND CONDITIONING: Sound conditioning shall be installed in
building hallway walls and suite demising walls.
<PAGE> 33
EXHIBIT D
Janitorial Services
DAILY SERVICES: (Five Times Per Week)
1. Empty waste baskets.
2. Empty and clean ash trays, including those in public areas.
3. Dust desk tops which are clear of working papers.
4. Sweep or vacuum entire floor area - public and private.
5. Toilet Rooms:
(a) Empty all waste receptacles.
(b) Sweep and wet mop floors.
(c) Clean and disinfect all fixtures and clean mirrors and shelves.
6. Clean and disinfect drinking fountains and water coolers.
7. Police parking areas for rubbish and trash.
WEEKLY EXPENSES:
1. Damp mop floors, stairways, lobbies and corridors.
MONTHLY SERVICES:
1. Strip, wax and polish floor in lobby area and aisles.
2. Dust window blinds.
3. Wash all glass in office partitions.
4. Wash outside and inside building entry mats
SEMI-ANNUAL SERVICES:
1. Power scrub tile areas and wax or apply floor treatment.
2. Wash windows.
SEASONABLE SERVICES:
1. Snow removal from concrete walks as necessary.
2. Snow plowing of the parking lots as necessary.
3. Lawn cutting service of green areas as required.
<PAGE> 34
EXHIBIT E
Rules and Regulations
A. No sign, picture, lettering, notice or advertisement of any kind shall
be painted or displayed on or from the windows, doors, roof or outside
walls of the building in which the leased premises are located. All of
Tenant's interior sign painting or lettering shall be done by Landlord
in accordance with Landlord's specifications and the cost thereof shall
be paid by Tenant.
B. Vending machines will not be permitted to be installed by anyone but the
Landlord.
C. No electric or other wires for any purpose shall be brought into the
leased premises without Landlord's written permission specifying the
manner in which same may be done. Boring, cutting or stringing of wires
shall not be done without Landlord's prior written permission. Tenant
shall not disturb or interfere with the electric light fixtures and all
work upon or alterations to the same shall be done by persons authorized
by Landlord.
D. Water closets and other toilet fixtures shall not be used for any
purpose other than that for which the same is intended, and any damage
resulting to same from Tenant's misuse shall be paid for by Tenant. No
person shall waste water by interfering or tampering with the faucets or
otherwise.
E. No person shall disturb the occupants of this or adjoining buildings or
premises by the use of radios, television sets, loudspeakers, musical
instruments, or by making loud or disturbing noises.
F. No bicycle or other vehicle, and no dog or other animal shall be allowed
in offices, halls, corridors, or elsewhere in the building.
G. All safes, equipment or other heavy articles shall be carried in or out
only at such time and in such manner as shall be prescribed in writing
by Landlord, and Landlord shall have the right to specify the proper
position of any safe, equipment or other heavy article which shall only
be used by Tenant in a manner which will not interfere with or cause
damage to the lease premises or the building in which they are located,
or to the other tenants in a manner which will not interfere with or
cause damage to the lease premises or the building in which they are
located, or to the other tenants or occupants of the building. Tenant
shall be responsible for any damage to the building or the property of
its tenants or others and injuries sustained by any person resulting
from the use of moving of such articles in or out of the leased
premises, and shall make all repairs and improvements required by
Landlord or governmental authorities in connection with the use or
moving of such articles.
H. No additional lock or locks shall be placed on any door in the building
without Landlord's prior written permission. A reasonable number of
keys will be furnished by Landlord, and Tenant shall not make or permit
any duplicate keys to be made.
I. Tenant shall not install or operate any steam or gas engine or boiler or
carry on any mechanical business on leased premises, or use oil, burning
fluids, camphene or gasoline for heating or lighting, or for any other
purpose. No article deemed extra hazardous on account of fire or other
dangerous properties, or any explosive, shall be brought into the
leased premises. This prohibits the use of hot plates (cooking) and
only approved electric percolators shall be permitted.
J. The leased premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
K. Landlord shall have the right to enter upon the leased premises at all
reasonable hours for the purpose of inspecting the same.
L. Wherever the word "Tenant" occurs, it is understood and agreed
that it shall mean Tenant's associates, agents, clerks, servants and
visitors. Wherever the word "Landlord" occurs, it is understood and
agreed that it shall mean Landlord's assigns, agents, clerks, servants
<PAGE> 35
M. Landlord shall have the right to enter the leased premises at hour:
convenient to the Tenant for the purpose of exhibiting the same to
prospective Tenants within the sixty (60 day period prior to the
expiration of this lease, and may place signs advertising the leased
premises for rent on the windows and doors of the premises at any time
within said sixty (60) day period.
N. Each Tenant, before closing and leaving the premises at any time, shall
see that all Tenant entrance doors are closed and locked, and that
building security regulations are followed. In the event Tenant
installs or causes to be installed any internal security system within
and for the premises, Tenant shall notify Landlord of such installation
in advance, and shall provide Landlord with means of access to the
Premises at all times. Tenant shall pay all costs and expenses
attributable to such system and any distribution it may cause by way of
(but not limited to) false alarms.
O. Canvassing soliciting and peddling in the building are prohibited and
each Tenant shall cooperate to prevent same.
P. There shall not be used in any space, or in public halls of the
building, either by Tenant its servants, agents, employees, visitors or
licensees or by jobbers or others, in the delivery or receipt of
merchandise, hand truck, except those equipped with rubber tires and
side guards.
Q. Without first obtaining Landlord's written permission, no Tenant shall
install, attach, or bring into the demised premises any instrument,
duct, refrigerator, air conditioner, water cooler, or any other
appliance requiring the use of gas, electric current or water. Any
branch of this convenient will authorize the Landlord to enter the
demised premises and remove whatever Tenant may have so installed,
attached or brought in, and charge the cost of such removal and any
damage that may be sustained thereby, as additional rent, payable at the
option of Landlord, immediately or with the next month's rent occurring
under this Lease.
R. Each Tenant shall be responsible for all persons authorized to have
access to the building and shall be liable to Landlord for all their
acts or neglects while in the building. Landlord may require all
persons given access to the building during nonbusiness hours to sign a
register on entering and leaving the building.
S. Safes and/or other heavy times shall not be brought into the building or
located in the premises without the Landlord's prior written approval.
T. No Tenant, nor any Tenant's servants, employees, agents, or licensees
shall at any time bring or keep upon the demised premises any flammable,
combustible, or explosive fluid, chemical or substance.
U. Tenant shall not do any cooking, conduct any restaurant,
luncheonette, or cafeteria for the sale or service of food or
beverages to its employees or to others, or cause or permit any odors
of cooking or other process of any unusual or objectionable odors to
emanate from the demised premises.
V. Tenant and its employees shall park only in strict compliance with all
signs posted and regulations issued by owner, within spaces designated
for parking, and not in such a manner as to block other parking spaces,
drives loading areas or fire lanes. Tenant hereby authorizes Landlord
to remove any improperly parked vehicle from the parking lot, at
Tenant's sole risk and expense. To facilitate security arrangements and
parking controls, a list of the names of Tenant's employees working in
the building and of their vehicle license number shall be furnished to
the Landlord upon request.
<PAGE> 36
Building directory tablet will be furnished by the Landlord and the number
of lists thereon for each Tenant shall be at the discretion of the
Landlord. Landlord shall have the right to prohibit any advertising by the
Tenant which, in Landlord's opinion, tends to impair the reputation of the
building or its desirability as a building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such
advertising. Tenant shall not use the name of the building or its owner on
any advertising without the express written consent of Landlord. Directory
signs shall not contain a description of the nature of Tenant's business.
X. Tenant hereby agrees not to handle, store or dispose of any hazard or toxic
waste or substance upon the Premises which is prohibited by any federal,
state or local statutes, ordinances or regulations. Tenant hereby covenants
to indemnify and hold landlord, its successors and assigns, harmless from
any loss, damage, claim, costs, liabilities or cleanup costs arising out of
Tenant's use, handling, storage or disposal of any such hazardous or toxic
wastes or substances on the Premises.
<PAGE> 37
RIDER TO LEASE DATED OCTOBER 22, 1992
32605 W. 12 Mile Rd., Farmington Hills, MI
A. Tenant is hereby granted an option to pay for its Tenant Improvements
(as defined in the Lease) for the sum of $100,000.00 (the "Option").
B. In the event that Tenant shall exercise this Option, the following
SCHEDULE OF RENTS to the Lease will in effect:
MONTHS MONTHLY RENT
1 $ 0.00
2 - 11 14,175.00
12 4,175.75
13 - 14 0.00
15 - 19 21,701.13
20 11,701.13
21 - 23 21,701.13
24 11,701.13
25 - 26 0.00
27 - 31 21,701.13
32 11,701.13
33 - 35 21,701.13
36 11,701.13
37 - 38 0.00
39 21,701.13
40 16,701.13
41 21,701.13
42 16,701.13
43 21,701.13
44 11,701.13
45 - 65 21,701.13
C. Upon the exercise of this option, the total rent for the Leased
Premises during the Term of the Lease, as set forth in Paragraph 3. of the
Lease, will be reduced to $1,105,886.36.
D. This Option shall expire on May 31, 1993.
E. No other provision of the Lease, except as set forth herein, shall be
effected by the exercise of this Option.
LANDLORD:
ORCHARD RIDGE OFFICE PARK
LIMITED PARTNERSHIP
By: Matt Wick
-----------------------------
Its: General Agent
----------------------------
<PAGE> 38
TENANT:
COMPLETE BUSINESS SOLUTIONS,
INC., A MICHIGAN CORPORATION
By: Tim Manney
---------------------------
Its: Chief Financial Officer
--------------------------
<PAGE> 39
RIDER TO LEASE DATED OCTOBER 22, 1992
32605 W. 12 MILE RD., FARMINGTON HILLS, MI
A. Tenant shall be granted an option to pay for the balance of its Tenant
Improvements (as defined in the Lease) for the sum of Eighty Thousand Two
Hundred and 00/100 Dollars ($80,200.00).
B. In the event that Tenant shall exercise this Option, the Lease
Premises (as defined in the Lease) shall be modified to consist of 20,701 square
feet constituting eighteen percent 18% of the Building, and Exhibit A attached
to the Lease shall be modified to include the space in the exhibit attached
hereto.
C. This Option shall expire on August 31, 1993.
D. All other provisions of the Lease shall remain unchanged and in full
force and effect.
LANDLORD:
ORCHARD RIDGE OFFICE PARK
LIMITED PARTNERSHIP
By: Matt Wick
--------------------------
Its: General Agent
-------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.,
a Michigan Corporation
By: Tim Manney
--------------------------
Its: Chief Financial Officer
-------------------------
<PAGE> 40
PHASE II EXPANSION PLAN
[GRAPHIC]
PHASE II - 2ND - C.B.S.I.
EXPANSION - PLAN "A"
-------------------------
7-27-93 1/8" = 1'0"
<PAGE> 41
ESTOPPEL CERTIFICATE
The Travelers Companies
201 East 5th Street, Suite 1420
Cincinnati, Ohio 45202-4115
RE: Leased Premises known as 32605 West Twelve Mile Road, Suite 115 and
Suite 250, Farmington Hills, Michigan 48334
Ladies and Gentlemen:
Respecting that certain Lease dated October 22, 1992 and Amendment to Lease
dated October 1, 1993 (herein cumulatively the "Lease) with Orchard Ridge
Office Park Limited Partnership as Landlord, Tenant hereby certifies that it
has unconditionally accepted possession of the premises described in said Lease
and that said Lease is in full force and effect and has not been modified,
supplemented, or amended in any way and that the date of commencement of the
Term of the Amendment to Lease is January 6, 1994 and the end of the Term of
the Lease is June 15, 1998, unless sooner terminated as therein provided.
Undersigned further certifies that all terms and conditions to be performed
by the Landlord under the Lease has been or are being satisfied and that on this
date there are not existing defenses of offsets which the undersigned has
against the full enforcement of the Lease as amended by Landlord and that no
Rent has been paid in advance (except as provided in the Lease) and that Rent
has continued to be paid in accordance with the Lease since the Commencement.
Tenant is in occupancy of the Leased Premises, and there is ongoing full
operation of Tenant's business at the Leased Premises being conducted by named
Tenant during normal business hours.
Undersigned further agrees not to look to The Travelers Companies as
mortgagee, mortgagee in possession, or successor in title to the property for
accountability for any Security Deposit required by the Landlord under the Lease
unless such sums have actually been received by the Travelers Companies as cash
security for Tenant's performance of the Lease.
Tenant understands that the Lease may be assigned as collateral security
for a mortgage loan to be granted to Landlord by The Travelers Companies under a
Collateral Assignments of Lease from containing (among others) the agreements by
and restrictions on Landlord that, without your prior written authorization as
Assignee, Landlord will not thereafter modify, terminate, or accept surrender of
the Lease and will not reduce, abate, or accept prepayment of any Rent (except
Rent paid in advance). Tenant acknowledges its Landlord's agreements and the
restrictions on Landlord's rights under said Assignment and hereby
agrees to be bound by said agreements and restrictions.
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
By: Tim Manney
--------------------------------------
Tim Manney, Chief Financial Officer
Date: 1/18/94
------------------------------------
<PAGE> 42
RECEIPT
January 6, 1994
I hereby acknowledge receipt on this 18th day of January 1994 two (2) keys for
Suite 115 of the Orchard Ridge Office Park located at 32605 West Twelve Mile
Road, Farmington Hills, Michigan.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Tim Manney
--------------------------
Its: Chief Financial Officer
-------------------------
<PAGE> 43
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is dated this 1st day of October 1993 between
Orchard Ridge Office Park Limited Partnership, a Michigan Limited Partnership,
whose address is 32605 West Twelve Mile Road, Suite 290, Farmington Hills,
Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a Michigan
Corporation, whose address is 32605 West Twelve Mile Road, Suite 250, Farmington
Hills, Michigan 48334 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to Lease
dated October 22, 1992 for Suite 250 of the office building located at 32605
West Twelve Mile Road, Farmington Hills, Michigan.
WHEREAS, the Lease provides for, among other things, a commencement date of
January 16, 1993 and an expiration date of June 15, 1998.
WHEREAS, Landlord and Tenant desire to amend the Lease to include the
rental of Suite 115.
NOW THEREFORE, in consideration of the mutual covenants between Landlord
and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended as follows:
a. The Leased Premises include Suite 115 which is located on
the first-floor of the west-wing of the Building.
b. The Leased Premises consist of 23,171 square feet, which
includes 2,470 square feet for Suite 115.
c. The Leased Premises constitute 20.09% of the Building, which
includes 2.09% for Suite 115.
3. Paragraph 2 of the Lease is amended to provide for a Lease Term
for Suite 115 to commence on or before November 1, 1993 and end on
June 15, 1998.
4. Paragraph 3 of the Lease is amended to reflect the Rent of
$1,277,242.61 for the Leased Premises, which includes Rent of
$171,356.25 for Suite 115.
4. The Schedule of Rents is amended to provide for the following
monthly rental for Suite 115.
MONTHS PERIOD COVERED MONTHLY RENT
------ -------------- ------------
1-55 11/01/93 thru 05/31/98 $3,087.50
55.5 06/01/98 thru 06/15/98 $1,543.75
<PAGE> 44
4. Exhibit A of the Lease is amended to include the attached
Floor Plan for Suite 115.
5. All other terms and conditions of the Lease are hereby
ratified and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESS: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
Jasna Rajsic By: Matt Wick
- ------------------------ -------------------------------
Its: General Business Agent
------------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Brenda Guinn By: Tim Manney
- ------------------------ -------------------------------
Its: Chief Financial Officer
------------------------------
<PAGE> 45
FLOOR PLAN
C.B.S.I. EXPANSION
<PAGE> 46
SECOND AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is dated this 14th day of June 1994 between
Orchard Ridge Office Park Limited Partnership, a Michigan Limited Partnership,
whose address is 32605 West Twelve Mile Road, Suite 290, Farmington Hills,
Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a Michigan
Corporation, whose address is 32605 West Twelve Mile Road, Suite 250,
Farmington Hills, Michigan 48334 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to
Lease dated October 22, 1992 for Suite 250 and an Amendment to Lease dated
October 1, 1993 for Suite 115 of the office building incated at 32605 West
Twelve Mile Road, Farmington Hills, Michigan.
WHEREAS, the Lease provides for, among other things, a commencement
date of January 16, 1993 and an expiration date of June 15, 1998.
WHEREAS, Landlord and Tenant desire to amend the Lease to include the
rental of additional space more commonly known as Suite 130.
NOW THEREFORE, in consideration of the mutual covenants between
Landlord and Tenant and other good and valuable consideration, the adequacy
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended to reflect that the Leased
Premises consist of 25,571, which includes 2,400 square feet for Suite 130.
2. Paragraph 1 of the Lease is further amended to reflect that the
Leased Premises constitute 22.12% of the Building, which includes 2.03% for
Suite 130.
3. Paragraph 2 of the Lease is amended to provide for a Lease Term
for Suite 130 to commence on or about June 20, 1994 and to end on June 15,
1998.
4. Paragraph 3 of the Lease is amended to reflect the Rent of
$1,438,762.61 for the Leased Premises, which includes Rent of $161,520.00
for Suite 130.
5. The Schedule of Rents is modified to provide for the following
monthly rental for Suite 130.
PERIOD COVERED MONTHLY RENT
-------------- ------------
06/20/94 thru 06/30/94 $1,320.00
07/01/94 thru 09/30/94 $ 0.00
10/01/94 thru 05/31/98 $3,600.00
06/01/98 thru 06/15/98 $1,800.00
<PAGE> 47
6. Exhibit A of the Lease is amended to include the
attached Floor Plan for the Additional Space.
7. All other terms and conditions of the Lease are hereby
ratified and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
Brenda Guinn By: Matt Wick
- ------------------------- ---------------------------
Its: Business Manager
--------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Brenda Guinn By: Tim Manney
- -------------------------- ----------------------------
Its: Chief Financial Officer
---------------------------
<PAGE> 48
EXHIBIT A
Suite 130
[FLOOR PLAN]
<PAGE> 49
THIRD AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is dated this 28 day of June 1994 between
Orchard Ridge Office Park Limited Partnership, a Michigan Limited Partnership,
whose address is 32605 West Twelve Mile Road, Suite 290, Farmington Hills,
Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a Michigan
Corporation, whose address is 32605 West Twelve Mile Road, Suite 250,
Farmington Hills, Michigan 48334 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to
Lease dated October 22, 1992 for Suite 250, Amendment to Lease dated October 1,
1993 for Suite 115, and Amendment to Lease dated June 14, 1994 for Suite 130 of
the office building located at 32605 West Twelve Mile Road, Farmington Hills,
Michigan.
WHEREAS, the Lease provides for, among other things, a commencement
date of January 16, 1993 and an expiration date of June 15, 1998.
WHEREAS, Landlord and Tenant desire to amend the Lease to include the
rental of additional space more commonly known as Suite 120.
WHEREAS, Landlord and Tenant desire to extend the Term of the Lease
through June 30, 2000 for Suite 120.
NOW, THEREFORE, in consideration of the mutual covenants between
Landlord and Tenant and other good and valuable consideration, the adequacy
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended to reflect that the
Leased Premises consist of 28,391 square feet through June 15, 1998 and
2,820 square feet after June 15, 1998 for Suite 120.
2. Paragraph 1 of the Lease is further amended to reflect
that the Leased Premises constitute 24.51% of the Building through June
15, 1998 and 2.39% after June 15, 1998 for Suite 120.
3. Paragraph 2 of the Lease is amended to provide for a
Lease Term for Suite 120 to commence on August 1, 1994 and to end on
June 30, 2000.
4. Paragraph 3 of the Lease is amended to reflect the Rent
of $1,732,137.61 for the Leased Premises, which includes Rent of
$301,093.75 for Suite 120.
5. The Schedule of Rents is modified to provide for the
following monthly rental for Suite 120.
PERIOD COVERED MONTHLY RENT
-------------- ------------
08/01/1994 thru 06/30/1998 $4,171.25
07/01/1998 thru 06/30/1999 $4,288.75
07/01/1999 thru 06/30/2000 $4,465.00
6. Exhibit A of the Lease is amended to include the
attached Floor Plan for Suite 120.
<PAGE> 50
IN WITNESS WHEREOF, this Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
Brenda P. Guinn By: Matt Wick
- --------------------------- ---------------------------------
Its: Agent
--------------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Brenda P. Guinn By: Tim Manney
- --------------------------- ---------------------------------
Its: Chief Financial Officer
--------------------------------
<PAGE> 51
FLOOR PLAN
Suite 120
<PAGE> 52
ESTOPPEL CERTIFICATE
The Travelers Companies
201 East 5th Street, Suite 1420
Cincinnati, Ohio 45202-4115
RE: Leased Premises known as 32605 West Twelve Mile Road,
Suites 115, 120, 130, and 250, Farmington Hills, Michigan
Ladies and Gentlemen:
Respecting that certain Lease dated October 22, 1992, Amendment to Lease
dated October 1, 1993, Second Amendment to Lease dated June 14, 1994, and Third
Amendment to Lease dated June 28, 1994 (herein cumulatively the "Lease") with
Orchard Ridge Office Park Limited Partnership as Landlord, Tenant hereby
certifies that it has unconditionally accepted possession of the premises
described in said Lease and that said Lease is in full force and effect and has
not been modified, supplemented, or amended in any way and that the date of
commencement of the Term of the Third Amendment to Lease is August 9, 1994 and
the end of the Term of the Lease is July 31, 2000, unless sooner terminated
as therein provided.
Undersigned further certifies that all terms and conditions to be performed
by the Landlord under the Lease has been or are being satisfied and that on this
date there are not existing defenses of offsets which the undersigned has
against the full enforcement of the Lease as amended by Landlord and that no
Rent has been paid in advance (except as provided in the Lease) and that Rent
has continued to be paid in accordance with the Lease since the Commencement.
Tenant is in occupancy of the Leased Premises, and there is ongoing full
operation of Tenant's business at the Leased Premises being conducted by named
Tenant during normal business hours.
Undersigned further agrees not to look to The Travelers Companies as
mortgagee, mortgagee in possession, or successor in title to the property for
accountability for any Security Deposit required by the Landlord under the Lease
unless such sums have actually been received by The Travelers Companies as cash
security for Tenant's performance of the Lease.
Tenant understands that the Lease may be assigned as collateral security
for a mortgage loan to be granted to Landlord by The Travelers Companies under a
Collateral Assignments of Lease from containing (among others) the agreements by
and restrictions on Landlord that, without your prior written authorization as
Assignee, Landlord will not thereafter modify, terminate, or accept surrender of
the Lease and will not reduce, abate, or accept prepayment of any Rent (except
Rent paid in advance). Tenant acknowledges its Landlord's agreements and the
restrictions on Landlord's rights under said Assignment and hereby agrees to be
bound by said agreements and restrictions.
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
By: Frank Albin
----------------------------------
Its: Resource & Facilities Manager
---------------------------------
Date: 8/10/94
--------------------------------
<PAGE> 53
RECEIPT
August 9, 1994
I hereby acknowledge receipt on this 9th day of August 1994 of two (2) keys for
Suite 120 and two (2) keys each for the five private window offices in Suite
120 of the Orchard Ridge Office Park located at 32605 West Twelve Mile Road,
Farmington Hills, Michigan.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Frank Albin
--------------------------------
Its: Resource & Facilities Manager
--------------------------------
<PAGE> 54
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE is dated this 30th day of September 1994
between Orchard Ridge Office Park Limited Partnership, a Michigan Limited
Partnership, whose address is 32605 West Twelve Mile Road, Suite 290,
Farmington Hills, Michigan 48334 ("Landlord") and Complete Business Solutions,
Inc., a Michigan Corporation, whose address is 32605 West Twelve Mile Road,
Suite 250, Farmington Hills, Michigan 48334 ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to Lease
dated October 22, 1992 for Suite 250 and Amendments to Lease dated
October 1, 1993 for Suite 115, June 14, 1994 for Suite 130, and June 28, 1994
for Suite 120 of the office building located at 32605 West Twelve Mile Road,
Farmington Hills, Michigan.
WHEREAS, Landlord and Tenant desire to amend the Lease to include the
rental of additional space located on the first floor of the west-wing currently
known as Suite 110, Suite 120, and Suite 140 ("Additional Space") so that the
Leased Premises will consist of the entire first and second floor of the
west-wing excepting Suite 100 and the common areas.
WHEREAS, Landlord and Tenant desire to extend the Term of the Lease through
June 15, 2003 for the Leased Premises.
NOW, THEREFORE, in consideration of the mutual covenants between Landlord
and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended to reflect that the Leased
Premises shall consist of the entire first and second floor of the
west-wing excepting Suite 100 and the common areas and shall consist of
37,661 square feet which constitutes 31.88% of the Building.
2. Paragraph 2 of the Lease is amended to provide for a Commencement
Date of January 1, 1995 for the Additional Space and an Expiration Date of
June 15, 2003 for the Leased Premises.
4. Paragraph 3 of the Lease is amended to reflect an aggregate Rent
inclusive of this Fourth Amendment to Lease.
5. The Schedule of Rents to the Lease is amended to provide for the
monthly rental set forth on the attached Schedule of Rents to this Fourth
Amendment to Lease.
6. Paragraph B of the first Rider to Lease is replace by the
following paragraph.
Tenant shall have, to the extent the Landlord is able to
grant same, at the then market rental rates, the right of first
refusal to lease any additional space that may come available in
the Building during the Term of the Lease. Upon written notice
from Landlord that it has a prospective Tenant for such space,
Tenant shall have ten (10) days
<PAGE> 55
from receipt of said notice to notify Landlord in writing of its
intent to exercise its option to lease the additional space.
Failure by Tenant to notify Landlord as provided shall release
Landlord of further obligations to Tenant hereunder. The
Expiration Date of the Lease on the additional space shall be as
agreed upon between Landlord and Tenant, but, in no event, shall
the Expiration Date be earlier than the Expiration Date set forth
in Paragraph 2 of this Fourth Amendment to Lease.
7. Paragraph D of the first Rider to Lease is amended to provide
for five (5) additional reserved parking spaces of which two (2) of those
additional reserved parking spaces will replace the exiting reserved
parking spaces currently known as "American Vacation" when these spaces
become available.
8. Exhibit A of the Lease is amended to include the attached Floor
Plan for the suites located on first floor of the west-wing in which
Landlord will build out the Additional Space, using building standard
materials, as indicated on the Floor Plan.
9. All other terms and conditions of the Lease are hereby ratified
and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Fourth Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
Ellen F. Hill By: Matt Wick
- --------------- ----------------------------
Its: Business Manager
---------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Ellen F. Hill By: Tim Manney
- -------------- ----------------------------
Its: Chief Financial Officer
---------------------------
<PAGE> 56
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
<TABLE>
<CAPTION>
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,661 37,661
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01/01/95 N/A N/A N/A N/A 1,610.39 2,519.36 2,505.04 6,634.79
01/16/95 0.00 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 24,570.63
02/16/95 0.00 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 24,570.63
03/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
07/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
08/16/95 11,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 36,271.76
09/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
10/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/16/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/16/95 11,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 36,271.76
01/16/96 0.00 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 24,570.63
02/16/96 0.00 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 24,570.63
03/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/16/96 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
05/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/16/96 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
07/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
08/16/96 11,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 36,271.76
09/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
10/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/16/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
01/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
02/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
03/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
07/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
08/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
09/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
10/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/16/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
01/16/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
02/16/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
03/16/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/16/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/16/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/16/98 57,276.18 57,276.18
07/16/98 57,276.18 57,276.18
08/16/98 57,276.18 57,276.18
09/16/98 57,276.18 57,276.18
</TABLE>
<PAGE> 57
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
<TABLE>
<CAPTION>
- ---------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- --------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,661 37,661
- ---------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/16/98 57,276.10 57,276.10
11/16/98 57,276.10 57,276.10
12/16/98 57,276.10 57,276.10
01/16/99 57,276.10 57,276.10
02/16/99 57,276.10 57,276.10
03/16/99 57,276.10 57,276.10
04/16/99 57,276.10 57,276.10
05/16/99 59,629.92 59,629.92
06/16/99 59,629.92 59,629.92
07/16/99 59,629.92 59,629.92
08/16/99 59,629.92 59,629.92
09/16/99 59,629.92 59,629.92
10/16/99 59,629.92 59,629.92
11/16/99 59,629.92 59,629.92
12/16/99 59,629.92 59,629.92
01/16/2000 59,629.92 59,629.92
02/16/2000 59,629.92 59,629.92
03/16/2000 59,629.92 59,629.92
04/16/2000 59,629.92 59,629.92
05/16/2000 59,629.92 59,629.92
06/16/2000 61,983.73 61,983.73
06/16/2000 61,983.73 61,983.73
07/16/2000 61,983.73 61,983.73
08/16/2000 61,983.73 61,983.73
09/16/2000 61,983.73 61,983.73
10/16/2000 61,983.73 61,983.73
11/16/2000 61,983.73 61,983.73
12/16/2000 61,983.73 61,983.73
01/16/2001 61,983.73 61,983.73
02/16/2001 61,983.73 61,983.73
03/16/2001 61,983.73 61,983.73
04/16/2001 61,983.73 61,983.73
05/16/2001 61,983.73 61,983.73
06/16/2001 64,337.54 64,337.54
07/16/2001 64,337.54 64,337.54
08/16/2001 64,337.54 64,337.54
09/16/2001 64,337.54 64,337.54
10/16/2001 64,337.54 64,337.54
11/16/2001 64,337.54 64,337.54
12/16/2001 64,337.54 64,337.54
01/16/2002 64,337.54 64,337.54
02/16/2002 64,337.54 64,337.54
03/16/2002 64,337.54 64,337.54
04/16/2002 64,337.54 64,337.54
05/16/2002 64,337.54 64,337.54
06/16/2002 66,691.35 66,691.35
07/16/2002 66,691.35 66,691.35
</TABLE>
<PAGE> 58
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
<TABLE>
<CAPTION>
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,661 37,661
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/16/2002 66,691.35 66,691.35
09/16/2002 66,691.35 66,691.35
10/16/2002 66,691.35 66,691.35
11/16/2002 66,691.35 66,691.35
12/16/2002 66,691.35 66,691.35
01/16/2003 66,691.35 66,691.35
02/16/2003 66,691.35 66,691.35
03/16/2003 66,691.35 66,691.35
04/16/2003 66,691.35 66,691.35
05/16/2003 66,691.35 66,691.35
</TABLE>
<PAGE> 59
AMENDMENT TO FOURTH AMENDMENT TO LEASE
THIS AMENDMENT TO FOURTH AMENDMENT TO LEASE is dated this 15th day of
March 1995 between Orchard Ridge Office Park Limited Partnership, a Michigan
Limited partnership, whose address is 32605 West Twelve Mile Road, Suite 290,
Farmington Hills, Michigan 48334 ("Landlord") and Complete Business Solutions,
Inc., a Michigan Corporation, whose address is 32605 West Twelve Mile Road,
Suite 250, Farmington Hills, Michigan 48334 ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to
Lease dated October 22, 1992 for Suite 250 and Amendments to Lease dated
October 1, 1993 for Suite 115, June 14, 1994 for Suite 130, June 28, 1994 for
Suite 120, and September 30, 1994 for Suites 110, 125, and 140 of the office
building located at 32605 West Twelve Mile Road, Farmington Hills, Michigan.
WHEREAS, Landlord and Tenant desire to amend the Schedule of Rents to
Fourth Amendment to Lease to reflect rental payments owing on the first of each
month pursuant to Paragraph 3 of the Lease.
NOW, THEREFORE, in consideration of the mutual convenants between
Landlord and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. The Schedule of Rents to Fourth Amendment to Lease is
replaced with the attached Schedule of Rents to Fourth Amendment to
Lease (Revised March 7, 1995).
2. All other terms and conditions of the Lease are hereby
ratified and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Amendment to Fourth Amendment to Lease has been
executed by the parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
MaryAnn Szwabowski By: Matt Wick
- -------------------------------- ------------------------------
Its: Business Manager
-----------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
MaryAnn Swabowski By: Tim Manney
- --------------------------------- ------------------------------
Its: Chief Financial Officer
-----------------------------
<PAGE> 60
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
(Revised March 7, 1995)
<TABLE>
<CAPTION>
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,661 37,661
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01/01/95 5,850.56 3,087.50 3,600.00 4,171.25 16,709.31
02/01/95 0.00 3,087.50 3,600.00 4,171.25 10,858.75
02/20/95 N/A N/A N/A N/A 1,069.76 1,573.57 2,743.33
03/01/95 10,850.57 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 30,244.12
03/09/95 N/A N/A N/A N/A N/A N/A 3,841.06 3,841.06
04/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
07/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
08/01/95 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
09/01/95 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
10/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/01/95 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/01/96 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
01/01/96 5,850.56 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 30,421.19
02/01/95 0.00 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 24,570.63
03/01/96 10,850.57 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 35,421.20
04/01/96 19,201.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 43,771.76
05/01/96 19,201.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 43,771.76
06/01/96 19,201.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 43,771.76
07/01/96 19,201.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 43,271.76
08/01/96 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
09/01/96 16,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 41,271.76
10/01/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/01/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/01/96 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
01/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
02/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
03/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
06/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
07/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
08/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
09/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
10/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
11/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
12/01/97 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
01/01/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
02/01/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
03/01/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
04/01/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
05/01/98 21,701.13 3,087.50 3,600.00 4,171.25 3,328.13 5,206.67 5,177.08 46,271.76
</TABLE>
<PAGE> 61
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
(Revised March 7, 1995)
<TABLE>
<CAPTION>
- --------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,651 37,661
- --------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,171.25
06/01/98 10,850.56 1,543.75 1,800.00 2,085.52 1,664.06 2,603.33 2,588.54 28,638.05 51,773.91
07/01/98 57,276.10 57,276.10
08/01/98 57,276.10 57,276.10
09/01/98 57,276.10 57,276.10
10/01/98 57,276.10 57,276.10
11/01/98 57,276.10 57,276.10
12/01/98 57,276.10 57,276.10
01/01/99 57,276.10 57,276.10
02/01/99 57,276.10 57,276.10
03/01/99 57,276.10 57,276.10
04/01/99 57,276.10 57,276.10
05/01/99 57,276.10 57,276.10
06/01/99 58,453.01 58,453.01
07/01/99 59,629.92 59,629.92
08/01/99 59,629.92 59,629.92
09/01/99 59,629.92 59,629.92
10/01/99 59,629.92 59,629.92
11/01/99 59,629.92 59,629.92
12/01/99 59,629.92 59,629.92
01/01/2000 59,629.92 59,629.92
02/01/2000 59,629.92 59,629.92
03/01/2000 59,629.92 59,629.92
04/01/2000 59,629.92 59,629.92
05/01/2000 59,629.92 59,629.92
06/01/2000 60,806.83 60,806.83
07/01/2000 61,983.73 61,983.73
08/01/2000 61,983.73 61,983.73
09/01/2000 61,983.73 61,983.73
10/01/2000 61,983.73 61,983.73
11/01/2000 61,983.73 61,983.73
12/01/2000 61,983.73 61,983.73
01/01/2001 61,983.73 61,983.73
02/01/2001 61,983.73 61,983.73
03/01/2001 61,983.73 61,983.73
04/01/2001 61,983.73 61,983.73
05/01/2001 61,983.73 61,983.73
06/01/2001 63,160.63 63,160.63
07/01/2001 64,337.54 64,337.54
08/01/2001 64,337.54 64,337.54
09/01/2001 64,337.54 64,337.54
10/01/2001 64,337.54 64,337.54
11/01/2001 64,337.54 64,337.54
12/01/2001 64,337.54 64,337.54
</TABLE>
<PAGE> 62
SCHEDULE OF RENTS TO FOURTH AMENDMENT TO LEASE
(Revised March 7, 1995)
<TABLE>
<CAPTION>
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
PAYMENT SUITE 250 SUITE 115 SUITE 130 SUITE 120 SUITE 110 SUITE 125 SUITE 140 COMBINED MONTHLY RENT
Lease/Riders 1st Amndmt 2nd Amndmt 3rd Amndmt 4th Amndmt 4th Amndmt 4th Amndmt 4th Amndmt Entire Lease
20,701 2,470 2,400 2,820 2,250 3,520 3,500 37,661 37,661
- ------- ------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01/01/2002 54,337.54 64,337.54
02/01/2002 64,337.54 64,337.54
03/01/2002 64,337.54 64,337.54
04/01/2002 64,337.54 64,337.54
05/01/2002 64,337.54 64,337.54
06/01/2002 65,514.45 65,514.45
07/01/2002 66,691.35 66,691.35
08/01/2002 66,691.35 66,691.35
09/01/2002 66,691.35 66,691.35
10/01/2002 66,691.35 66,691.35
11/01/2002 66,691.35 66,691.35
12/01/2002 66,691.35 66,691.35
01/01/2003 66,691.35 66,691.35
02/01/2003 66,691.35 66,691.35
03/01/2003 66,691.35 66,691.35
04/01/2003 66,691.35 66,691.35
05/01/2003 33,345.67 33,345.67
06/01/2003
</TABLE>
<PAGE> 63
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE is dated this 14 day of October 1994 between
Orchard Ridge Office Park Limited Partnership, a Michigan Limited Partnership,
whose address is 32605 West Twelve Mile Road, Suite 290, Farmington Hills,
Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a Michigan
Corporation, whose address is 32605 West Twelve Mile Road, Suite 250, Farmington
Hills, Michigan 48334 ("Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant entered into a certain Lease and Riders to
Lease dated October 22, 1992 for Suite 250 and First, Second, Third and Fourth
Amendments to said Lease, the cumulative effect of which are that, except for
Suite 100 (Bridgewall Construction Co.) and the common areas, the current Leased
Premises consist of the first and second floors of the West-Wing of the Office
Complex.
WHEREAS, Landlord and Tenant desire to further amend the Lease to include
the rental of additional space located on the first floor of the East-Wing more
commonly known as Suite 195.
NOW, THEREFORE, in consideration of the mutual covenants between Landlord
and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended to reflect that from October
17, 1994 through the end of the Lease Term, the Leased Premises shall
include Suite 195, an additional 4,428 square feet space which comprises
an additional 3.75% of the Building.
2. Paragraph 3 of the Lease is amended to reflect an aggregate Rent
inclusive of this Fifth Amendment to Lease.
3. The Schedule of Rents to the Lease is amended to provide for a the
following monthly rents for Suite 195:
Through June 15, 1995 6549.75
Through June 15, 1996 6549.75
Through June 15, 1997 6549.75
Through June 15, 1998 6549.75
Through June 15, 1999 6734.25
Through June 15, 2000 7011.00
Through June 15, 2001 7287.75
Through June 15, 2002 7564.50
Through June 15, 2003 7841.25
<PAGE> 64
4. Exhibit A of the Lease is amended to include the attached Floor
Plan for Suite 195 in which Tenant will accept in an "as is" condition.
5. All other terms and conditions of the Lease are hereby ratified
and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Fifth Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
Janette L. Landis By: Matt Wick
- ------------------ ------------------------------
Its: Business Manager
-----------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Janette L. Landis By: Tim Manney
- ------------------ -----------------------------
Its: Chief Financial Officer
-----------------------------
<PAGE> 65
SIXTH AMENDMENT TO LEASE
THIS SIXTH AMENDMENT TO LEASE is dated this 10th day of August 1995 between
Orchard Ridge Office Park Limited Partnership, a Michigan Limited Partnership,
whose address is 32605 West Twelve Mile Road, Suite 290, Farmington Hills,
Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a Michigan
Corporation, whose address is 32605 West Twelve Mile Road, Suite 250, Farmington
Hills, Michigan 48334 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant executed a certain Lease and Riders to Lease
dated October 22, 1992 for Suite 250 and Amendments to Lease dated October 1,
1993 for Suite 115, June 14, 1994 for Suite 130, June 28, 1994 for Suite 120,
September 30, 1994 for Suites 110, 125, and 140, and October 14, 1994 for Suite
195 of the office building located at 32605 West Twelve Mile Road, Farmington
Hills, Michigan.
WHEREAS, Landlord and Tenant desire to amend the Lease to reduce the square
footage of Suite 195.
NOW, THEREFORE, in consideration of the mutual covenants between Landlord
and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows:
1. Paragraph 1 of the Lease is amended to reflect that effective
August 1, 1995 the square footage for Suite 195 shall be reduced from 4,428
square feet to 800 square feet which constitutes 0.68% of the Building.
2. Paragraph 3 of the Lease is amended to reflect an aggregate rent
inclusive of this Sixth Amendment to Lease.
3. The Schedule of Rents to the Lease is amended to reflect that
effective August 1, 1995 the monthly rent for Suite 195 shall be reduced to
$1,166.67 per month.
4. Exhibit A of the Lease is amended to include the attached Floor
Plan for Suite 195 which reflects the square footage leased in accordance
with this Sixth Amendment to Lease.
5. With respect to Suite 195 only, Landlord may terminate the lease
relationship of Suite 195 with a five (5) day written notice to the Tenant
delivered by Certified Mail, Return Receipt Requested and Tenant may
terminate the lease relationship of Suite 195 with a thirty (30) day
written notice to the Landlord delivered by Certified Mail, Return Receipt
Requested. This right to terminate shall only apply to Suite 195.
<PAGE> 66
6. All other terms and conditions of the Lease are hereby ratified
and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Sixth Amendment to Lease has been executed by the
parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
PARTNERSHIP
MaryAnn Szwabowski By: Matt Wick
- --------------------------- ------------------------------
Its: Business Manager
-----------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Patrice G. Parker By: Tim Manney
- --------------------------- ------------------------------
Its: C.F.O.
-----------------------------
<PAGE> 67
SEVENTH AMENDMENT TO LEASE
THIS SEVENTH AMENDMENT TO LEASE is dated this 6th day of August 1996
between Orchard Ridge Office Park Limited Partnership, a Michigan Limited
Partnership, whose address is 32605 West Twelve Mile Road, Suite 290, Farmington
Hills, Michigan 48334 ("Landlord") and Complete Business Solutions, Inc., a
Michigan Corporation, whose address is 32605 West Twelve Mile Road, Suite 250,
Farmington Hills, Michigan 48334 ("Tenant").
W I T N E S S E T H
WHEREAS, Landlord and Tenant entered into a certain Lease and Riders to
Lease dated October 22, 1992 for Suite 250 and First, Second, Third, Fourth,
Fifth, and sixth Amendments to said Lease for Suites 110, 115, 120, 125, 130,
140, and 195 of the building located at 32605 West Twelve Mile Road, Farmington
Hills, Michigan.
WHEREAS, Landlord and Tenant desire to further amend the Lease to include
the rental of additional contiguous square footage for Suite 195.
NOW, THEREFORE, in consideration of the mutual covenants between Landlord
and Tenant and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged and accepted, the parties hereby
agree as follows.
1. Paragraph 1 of the Lease is amended to reflect that from August
15, 1996 through the end of the Lease Term, which is June 15, 2003, the
square footage for Suite 195 shall be increased from 800 square feet to
4,428 square feet which constitutes 3.75% of the Building.
2. Paragraph 3 of the Lease is amended to reflect an aggregate Rent
inclusive of this Seventh Amendment to Lease.
3. The Schedule of Rents to the Lease is amended to provide for the
following monthly rental for Suite 195:
08/15/1996 thru 08/31/1996 $3,591.80
09/01/1996 thru 05/31/1997 $6,549.75
06/01/1997 thru 05/31/1998 $6,549.75
06/01/1998 thru 05/31/1999 $6,734.25
06/01/1999 thru 05/31/2000 $7,011.00
06/01/2000 thru 05/31/2001 $7,287.75
06/01/2001 thru 05/31/2002 $7,564.50
06/01/2002 thru 05/31/2003 $7,841.25
06/01/2003 thru 06/15/2003 $3,920.63
If the Landlord fails to deliver the Leased Premises on the Commencement
Date of August 15, 1996, the Commencement Date and Schedule of Rents shall be
postponed until the Leased Premises are substantially complete in accordance to
the attached Floor Plan.
4. Exhibit A of the Lease is amended to include the attached Floor Plan
for Suite 195 for which Landlord will perform certain improvements, at Tenant's
expense, as shown on the Floor Plan for which Tenant will pay the total sum of
$20,000 to Landlord upon the execution of this Seventh Amendment to Lease.
<PAGE> 68
5. Any other Agreements in reference to Suite 195 except as stated in
this Seventh Amendment to Lease are hereby null and void.
6. All other terms and conditions of the Lease are hereby ratified
and confirmed and remain in full force and effect.
IN WITNESS WHEREOF, this Seventh Amendment to Lease has been executed by
the parties hereto as of the day and year first above written.
WITNESSES: LANDLORD:
ORCHARD RIDGE OFFICE PARK LIMITED
MaryAnn Szwabowski By: Enriko Sasson
- ------------------- ------------------------------
Its: General Partner
-----------------------------
TENANT:
COMPLETE BUSINESS SOLUTIONS, INC.
Julie Fuller By: Tim Manney
- ------------------- ------------------------------
Its: Chief Financial Officer
-----------------------------
<PAGE> 1
EXHIBIT 10.4
LEASE AGREEMENT
THIS INDENTURE of lease made at Madras 26th March, 1993 between the PRESIDENT OF
INDIA through the Development Commissioner, Madras Export Processing Zone,
Ministry of Commerce, presently at the Administrative Office Building, National
Highway 45, Tambaram, Madras - 600 045 hereinafter called "Lessor" (which
expression shall unless the context does not admit include his successors in
office and assigns) on the one part and M/s. Total Business Solutions (India)
Pvt. Ltd., Unit 13, Block 2, BDF Buildings, Madras Export Processing Zone,
Tambaram, Madras - 600 045 and represented by its Director Shri K. Achyuthan,
Madra hereinafter referred to as the "Lessee" (which expression are included,
unless such inclusion is inconsistent with the context of the meaning thereof
its executors and assigns) on the other part: WHEREAS the Government of India
has constituted, the Madras Export Processing Zone, hereinafter called the MEPZ
in the land acquired for the purpose with the object of encouraging the export
industries in India and for earning foreign exchange on the export of various
kinds of products from the MEPZ in the interest of the national economy by
establishing industrial units in the said zone: AND WHEREAS the Lessor has
contructed a building known as Standard Design Factory on a portion of land in
MEPZ for the purpose of allotting the same to various entrepreneurs carrying on
business of manufacturing and or processing articles, things, materials
components and instruments relating to various items of manufacture:
AND WHEREAS the Lessee have approached the Lessor for demising to it a portion
of the said building constructed and or erected on the Unit No. 13, Block 2, in
the MEPZ within the village limits of Kadaper of Taluk Saidapet, District
Chengalpattu. Sub-Registration district of Tambaram containing the
admeasurement 500 sq. meters or thereabouts and more particularly described in
the first Schedule hereunder written to establish manufacturing/processing
establishment for the manufacture of articles, things, materials, components,
instruments relating to the items for manufacture of export goods at the rent
and upon the terms and conditions hereinafter contained and to grant to it all
facilities and a variety of concessions.
AND WHEREAS the Lessor has agreed to let out a portion of the said building
with partition, fittings and fixtures thereto as listed in the Second schedule
admeasuring about 500 Sq. meters equivalent to meters of thereabout on the II
floor of the said building with effect from 13th January, 1992 at the rent of
Rs. 37,500/- per quarter for a term of five years upon the terms and conditions
hereinafter contained.
AND WHEREAS it has been agreed by and between the parties hereto that the stamp
duty and registration charges shall be borne and paid by the Lessee.
Yasmin Ahmed ....2...
Development Commissioner, For TOTAL BUSINESS SOLUTIONS
Madras Export Processing Zone, (INDIA) PRIVATE LIMITED,
Madras - 45. K. Achyuthan
DIRECTOR.
<PAGE> 2
: 3 :
f) Not to manufacture/process any article, things, materials, components
and instruments which do not in any way relate to the industry other than the
authorized one for which permission was granted.
g) To submit from time to time to the Development Commissioner, plans and
the schemes of the particular industry to be established together with such
other details as may be required.
h) To export the entire production (whether manufactured/processed
including seconds, wastes and scrap material to foreign countries in accordance
with the provisions of law and with the provisions of letter of
approval/licence subject to such concessions and facilities as may be given to
the government to the Lessees in the matter of disposal of seconds, waste and
scrap material, the Customs Duty, putting of applications or Import Licences,
etc., and such other concessions as may be notified hereafter from time to time.
i) To furnish a legal undertaking as may be prescribed for the fulfilment
of export obligations set out in their application for setting up industries
in the Zone.
j) To arrange forwarding/clearance of manufactured/processed goods for
export or import of raw materials spares and such other materials as are
required for manufacture/processing to the satisfaction of the Development
Commissioner or agencies authorized by the Development Commissioner.
k) Not to allow any of the products manufactured/processed in MEPZ
produced by the Lessee to enter or pass into and/or be sold in any market in
India or in anywhere in India provided always that the Development Commissioner
may permit the Lessee to sell and/or dispose of the products to enter or pass
into and/or be sold in any market in India or anywhere in India.
l) To sell or dispose of the products manufactured/processed by the Lessee
in the local markets in India or as may be directed by the Development
Commissioner in the event the Development Commissioner considers that the said
products are essential or necessary for national defence or for countering
natural disaster or considered urgent and necessary for the national economy
upon payment as may be mutually agreed upon and that the Lessee shall not
entitled to make any/other claim for compensation for delivering the products
as aforesaid in any manner whatsoever.
....4..
Yasmin Ahmed
- -------------------------
Development Commissioner, For TOTAL BUSINESS SOLUTIONS
Madras Export Processing Zone, (INDIA) PRIVATE LIMITED
Madras-45. K. Achyuthan
DIRECTOR.
<PAGE> 3
: 4 :
m) To permit the Development Commissioner or any officer, surveyor, workmen
or other persons employed by him from time to time at any time without any prior
notice being given to enter into and upon the demised premises and to inspect
the general state of the demised premises and also processing plant and
machinery, etc., and the books of account and other documents and vouchers
concerning the products manufactured by the Lessee.
n) Not to do or permit anything to be done or stored (except those for
production of products approved for manufacture in the demised premises) which
may be a nuisance, annoyance, dangerous or disturbance to the owners, occupiers
or residents of the other premises in the vicinity.
o) To use the demised premises only for the purpose of manufacturing,
processing or assembling products for export and other purposes incidental
thereto the same and not to use the said demised premises or any part thereof
for any other purpose.
p) Not to sublet, assign or transfer, change or alienate the premises or any
part thereof without the prior consent in writing of the Lessor first hand and
obtained and subject to such terms and conditions as the Lessor may prescribed
in granting the possession to the Lessee for the transfer of the said demised
premises or any part thereof as hereinbefore mentioned.
q) To intimate before hand in writing to the Lessor within a forthright of
the changes made or effected in the corporate structure of the constitution of
the Lessee.
r) To submit statements of accounts and such other details within such time
as may be stipulated by the Lessor during the term of these presents giving all
the necessary particulars as may be required by the Lessor.
s) To allow the persons and vehicle entering and leaving MEP2 to be examined
by the staff of the Lessor or any agency authorised by the Development
Commissioner for the purpose of checking that no products or any materials
manufactured in the demised premises are removed in the manner not authorised
by those presents.
t) Not to make any structural alterations or changes of any nature whatsoever
to the demised premises or any additions, alterations or changes of any nature
whatsoever to the building erected on the demised premises without the previous
permission of the Lessor have been obtained in writing and if permitted, to
carry out the same in accordance with the building Bye-laws of the local
authority or any other statutory Regulations.
....5..
Yasmin Ahmed TOTAL BUSINESS SOLUTIONS (INDIA) PRIVATE LIMITED,
- ---------------------
DEVELOPMENT COMMISSIONER, DIRECTOR.
MADRAS EXPORT PROCESSING ZONE,
MADRAS-45. K. Achyuthan
<PAGE> 4
: 5 :
u) Not to cause any annoyance or hindrance to other tenants/lessees of the
lessor and to so conduct the activities which will impede the other lessee of
the lessor in manufacturing or processing the multi products AND in the event
the Lessee experiences or finds any difficulty in a conducting its/his/their
business and/or activities connected therewith smoothly and efficiently by
reason of the user of the said building or any portion thereof by the other
tenants of the building the same shall be referred to the Development
Commissioner and any directions or orders issued by the Development
Commissioner in relations thereto shall be complied with by the Lessee.
v) To observe and perform all rules and regulations prescribed under the
Labour Legislation such as Industrial Disputes Act, Workmen's Compensation
Act, Payment of Wages Act, Minimum Wages Act and any other statutes governing
the relationship of the employers including the Factories Act and Fatal
Accidents Act.
w) If the said rent hereby reserved shall be in arrears for the space of 30
days whether the same shall have been legally demanded or not, if within a
period of ONE year from the date of the commencement of Lease the entire
demised premises are not utilised for the purpose for which the same has been
demised or if the Lessee ceases to manufacture products for a period of six
continuous months for whatever cause arising, including a strike, lockout or
any injunction from Court in any sort of litigation, if and whenever there
shall be a breach of any of the covenants and conditions hereinbefore set out or
referred to including breach of any of the conditions of meeting the export
obligations already undertaken by the Lessee and or as may be notified from
time to time by the Lessor or the Lessee becoming insolvent or is wound up or
amalgamated or merged with other Body Corporate or otherwise pursuant to the
Court's Orders or under the Provisions of Law then in force or under any
Agreement entered into by the Lessee, the Lessor may re-enter upon any part of
the demised premises in the name of the whole and thereupon the demise hereby
granted shall absolutely cease and determine and in that case, PROVIDED ALWAYS
THAT the Lessor shall in addition to the right or determination of this lease
and to effect re-entry as mentioned aforesaid be entitled to recover as and by
way of compensation such amount as may be considered by the Lessor as
appropriately recoverable from the Lessee in the event the Lessee were not given
or granted all those various concessions and variety of facilities.
....6..
For TOTAL BUSINESS SOLUTIONS
(INDIA) PRIVATE LIMITED,
Yasmin Ahmed
- ---------------------
DEVELOPMENT COMMISSIONER, K. Achyuthan DIRECTOR.
MADRAS EXPORT PROCESSING ZONE,
MADRAS-45.
<PAGE> 5
: 6 :
x) At the expiration or sooner of the termination of the said term quietly to
deliver upto the Lessor the vacant possession of the demised premises after
removing the partitions and fittings and fixtures pertaining thereto any
alterations, changes or additions erected on the demised premises by the
Lessee and such removal should be done without in any way damaging or defacing
the premises and such delivery should be given within a period of SIXTY days
after expiration or sooner determination of the said term, provided always that
in the event the Lessee fails to deliver vacant and peaceful possession of the
demised premises as aforesaid, the said partitions and fittings and fixtures
and any alterations, changes or additions as aforesaid on the expiry of the
above mentioned period shall belong to the Lessor and the Lessee shall not be
entitled any compensation therefor provided always that in case the Lessor
desires to retain the said partitions and fittings and fixtures etc. as
aforesaid the Lessor shall pay to the Lessee compensation thereof as may be
determined by the Development Commissioner and the Lessee shall not be entitled
to raise any objection against such retention and or the valuation determined
by the said Development Commissioner as aforesaid, provided always that the
lessee shall continue to be liable to pay compensation for the period of
unauthorised occupation of the said premises till the date the Lessor hands
over vacant and peaceful possession of the demised premises at such rates as
may be charged by the Lessor.
y) If the said rent hereby reserved shall be in arrears for a period of 30 days
whether the same shall have been legally demanded or not the Lessor may take
steps to recover the arrears of rent as arrears of land revenue or move to the
appropriate Court of Law and recovery.
z) A Penal Interest in rent arrears shall be payable on rent in arrears in
the first 12 months at 12% next 12 months but upto 24 months at 12% on the
first year arrears and at 18% for subsequent months and rental arrears for
beyond 24 months at 12% on first year arrears, 13% on second year and 24% beyond
24 months.
aa) The lessor doth hereby covenant with the Lessee that the Lessee paying the
rent hereby reserved and performing in the covenants herein before on the
Lessee's. Part contained shall and may peaceably enjoy the demised premises for
the said term hereby granted without any interruption or disturbance from or by
the Lessor or any person or persons lawfully claiming by form or under the
Lessor.
....7..
Yasmin Ahmed
- --------------------- For TOTAL BUSINESS SOLUTIONS
(INDIA) PRIVATE LIMITED
DEVELOPMENT COMMISSIONER,
MADRAS EXPORT PROCESSING ZONE,
MADRAS-45.
K. Achyuthan DIRECTOR
<PAGE> 6
: 7 :
ab) All disputes and differences arising out of or in any way touching or
concerning these Presents (except as to any matters and decision of which is
left to the sole discretion of the said lessor, as especially provided for in
these presents) shall be referred to be arbitration of two arbitrators, one
each to be appointed by the respective parties to these Presents. The
arbitrators so appointed shall appoint an Umpire in the manner provided in the
Arbitration Act 1940. It will be no objection that a person appointed as
Arbitrator on behalf of the Lessor is or was an employee of the Government, that
he had to deal with the matters to which the lease herein relates and/or that
in the course of his duties as such employee of the Government he has expressed
a view on all or any of the matters in dispute or difference. In the event of
either or both of the arbitrators dying, neglecting or refusing to act or
resigning, or being unable to act for any reason, the substitute(s) to be
appointed by the concerned parties shall be entitled to proceed with the
reference from the stage at which it was left by the previous
Arbitrator/Arbitrators. The cost of and in connection with the arbitration
shall be in the discretion of the Arbitrators who may make suitable provisions
for the same in their Award. Subject to the aforesaid, the provisions of the
Arbitration Act, 1940 and the Rules thereunder and any statutory modifications
thereof for the same for the time being in force shall apply to the arbitration
proceedings under this clause.
ac) If the Lessee shall have duly performed and observed the covenants and
conditions on the part of the Lessee herein before contained and shall at the
end of the said term hereby granted be desirous of receiving a new lease of the
demised premises and of such desire shall give notice granted in writing to the
Lessor before the expiration of the term hereby granted, the Lessor shall and
will at the cost and expenses in every respect of the lease grant to the Lessee
a new lease of the demised premises for a further term of five years on payment
of yearly rent as may be determined by the Lessor AND WITH covenants provisos
and stipulations herein before contained except this provision for renewal and
such new lease shall contain in lieu of this clause a covenant at end of the
said renewed term of five years the Lessor shall at the like cost and expense
grant to the lessee further renewals and that every such renewal shall be for
such terms and subject to such covenants, provisos and stipulations. The cost
of and in connection with arbitration shall be at the discretion of the
arbitrator who may make a suitable provision of the same in his award subject
as aforesaid, the Arbitration Act 1940 shall apply to the arbitration
proceedings under this clause.
....8..
Yasmin Ahmed For TOTAL BUSINESS SOLUTIONS
- --------------------- (INDIA) PRIVATE LIMITED,
DEVELOPMENT COMMISSIONER, K. Achyuthan DIRECTOR
MADRAS EXPORT PROCESSING ZONE,
MADRAS-45.
<PAGE> 7
: 8 :
IN WITNESS WHERE OF YASMIN AHMED the Development Commissioner of MEPZ,
Ministry of Commerce, Government of India on behalf of the President of India
set her hand and affix the common seal of office hereto on its behalf and the
lessee hath here unto got his hand affixed the common seal of the Company the
day and year first abovewritten.
FIRST SCHEDULE
(Description of Building)
All that piece of parcel of land and premises numbered as Unit 13, Block 2, SDf
Building, M.E.P.Z., Tambaram, Madras - 600 045 in the Madras Export Processing
Zone in Schedule No. 164/1 (part) within the village limits of Kadaperi, Taluk
Saidapet, District Chengalpattu containing by admeasurement 500 sq. mtrs or
thereabouts and bounded as follows, with partitions, fittings and fixtures
thereto listed in Second Schedule annexed to that to say--
On or towards the north say... Block 1
On or towards the south say... Corridor between Unit 13
and Unit 14
On or towards the east say... Common Corridor & Pathway
On or towards the west say... By Road
SECOND SCHEDULE
INVENTORY OF ELECTRICAL INSTALLATION.
Name of the Occupant : M/s. Total Business Solutions
(India) Pvt. Ltd.
Location : Unit 13, Block 2, SDF Buildings,
Madras Export Processing Zone.
- -------------------------------------------------------------------------
SR.No. Description Qty
1. 2. 3.
- -------------------------------------------------------------------------
A. LIGHT FIXTURES, WIRING & OTHER ACCESSORIES:
1. 'Philips' make single mounting soil type light
fixtures type TMS 21/140 with accessories and
fluorescent lamp 11 Nos.
....9..
Yasmin Ahmed For TOTAL BUSINESS SOLUTIONS
- ------------------- (INDIA) PRIVATE LIMITED
K. Achyuthan DIRECTOR
Development Commissioner,
Madras Export Processing Zone.
Madras-45
<PAGE> 8
: 9 :
2. 'Philips' make twin mounting soil type light
fixtures TMC 21/240 with accessories and
fluorescent lamps 2 Nos.
3. 'Philips' make twin mounting Industrial type
light fixtures type TKC 22/240 with accessories
and fluorescent lamps 32 Nos.
4. Mirror light fittings with 20w fluorescent lamp 2 Nos.
5. 5 Amps Piano type switches 81 Nos.
6. 5 Amps 3 pin sockets 10 Nos.
7. 15 Amps piano type switches 14 Nos.
8. 15 Amps 3 pin socket 14 Nos.
9. Total No. of light points 47 Nos.
10. Total No. of Fan points 29 Nos.
11. total No. of 5 Amps 3 pin plug points 10 Nos.
12. Total No. of 15 Amps 3 pin plug points 14 Nos.
B. MAIN BOARDS & MCB DISTRIBUTION BOARDS ETC.
1. 8 way SP MCB DB with accessories:
i. 63 Amps Isolator 1 No.)
ii. 10 Amps SP MCB 6 Nos) 2 sets
2. 12 way SP MCB DB with accessories:
i. 60 Amps Isolator 1 No.)
ii. 15 Amps SP MCB 8 Nos) 2 sets
3. 200 Amps TPN sw fuse switch unit with NRC fuse
(fixed on angle iron frame work) 1 No.
4. 100 Amps TPM fuse switch unit with NRC fuse
(fixed on angle iron frame work) 2 Nos.
....10..
Yasmin Ahmed For TOTAL BUSINESS SOLUTIONS
- ----------------- [INDIA] PRIVATE LIMITED,
K. Achyuthan DIRECTOR
Development Commissioner,
Madras Export Processing Zone,
Madras - 45.
<PAGE> 9
: 10 :
5. Main Penal Board with following items:
i. 200 Amps TPN fuse switch unit with HRC fuse 1 No. )
ii. 100 Amps TPN fuse switch unit with HRC fuse 3 Nos. )
iii. 32 Amps SPN switch fuse unit 4 Nos. )
iv. Ammeter-0 to 200 A with CTS selector switch 1 No. )
v. Voltmeter 0 to 600 V with selector switch 1 No. ) 1 set
vi. Indicating lamps with bulbs 3 Nos. )
vii. Side look fuses 3 Nos. )
viii. Toggle Switches 3 Nos. )
ix. 200 Amps busbar chamber Al. busbars 1 No. )
TOILETS, PANTRY, AHU & HALL PORTION
1. Wash basin with fittings (I/C tap)................ 2 Nos.
2. Indian Water closet with fittings................. 3 Nos.
3. High level flush tank (Cost iron)................. 3 Nos.
4. European Water closet with fittings............... 1 No.
5. Porcelain low level flush cistern................. 1 No.
6. Mirror............................................ 2 Nos.
7. Brass Bib Cock.................................... 4 Nos.
8. Brass stop cock................................... 7 Nos.
9. Porcelain Urinal 2 Nos. with automatic cister 1 set
10. Nahins trap....................................... 5 Nos.
11. Kitchen sink with fittings (1/C tap).............. 1 No.
12. Wooden door (Flush) shutters...................... 7 Nos.
12A. Wooden door (Flush) double shutter................ 1 No.
13. M.S. Rolling shutter.............................. 1 No.
14. Anodised Aluminium glaled door
with all fittings D1........................ 1 No.
D2........................ 2 Nos.
(Common door)
....11..
Yasmin Ahmed For TOTAL BUSINESS SOLUTIONS
- ------------------ [INDIA] PRIVATE LIMITED
K. Achyuthan DIRECTOR
Development Commissioner,
Madras Export Processing zone
Madras - 45.
<PAGE> 10
: 11 :
15. Aluminium glaxed windows W1.................. 1 No.
W4.................. 1 No.
W2.................. 16 Nos.
W5.................. 8 Nos.
W3 (Ventilators).... 5 Nos.
SIGNED, SEALED AND DELIVERED Yasmin Ahmed
-----------------------
By Smt. YASMIN AHMED I.A.S. Development Commissioner,
Development Commissioner, Madras Export Processing Zone,
Madras Export Processing Zone on Madras-45
behalf of President of India in the
presence of
1. V. Rajaram (V. Rajaram , MEPZ, Madras)
2. Suresh (Suresh, Ms-45)
SIGNED, SEALED AND DELIVERED
By the above-named Lessee and represented by its Director Shri K.
Achyuthan
For TOTAL BUSINESS SOLUTIONS (INDIA) PRIVATE LIMITED....
DIRECTOR
in the presence of
1. RS Iyengar
27 Jumaih Street
Madras 34
2. P. Gunasagar
P. GUNASAGAR
1 Ekamkara Chetty Street
Komkkupet ....12..
Madras - 600021
For TOTAL BUSINESS SOLUTIONS
(INDIA) PRIVATE LIMITED,
K. Achyathan DIRECTOR
<PAGE> 11
: 12 :
The COMMON SEAL of the abovenamed Licensee was, pursuant to a Resolution of its
Board of the Directors of the Directors passed in that behalf of
For TOTAL Business Solutions (India) Private Ltd
K. Achyuthan
affixed hereto in the presence of:
[SEAL]
1. B. Venkateshwar Rao
G. Narayanan
<PAGE> 12
EXHIBIT 10.4
MADRAS EXPORT PROCESSING ZONE
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE, DEPARTMENT OF COMMERCE
MEPZ/Appln/31/84(1). II Floor, "Rosy Tower",
7, Nungambakkam High Road,
Madras-600 034.
Dated: 23-9-1986.
To
M/s. Indchem Electronics Ltd.,
Post Bag No. 5059,
Plot 47, Developed Plots for
Electrical and Electronics
Industries, Seevaram Village,
Porungudi, Madras-600 096.
Sirs,
Sub: MEPZ - Allotment of unit in SDF building to
Indchem Electronics Ltd. for setting up a
unit in MEPZ for development of computer
software.
Ref: 1. Government of India, Ministry of Commerce
Letter No. 8/25/84-MEPZ, dt, 14.5.1985.
2. Your letter dated 27,8.1986.
-------------------------------------------------
Kindly refer to the Government of India, Ministry of Commerce letter
No. 8/25/84-MEPZ, dt, 14.5.1985 wherein the Ministry has communicated the
Government's approval for setting up a new industrial undertaking in MEPZ for
development of computer software for export. The validity of the Letter of
Approval has been extended upto 13.11,1986 in my letter No. MEPZ/Appln/31/84,
dt. 30.6.1986. After careful examination of the requirement of area for setting
up the unit with reference to the volume of exports, the employment content, the
machines to be installed etc. and taking into consideration your preference to
the space in the SDF building and the vacant site in the zone indicated in the
letter second cited, we write to inform you that the Unit/ No. 13 admeasuring
500 sq. metres in Block No. II of the SDF building in the Zone has been
allotted to you for the manufacture of your licenced product.
2. You are requested to take action to take possession of the said premises
in the said SDF Building at the earliest date. However, before possession is
handed over to you the formalities of executing tenancy agreement and payment of
lease rent will have to be completed by you.
3. A copy of tenancy agreement is sent herewith. I request you to complete
it and forward three copies of it duly typed on the ledger paper for our
scrutiny and further action.
4. The lease rent for the space in SDF unit bo Rs.300/- per sq. metre per
annum plus Municipal Taxes, water charges and Service charges for the common
area. You are requested to ensure that the lease rent is paid to MEPZ
administration regularly. In this connection your kind attention is also drawn
to the sub-clauses XI and X2 of clause 1 of the Tenancy agreement. Before taking
possession you are requested to pay three months rent in advance, within 7 days
from the date of receipt of this order.
5. You are requested to make the payment of rent into the Central Bank of
India (Main Branch), II Line Beach, Madras under
contd....2
<PAGE> 13
- 2 -
the head of account "007 Foreign Trade and Export Promotion(i) Other Receipts".
The challan for the remittance prepared in quadruplicate and got countersigned
by the Accounts Officer, Office of the Development Commissioner, MEPZ is sent
herewith.
6. In case the said SDP unit is not taken possession by you within 15 days
of receipt of this communication, the allotment will stand cancelled.
7. If you are willing to accept the above said conditions, please
communicate your acceptance in the form of an undertaking to abide by the said
conditions. On receipt of your undertaking and the remittance challan, we
will proceed to hand over possession of the plot to you.
8. Please acknowledge receipt of this letter.
Yours faithfully,
(T.M. ARUMUGAM)
Development Commissioner
cc to:
Smt. C.G. Lal, Deputy Secretary, Govt. of India, Ministry
of Commerce, Udyoo Bhavan, New Delhi-11.
The Managing Director, SIPCOT, Greems Road, Madras-6.
The Project Manager, N.B.C.C., Madras.
The Superintending Engineer, MES(South), TNEB, Madras-2.
The Commissioner, Tambaram Municipality, Tambaram, Madras-45.
The Asst. Development Commissioner, MEPZ, Madras-34.
The Assistant incharge, Site Office.
SDF/Plot Allotment File.
gs/23.9.1986.
<PAGE> 14
EXHIBIT 10.4
Registered AD
No.8/25/84-MEPZ
Government of India
Ministry of Commerce
(Department of Commerce)
New Delhi, the 14th May, 1985.
M/s. Indchem Electronics Ltd.,
Plot 47, Developed Plots for
Electrical & Electronics Industries,
Perungudi, Madras-600 096.
Subject: Application dated 31.8.84 for the grant of
permission for setting up of an industrial
unit in Madras Export Processing Zone, Madras
for the manufacture of Electronics equipments.
Sirs,
I am directed to refer to your application dated 31.8.84 on the above
cited subject and to say that the Government hereby approve your proposal for
setting up a new industrial undertaking in the Madras Export Processing Zone,
in the state of Tamil Nadu for the manufacture of the following items on the
basis of maximum utilization of plant and machinery and subject to the
condition given below:
Item of manufacture Yr: Annual capacity
- ------------------- --- ----------------
(Value in Rs.)
Computer software 1st 30 lakhs (Thirty lakh only)
2nd 50 " (Fifty lakh only)
3rd 60 " (Sixty lakh only)
4th 70 " (Seventy lakh only)
5th 75 " (Seventy five lakh only)
Conditions
i) Unless otherwise specified by a general or special or less, the
entire production shall be exported:
ii) You will maintain value addition of 88% during the first five
years of operation.
iii) A new company should be incorporated to implement the project in
Madras Export Processing Zone under Indian Laws,
iv) You will obtain clearance from the Tamil Nadu Water & Air
Pollution Control Board before setting up the unit in MEPZ.
v) You will maintain a separate account for your activity in Madras
Export Processing Zone, (MEPZ).
..2//
<PAGE> 15
- 2 -
2. You are requested to please confirm the acceptance of the above
conditions within 45 days of the date of issue of this letter failing which it
will be presumed that you are no longer interested in the implementation of the
project.
3. This letter of approval is valid for one year from the date of its
issued for commencement of commercial production and will automatically lapse,
if an application for the extension of the validity period of this letter
approval is not made before the expiry of the said period of one year.
4. In case assistance from financial institutions is envisaged, you will
make a complete application in this regard to the financial institution within
a period of 6 months from the date of issue of this letter of approval and
obtain a certificate of viability from the financial institution concerned
to be presented to the Development Commissioner, Madras EPZ, before the unit is
registered by him.
5. If you fail to comply-with the conditions stipulated above, this letter
of approval is liable for rejection/revocation.
6. This letter of approval shall not constitute clearance under MRTP Act.
7. Please quote our reference number quoted above in all future
correspondence with this Ministry.
8. Yom may kindly contact the Development Commissioner, Madras EPZ, for
allotment of suitable accommodation and other assistance to you.
Yours faithfully,
R. Sethuraman
-----------------------
(R. Sethuraman)
Under Secretary
Tele. No. 3016924.
Copy for information to:-
1. Dev. Commissioner, Madras EPZ, Madras.
2. DGTD, (Import & Exports Policy Cell), New Delhi.
3. Dev. Commissioner, SSI, Nirman Bhavan, New Delhi.
4. Jt. Chief Controller of Import & Exports, Madras.
5. Deptt. of Electronics, New Delhi.
6. Ministry of Finance, Deptt. of Economic Affairs, New Delhi.
7. Industries Commissioner, Govt. of Tamil Nadu, Madras.
8. Guard file/Main file.
R. Sethuraman
-----------------------
(R. Sethuraman)
Under Secretary.
<PAGE> 16
No. 8/25/84-MEPZ
Government of India
Ministry of Commerce
New Delhi, dated 13 JAN 1992
To
M/s Ind chem Electronics Ltd.
K.R. Buildings
124-A, Lattice Bridge Road
Adyar, Madras - 600020
Subject: Your proposal for take over of M/s Ind chem
Electronics Ltd. by M/s Total Business
Solutions (I) Pvt.Ltd., and approval of
revised projections - Reg.
_________
Sirs,
The undersigned is directed to refer to letter dated 26th
August, 1991 to Development Commissioner, Madras EPZ on the above subject and
to say that in view of the position explained therein, Government have agreed
to your proposal and have approved the following :-
(a) Transfer of Letter of Approval No. 8/25/84-MEPZ dated
14.5.85 issued to M/s Ind chem Electronics Ltd. for
manufacture of Computer Software to M/s Total Business
Solutions (I) Pvt.Ltd. a new company incorporated to
take over the operations of M/s Ind chem Electronics
Ltd., in MEPZ;
(b) Equity participation by M/s Complete Business Solutions
Inc. 30500 North Wester Highway Suite 200, Farmington
Hills, MI 48334, Michigan USA, to the extent of Rs, 7.6
lakhs constituting 76% of paid up equity in cash
on repatriation basis;
(c) Payment of dividend to M/s Complete Business Solutions
Inc., USA, amounting to Rs, 16.88 lakhs over the next
five years representing 20% in the first year, 25% in
the next year, 10% in the third year and 50%
thereafter;
(d) Revised projections with a value addition of 96.5% as
given in your letter dated 26.8.91 addressed to
Development Commissioner, MEPZ.
.......
<PAGE> 17
-2-
2. Accordingly, it has been noted that the LOA of even number
dated 14.5.85 will now be implemented by M/s Total Business
Solutions (I) Pvt.Ltd.
3. Consequently, condition No. (ii) of the Letter of Approval
dated 14.5.85 may be deemed to have been changed as under;
"(ii) You will maintain value addition of 96.5% during the
first five years of operation."
4. Further, the following conditions may be deemed to have been
added to the existing terms and conditions of LOA dated 14.5.85 ;-
"(vi) M/s Complete Business Solutions Inc., USA will contribute
to the extent of Rs. 7.6 lakhs being 76% of the paid up
equity in cash on repatriation basis;
(vii) Dividend amounting to Rs. 16.88 lakhs payable to M/s
Complete Business Solutions Inc. USA, over 5 year period
will be subject to RBI regulations."
5. All other terms and conditions of the Letter of Approval dated
14.5.85, shall remain unchanged.
6. You may keep this letter attached with the Letter of Approval
dated 14.5.85, issued to you earlier.
Yours faithfully,
G. P. Grover
G. P. Grover
Under Secretary to the
Government of India
Copy information to:-
1. Dev. Commissioner, Madras EPZ, Madras,
2. DGTD (Imports & Exports Policy Cell), New Delhi,
3. Dev. Commissioner, SSI, Nirman Bhavan, New Delhi,
4. Jt. CCI&E, Madras,
5. Department of Electronics, New Delhi,
6. Ministry of Finance (DEA), New Delhi,
7. Industries Commissioner, Govt. of TamilNadu, Madras,
8. Guard file/Main file,
G.P. Grover
(G.P. Grover)
Under Secretary
<PAGE> 18
EXHIBIT 10.4
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE
MADRAS EXPORT PROCESSING ZONE
Administrative Office Bldg.,
Tambaram, Madras-45.
......
Dt. 3.8.93
No.2/LA(18)92-EM
To
M/s. Total Business Solutions (India) Pvt. Ltd.,
Unit No. 13, SDF.
MEPZ, Madras-45.
Sirs,
Sub: MEPZ - Allotment of additional SDF building for
expansion of your unit in MEPZ for manufacture of
Computer Software.
Ref: Your Letters dated 5.2.93 6.4.93 & 8.6.93.
In the letter cited, you have requested for allotment of additional
space for expansion of your unit in MEPZ, for manufacture of Computer Software,
in addition to SDF Unit No. 13 already allotted to you. After careful
examination of the requirement of exports, the employment content, the machines
to be installed etc., we write to inform you that the Unit NO. 14 (factory area
except office room) admeasuring 453 sq. mtrs. in the second floor of block No.
II of SDF building in the Zone which has been surrendered by M/s. Ohmtron
Overseas (P) Ltd. from 1.8.93 for the manufacture of your licensed product.
2. The allotment of the unit is subject to the condition that you
shall enter into a lease agreement with the Development Commissioner, MEPZ and
should abide by the terms and conditions as stipulated in the lease agreement.
3. You are requested to take possession of the said premises in the
SDF Building on the date mentioned above, failing which the allotment will be
cancelled.
4. The lease rent for the space in the SDF unit is Rs. 300/- per
sq.m. per annum. i.e. Rs.,1. 35,900/-(Rupees one lakh thirty five thousand and
nine hundred only) for 453 sq. mtrs. and this yearly rent is payable in advance
computed from without any deductions whatsoever. In addition to the lease rent,
you should also pay Municipal Taxes, water charges and service charges for
common area. You are requested to ensure that the lease rent is paid to MEPZ
administration regularly.
5. You are requested to make payment of rent to the Development
Commissioner, MEPZ by means of Cheque or Demand Draft.
6. The allotment of the area is subject to the further condition
that implementation of the project will be started within 3 months from the date
of taking possession, as stipulated by the Government of India, Ministry of
Commerce in their Letter of Approval.
...2
<PAGE> 19
- 2 -
7. The shed allotted to you should be utilised only for the
purpose of carrying out the export production activities as envisaged in the
Letter of Approval issued to you. You should fulfil the export obligation and
value addition as envisaged in the above Letter of Approval. Failure on your
part in this regard will entail cancellation of allotment and resumption of the
shed allotted to you.
8. A declaration in the enclosed format may please be submitted to
this office.
9. Please acknowledge receipt of this letter.
Yours faithfully
Yasmin Ahmed
----------------------------
DEVELOPMENT COMMISSIONER
Copy to:
1. Shri K.K. Vijayan, Under Secretary, Ministry of Commerce, Udyog
Bhavan, New Delhi-110 011.
2. Asst. Divisional Engineer, MES, TNEB, Kadapperi, Madras-45.
3. AC (C) / A.O. / A.D.C. /
4. Preventive Supdt. / Appraiser / ASO. MEPZ.
5. IA.2 / IA.3 / E.2 / SR / Accounts Sections.
6. Asst. Engineer. TNSCC Ltd., MEPZ, Madras-45.
7. EM.2 Section - with a request to charge rent to M/s. Ohmtron
Overseas (P) Ltd. for the office area, i.e,
47 sq.m. with effect from 118.93.
<PAGE> 20
EXHIBIT 10.4
21 Jul 1994
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE
MADRAS EXPORT PROCESSING ZONE
*****
***
*
Admn. Office Building,
45, National Highways,
Tambaram, Madras - 45.
Lr. No.2/LA(18) 92 - E.M./8872 Dated: 18th July, 1994
To
M/s. Total Business Solutions (India)
Private Limited
S.D.F. Unit No. 13
Madras Export Processing Zone,
Tambaram, Madras - 600 045.
Sirs,
Sub: - MEPZ - Allotment of additional SDF building
for expansion of your unit in MEPZ for manu-
facture of Computer Software.
Ref: - Your letters dated 30.6.94 and 6.7.94.
* * * * *
In the letter cited, you have requested for allotment of additional
space for expansion of your unit in Madras Export Processing Zone for
manufacture of Computer Software. In addition to SDF Unit No. 13 and 14 already
allotted to you. After careful examination of the requirement of export, the
employment content, the machines to be installed etc., we write to inform you
that the Unit No.12, admeasuring 500 sq.mtrs. in the first floor of Block No. II
of SDF building in the Zone from 1.7.94 for manufacture of your licenced
product.
2. The allotment of the unit is subject to the condition that you
shall enter into a lease agreement with the Development Commissioner, Madras
Export Processing Zone and should abide by the terms and conditions as
stipulated in the lease agreement.
3. You are requested to take possession of the said premises in the
SDF building on the date mentioned above, failing which the allotment will be
cancelled.
4. The lease rent for the space in the SDF unit is Rs.300/-per
sq.m. per annum, i.e. Rs. 1,50,000/-(Rupees One lakh fifty thousand only) for
500 sq.mtrs. and this yearly rent is payable in advance computed from without
any deductions whatsoever. In addition to the lease rent, you should also pay
Municipal Taxes, water charges and service charges for common area. You are
requested to ensure that the lease rent is paid to MEPZ administration
regularly.
5. You are requested to make payment of rent to the Development
Commissioner, MEPZ by means of Cheque or Demand Draft on quarterly basis.
....... 2/-
<PAGE> 21
: 2 :
6. The allotment of the area is subject to the further condition
that implementation of the project will be started within three months from the
date of taking possession, as stipulated by the Government of India, Ministry
of Commerce in their Letter of Approval.
7. The shed allotted to you should be utilized only for the
purpose of carrying out the export production activities as envisaged in the
Letter of Approval issued to you. You should fulfil the export obligation and
value addition as envisaged in the above Letter of Approval. Failure on your
part in this regard will entail cancellation of allotment and resumption of the
shed allotted to you.
8. You have to pay the rent to CWC Warehouse xxxxxxxx for the
goods removed from SDF Unit No.1, belonging to M/s. Indo-Korea Arts and
Crafts(P) Ltd. and kept under safe custody in CWC, MEPZ, till the date of
liquidation.
9. A declaration in the enclosed format may please be submitted to
this office.
10. Please acknowledge receipt of this letter,
Yours faithfully,
K. Suresh
(K. SURESH)
Joint Development Commissioner
Copy to:
- --------
1. Assistant Divisional Engineer, MES., TNEB., Kapapperi, Ms. 4
2. AC (C)/A.O./A.D.C.
3. Preventive Supdt./Appraiser/ASO., MEPZ.
4. I.A.2/I.A.3/LA/PR/Accounts Sections.
5. Asst. Engineer, TNSCC Ltd., MEPZ., Madras - 45.
6. E.M.2 Section - with a request to enter in PRC Register.
7. Copy to M/s. Indo Korea Arts & Crafts (P) Ltd. file
<PAGE> 22
EXHIBIT 10.4
GOVERNMENT OF INDIA Admn. Office Building
MADRAS EXPORT PROCESSING ZONE 45, National Highway
No. 2/LA (18) 92EM/2458 MINISTRY OF COMMERCE Madras-45
Date 8.3.95
M/s. Complete Bussiness Solutions (I) Pvt Ltd.,
Unit No. 13 & 14,
SDF Building, Ph-I.
MEPZ, Madras-45
Sirs,
Sub: MEPZ - Allotment of SDF Building for setting up a unit by
you for manufacture and export of computer software
Ref: 1. Your letters dated 25.8.94 & 21.2.95
2, Letters dated 15.9.94 & 14.2.95 from
M/s. Worldwide Technologies Ltd.,
--------
Kindly refer to the letters cited. In the letter first cited, you
have requested for allotment of SDF/Unit No. 15 in phase I for expansion of
your project in MEPZ by agreeing to take over the export obligation of M/s.
Worldwide Technologies Ltd. After careful examination of the requirement of
exports, the employment content, the machines to be installed etc., we write to
inform you that the Units No. 15 admeasuring 500 sq. metres in Block II, third
floor of SDF/Building in the phase I is allotted to you with effect from
15.2.95 for the manufacture of your licensed product.
2. The allotment of the unit is subject to the condition that you
shall enter into a lease agreement with the Development Commissioner, Madras
Export Processing Zone and Should abide by the terms and conditions as
stipulated in the lease agreement.
3. You are requested to take possession of the said premises in
the SDF building on the date mentioned above failing which the allotment will
be cancelled.
4. The lease rent for the space in the SDF unit is Rs. 300/- per
sq. metre per annum, i.e. Rs. 1,50,000 (Rupees One lakh fifty thousand only) and
this yearly rent is payable in advance computed without any deduction what
soever. In addition to the lease rent, you should also pay Municipal Taxes,
water charges and service charges for common area. You are requested to ensure
that the lease rent is paid to Madras Export Processing Zone administration
regularly.
(Contd..2)
<PAGE> 23
(2)
5. You are requested to make payment of rent to the Development
Commissioner, Madras Export Processing Zone, by means of Cheque or
Demand Draft on quarterly basis in advance.
6. The rental rates mentioned above for SDF building are provisional.
Incase, the rent for SDF units in phase I is fixed at a higher rate, you should
pay the difference in the lease rent for the period from the date of taking
possession of the unit at the higher rate as may be fixed.
7. The allotment of the area is subject to the further condition that
implementation of the project will be started within three months from the date
of taking possession, as stipulated by the Government of India, Ministry of
Commerce in their letter of Approval issued to you, failing which MEPZ will
cancel the allotment and resume the SDF unit.
8. The shed allotted to you should be utilised only for the purpose of
carrying out the export production activities as envisaged in the letter of
Approval issued to you. You should fulfill the export obligation and value
addition as envisaged in the letter of Approval. Failure on your part in this
regard will entail cancellation of allotment and resumption of the shed
allotted to you.
9. A declaration in the enclosed format may please be submitted to this
office.
10. Please acknowledge receipt of this letter.
11. This issues with the approval of Development Commissioner MEPZ.
Yours Faithfully,
M. Balagangadharan
(M. BALAGANGADHARAN),
Deputy Development Commissioner.
Encl: As above.
Copy to:
1. Asst. Divnl. Engineer, MFS.. INGB., Kadappori, Madras:45
2. A.C (Customs)/Accounts Officer/A.D.C., MEPZ
3. Prov. Supdt/Appraiser/A.S.O
4. IA2/IA3/LA/Customs/Accounts Section
5. Asst. Engineer, INSCC Ltd/Asst. Engineer, NBCC Ltd
6. E.M.2 Section-with the request to make necessary entry in PRC register for
raising rental demand.
<PAGE> 24
EXHIBIT 10.4
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE
MADRAS EXPORT PROCESSING ZONE
*****
Admn. Office Building
National Highways-45,
Tambaram, Madras-45.
Lr.No. 2/28/93 - E.M./251- Dated: 19.10.1994.
To
M/s. Complete Business Solutions (I) Pvt. Ltd.,
Unit No. 13, S.D.F., MEPZ.,
Kadaperi, Tambaram,
MADRAS-00 045.
Sirs,
Sub:- MEPZ - Allotment of Additional SDF
building for expansion of your unit
in Madras Export Processing Zone.
Ref:- Your letter dated 30.09.90.
*****
Kindly refer to the letter cited. In the letter cited, you have
requested for allotment of SDF Unit No. 1 in Phase I for expansion of your unit
in Madras Export Processing Zone. After careful examination of the requirement
of area for exports, the employment content, the machines to be installed etc.,
we write to inform you that the Unit No. 1 admeasuring 500 sq.m. in the Block I
of SDF Building in the Phase I is allotted to you with effect from 01.10.1994
for the manufacture of your licensed product.
2. The allotment of the unit is subject to the condition that you shall
enter into a lease agreement with the Development Commissioner, Madras Export
Processing Zone and should abide by the terms and conditions as stipulated in
the lease agreement.
3. It is informed that, you have to pay the rent with effect from 1st
October, 1994. (01.10.1994)
4. The lease rent for the space in the SDF unit is Rs. 300/- per sq.m.
per annum, i.e., Rs. 1,50,000/- (Rupees One lakh fifty thousand only) and this
yearly rent is payable in advance computed without any deduction what soever.
In addition to the lease rent, you should also pay Municipal Taxes, Water
charges and service charges for common area. You are requested to ensure that
the lease rent is paid to Madras Export Processing Zone administration
regularly.
5. You are requested to make payment of rent to the Development
Commissioner, Madras Export Processing Zone, by means of Cheque or Demand Draft
on quarterly basis in advance.
Contd. ....... 2/-
<PAGE> 25
: 2 :
6. In case, the rent for SDF unit in Phase I is fixed at a
higher rate, you should pay the difference in the lease rent for the period
from the date of taking possession of the land at the higher rate as may be
fixed.
7. The shed allotted to you should be utilised only for the
purpose of carrying out the export production activities as envisaged in the
Letter of Approval issued to you. You should fulfil the export obligation and
value addition as envisaged in the Letter of Approval. Failure on your part in
this regard will entail cancellation of allotment and resumption of the shed
allotted to you.
8. A declaration in the enclosed format may please be submitted
to this office.
9. Please acknowledge receipt of this letter.
Yours faithfully,
K. Suresh
K.(SURESH)
Joint Development Commissioner.
Encl. As above.
Copy to:
1. Asst. Divnl. Engineer, MES., TNE 9., Kadapperi, MS.45.
2. A.C. (Customs)/Accounts Officer/D.D.C., MEPZ.
3. Prev. Supdt./Appraiser/A.S.O.
4. IA2/IA3/LA/Customs/Accounts Section
5. Asst. Engineer, TNSCC Ltd./Asst. Engineer, NBCC Ltd.
6. E.M.2 Section - with the request to make necessary entry in PRC
register for raising rental demand.
7. T.B.S. file.
<PAGE> 1
EXHIBIT 10.5
COMPLETE BUSINESS SOLUTIONS, INC.
STOCK OPTION PLAN
1. ESTABLISHMENT OF PLAN
The Complete Business Solutions, Inc. Stock Option Plan (the "Plan") was
formulated by Complete Business Solutions, Inc. (the "Company") to encourage
employees of the Company and its subsidiaries to acquire common stock in the
Company through Incentive Stock Options (as hereinafter defined) and to permit
the Company to offer Nonqualified Options (as hereinafter defined) to persons
including without limitation directors, consultants and employees of the
Company. It is believed that the Plan will encourage such employees and other
persons to have a greater financial investment in the Company through ownership
of its common stock, will further stimulate their efforts on the Company's
behalf, will tend to maintain and strengthen their desire to remain with the
Company, and generally will be in the best interests of the Company and its
shareholders.
The following is a statement of the Plan, as adopted by the Board of
Directors on July 10, 1996 and approved by the shareholders on September 10,
1996.
2. TYPES OF OPTIONS
Options granted under the Plan may be of two types: (a) "Incentive Stock
Options" designed to comply with the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and (b) other options
("Nonqualified Options"). Eligible Employees (as defined in Section 14) under
the Plan may be granted either Incentive Stock Options, Nonqualified Options,
or both but the nature of each option shall be clearly designated at the time
of the grant. Persons who are not Employees of the Company on the date of grant
may only be granted Nonqualified Options. To the extent that any option
designated as an "Incentive Stock Option" under the Code, on the date of grant,
shall fail, for any reason whatsoever, to qualify for treatment as an
"Incentive Stock Option" under the Code, such option shall not lapse or
terminate, but shall become a Nonqualified Option for purposes of the Plan and
the Code.
3. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which may be
sold pursuant to options granted under the Plan from its date of inception and
pursuant to previously granted nonqualified options shall not exceed 2,732,500.
The shares sold under the Plan may be either authorized and unissued stock or
treasury stock. In the event that any options granted under the Plan shall
terminate or expire for any reason without having been exercised in full, the
shares not purchased under the options shall be available again for the purposes
of the Plan.
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<PAGE> 2
4. ADMINISTRATION
Except as herein otherwise provided, the Plan shall be administered by
the Board of Directors (the "Board") or under the supervision and on behalf of
the Board of Directors of the Company by a Committee (the "Committee") composed
of two or more directors who shall be appointed and may be removed by a
majority vote of the Board of Directors. Subject to the express provisions of
the Plan, the Board or the Committee shall have authority in its discretion to
determine the Employees to receive Incentive Stock Options and Employees or
other persons to receive Nonqualified Options, the times when they shall
receive them, the option price and term of each option, the period during which
each option may be exercised, and the number of shares to be subject to each
option.
Subject to the express provisions of the Plan, the Board or the
Committee shall also have authority to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the fair market value of any stock subject
to the Plan, to determine the terms and provisions of the respective option
agreements (which need not be uniform) and to make all other determinations
necessary or advisable for administering the Plan. The Board or the Committee
may correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any option agreement, in the manner and to the extent that it
shall deem necessary to carry it into effect, and it shall be the sole and
final judge of such correction. The determination of the Board or the Committee
on the matters referred to in this paragraph shall be conclusive and binding on
the Company and the persons to whom options are granted.
An option granted to a director, an option agreement, other contract or
other transaction under the Plan between the Company and a director, or any
other action taken by the Board or the Committee under the Plan in which a
director is otherwise interested is not void or voidable solely because of such
interest, or solely because any such director is present at the meeting of the
Board or the Committee which authorizes or approves any such option, option
agreement, contract, transaction or action, or solely because his vote is
counted for such purpose, if any of the following conditions is satisfied:
(a) the option, option agreement, contract, transaction or other action
is fair and reasonable to the Company when it is authorized, approved or
ratified;
(b) the material facts as to any such director's relationship or
interest as to the option, option agreement, contract, transaction or action
are disclosed or known to the Board or the Committee and the Board or the
Committee authorizes, approves or ratifies the option, option agreement,
contract, transaction or action by a vote sufficient for the purpose without
counting the vote of any such director, or
2
<PAGE> 3
(c) the material facts as to any such director's relationship or
interest and as to the option, option agreement, contract, transaction or
action are disclosed or known to the shareholders and they authorize, approve
or ratify the option or transaction.
5. ELIGIBILITY
Only Employees shall be eligible to receive Incentive Stock Options
under the Plan. Employees and other persons shall be eligible to receive
Nonqualified Options under the Plan. An Employee or other person who has been
granted an option under the Plan or any other stock option plan of the Company
may be granted additional options.
No Incentive Stock Option shall be granted under the Plan to any
individual who, immediately before such option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or its parent or subsidiary corporations, with the
application of the constructive attribution rules of Section 424 of the Code.
However, the foregoing restriction on granting of Incentive Stock Options shall
not apply if at the time the option is granted the option price is at least
110% of the fair market value of the stock subject to the option and such
option by its terms is not exercisable after the expiration of five years from
the date such option is granted. The aggregate fair market value of the stock
(determined at the time the option is granted) with respect to which Incentive
Stock Options granted to an individual first become exercisable in any calendar
year (under all plans of the Company or any of its parent or subsidiary
corporations) shall not exceed $100,000.
6. OPTION PRICES AND PAYMENT
The purchase price of each share of common stock provided under each
Incentive Stock Option granted pursuant to the Plan shall be a price not less
than the greater of the par value of the stock or the fair market value of the
stock on the date of the granting of the Incentive Stock Option as is
determined in good faith by the Board or the Committee. The purchase price of
common stock issuable upon exercise of options granted under the Plan shall be
paid in full in cash on the date of exercise, or upon such other terms and
conditions or such other consideration as the Board or the Committee shall deem
appropriate.
The proceeds of the sale of stock, subject to the options, are to be
added to the general funds of the Company and used for its corporate purposes.
7. PERIOD OF OPTION AND CERTAIN LIMITATIONS ON THE RIGHT TO EXERCISE
The period of time which the Employee must remain in the continuous
employ of the Company or a parent or subsidiary of the Company and the period
of time other optionees must wait from the date the options are granted before
they can exercise any part of the option shall be determined by the Board or
the Committee and shall be contained in the stock option agreement between each
such holder and the Company. In no event, may an Employee or other optionee
exercise any option granted under the Plan after that date which is more than
ten (10) years from
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<PAGE> 4
the date of the grant or after such earlier date as may be provided herein. At
the time of the exercise of the option, the holder of the option (or the
purchaser acting under Section 11 below) may be required to represent to the
Company that (1) at that time of exercise it is such holder's present intention
to acquire the shares for investment and not with a view to distributing the
shares and (2) neither the option nor any shares acquired upon exercise of the
option will be sold or otherwise transferred unless such transaction is
registered under the Securities Act of 1933 and any applicable state securities
laws or an exemption from such registration is available.
8. NONTRANSFERABILITY OF OPTIONS
No option granted under the Plan shall be transferable, otherwise than
by Will or by the laws of descent and distribution, nor shall any option be
pledged or hypothecated in any way (whether by operation of law or otherwise).
An option may be exercised during the lifetime of its holder only by such
holder. Any attempt to circumvent this Section shall cause the option and the
rights and privileges conferred by the option to become automatically null and
void.
9. RESTRICTIONS ON SALE OF SHARES
Shares issued pursuant to the exercise of an Incentive Stock Option
under the Plan may not be disposed of by the Employee until the expiration of 12
months after the transfer of such shares to the Employee and 24 months from the
date of grant.
10. TERMINATION OF EMPLOYMENT
Upon the termination of the employment of the holder of an option for
reasons other than death or disability, the rights of such holder shall be those
contained in his stock option agreement. Incentive Stock Options granted under
the Plan shall not be affected by any change of employment if the holder
continues to be an Employee. Option agreements may contain such provisions as
the Board or the Committee shall approve regarding the effect of leaves of
absence guaranteed by statute or contract. Nothing in the Plan or in any option
granted under it shall confer any right to continue in the employ of the Company
or any of its subsidiaries or interfere in any way with the right of the Company
or any of its subsidiaries to terminate any employment at any time.
11. DEATH OR DISABILITY OF HOLDER OF OPTION
In the event of the death or disability of a holder of an option under
the Plan, the option theretofore granted to him may be exercised after his death
or disability by his estate or his legal representative if the option would have
otherwise been exercisable by him and, in the case of Incentive Stock Options,
if he was employed by the Company at the time of death or disability and the
Incentive Stock Option is exercised within three months after the termination of
employment because of death or one year after the termination of employment
because of disability. Notwithstanding the foregoing, all options must be
exercised during the option term and also subject to all the conditions of the
Plan.
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<PAGE> 5
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
Notwithstanding any other provision of the Plan, in the event of any
change in the outstanding common stock of the Company by reason of a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
split-off, spin-off, combination, or exchange of shares, and the like, the
aggregate number and class of shares available under the Plan and the number
and class of shares subject to each outstanding option and the option prices
shall be appropriately adjusted by the Board or the Committee whose
determination shall be conclusive and in accordance with each Option Agreement.
In the event of any merger, consolidation, or sale or transfer by the Company
of substantially all its assets, the date of termination of any options
outstanding under the Plan and the date on or after which such options, or any
portion of such options not then exercisable, may be exercised, shall be
advanced to a date to be fixed by the Board or the Committee, which date shall
not be more than 15 days prior to such merger, consolidation or sale or
transfer; provided that the Company or the shareholders of the Company,
immediately after the transaction: (1) will not own more than 50% of the voting
power of the corporation surviving the transaction; or (2) if the Company and
the other corporation both survive the transaction, will not own more than 50%
of the voting power of the Company and more than 50% of the corporation or
business acquired.
13. AMENDMENT AND TERMINATION
Unless the Plan theretofore shall have been terminated as hereinafter
provided, the Plan shall terminate on December 31, 2006 and no option under it
shall be granted thereafter. The Board of Directors of the Company at any time
prior to that date may terminate the Plan, or make such changes in it and
additions to it as the Board of Directors of the Company shall deem advisable;
provided that, to the extent required by Section 422 of the Code, any such
amendments shall be approved by the shareholders within 12 months of their
adoption by the Board of Directors in order to be effective. No termination or
amendment of the Plan may, without the consent of the holder of an option then
existing, terminate his option or materially and adversely affect his rights
under the option.
14. DEFINITION OF EMPLOYEE
For purposes of the Plan, the term "Employee" means regular employees
of the Company and its parents or subsidiaries, who are executive, managerial
or other salaried employees, including officers, whether or not directors of
the Company.
5
<PAGE> 1
EXHIBIT 10.6
AGREEMENT
This Incentive Stock Option Agreement ("Agreement") dated as of September
12, 1996 by and between COMPLETE BUSINESS SOLUTIONS, INC. ("Company"), a
Michigan corporation, having an office at 32605 West 12 Mile Road, Suite 250,
Farmington Hills, Michigan 48334 and __________ ("Holder"), an individual.
WITNESSETH:
WHEREAS, the Company is a privately held Subchapter S corporation;
WHEREAS, the Complete Business Solutions, Inc. Stock Option Plan was
adopted by the Board of Directors on July 10, 1996;
WHEREAS, the Company has the authority to issue additional shares of the
Company's common stock (all of the Company's shares of common stock being
hereinafter referred to as "Common Stock");
WHEREAS, Holder is an employee of the Company and has provided valuable
services to the Company.
WHEREAS, the Company desires to grant Holder an option to purchase a
portion of the Company's Common Stock, upon the price, terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the terms and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Option.
Holder shall have the right, at his sole and absolute option, to
purchase on terms and conditions hereinafter set forth, all or any part of the
aggregate of _________ shares of Common Stock of the Company (collectively, the
"Option Shares") at the purchase price of $_____ per share (each an "Option
Price") (the "Option").
2. Exercise; Expiration Date.
(a) EXERCISE: To exercise any portion of the Option, Holder must
remain in the continuous employ of the Company, or a subsidiary of the Company
for at least one year from the date of this Agreement. After each year of such
employment after the date of this Agreement, the employee may purchase a
cumulative installment of one third of the Option
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<PAGE> 2
Shares, so that after three years of such employment Holder may purchase all of
the Shares. In no event, however, may Holder exercise the Option after 10
years from the date of this Agreement. The Option may be exercised in whole or
in part, at the option of Holder by delivering to the Company written notice of
Holder's exercise ("Exercise Notice") stating the amount of Option Shares to be
purchased thereby, accompanied by either (i) payment to the Company in full, in
cash of the aggregate sum due for the Option Shares then being purchased, or
(ii) notice to the Company that Holder elects to borrow the funds for such
purchase in accordance with Paragraph 4 below ("Loan Notice"). As soon as
practicable thereafter, and in any event within ten (10) business days of the
Company's receipt of the Exercise Notice and payment, the Company shall issue
and deliver to Holder a certificate representing the Option Shares being
purchased pursuant to such Exercise Notice. Each such certificate shall bear
the legend or legends required by applicable securities laws as well as such
other legends the Company requires to be included on certificates for its
Common Stock. Such certificate or certificates shall be deemed to have been
issued and Holder or any other persons so designated to be named therein shall
be deemed for all purposes to have become a holder of record of such shares as
of the date the Exercise Notice is delivered to the Company. In the case of an
exercise for less than all of the Option Shares permitted to be purchased
hereunder, the Holder shall reserve the right to exercise its Option at any
time and from time to time prior to the Expiration Date for the remainder of
the Option Shares.
(b) Except in the event of the death of the Holder: (1) the Option
may not be exercised by the Holder unless the Holder shall have been in the
employ of the Company or a subsidiary of the Company continuously from the date
of this Agreement to the date of the exercise of the Option; and (2) as soon as
the Holder shall for any reason cease to be employed by the Company or a
subsidiary of the Company, the Option will automatically terminate to the extent
that it has not been previously exercised. No change of employment will affect
the Option if after such change the Holder continues to be an employee of the
Company or a subsidiary of the Company.
(c) EXPIRATION DATE: The term "Expiration Date" shall mean the
earlier of 90 days following the date on which holder is no longer an employee
of the Company or ten (10) years from the date hereof, at 5:00 P.M. Detroit
time on such date or if such date shall be a federal holiday, a Saturday or a
Sunday, then 5:00 P.M. Detroit time the next following day which is not a
federal holiday, a Saturday or a Sunday.
3. Repurchase Rights.
If Holder's employment with the Company is terminated for any reason,
the Company shall have the right, but not the obligation, for a period of 60
days after such termination to repurchase any shares of the Company owned by
Holder. Such repurchase right shall expire and be null and void at such time as
the Company has filed a registration statement to issue additional shares or is
otherwise listed on any public exchange. The shares shall be repurchased from
Holder at their fair value as mutually determined between Company
2
<PAGE> 3
and Holder, provided, however, that if such shares shall have been acquired by
the Holder less than one year before the date of the Holder's termination of
employment, then the Company shall have the right to purchase such shares, for
a period of sixty days after the end of such one year period at a price equal
to the fair market value of the shares at the date of the expiration of the one
year period. In the absence of agreement between the parties as to the fair
value of the shares, Holder or the Company may request the auditor of the
Company to select a recognized valuation firm to determine the fair value of
the shares to be repurchased. The selection of a valuation firm and the
determination of the valuation firm shall be final and binding on the parties.
4. Loan.
At Holder's sole and absolute discretion as exercised by the Loan
Notice, Holder shall have the right from time to time and at any time to borrow
from the Company the necessary funds to purchase the Option Shares. In such
event, the Company shall loan to Holder and Holder shall borrow from the
Company, the aggregate sum of money required to buy the Option Shares then being
purchased ("Loan"), which Loan shall be upon terms and conditions to be
mutually agreed upon by the parties hereto except that the following shall
apply to any and each such Loan: (i) the interest rate shall be no more than
the "prime rate of interest" as set forth in the Wall Street Journal on the
date of the Exercise Notice or if the Wall Street Journal shall not exist at
such time, such comparable publication publishing the "prime rate of interest",
(ii) the Loan shall have a term of not less than two (2) years, (iii) the Loan
shall be repaid at "interest only" until the maturity date of the Loan at which
time the principal shall be due, such interest to be paid no more frequently
than semi-annually but no interest shall be paid on interest, and (iv) the Loan
shall be with recourse to the Holder and the Company shall have a security
interest in Holder's Option Shares.
5. Holder's Income Tax Coverage
For so long as the Company shall be a Subchapter S corporation, the
Company agrees that notwithstanding any of its distributions, dividends or
payments made to the shareholders of the Company, the Company shall make a
distribution of income to Holder after any exercise of the Option, an amount
not less than Holder's federal, state and local personal income tax liability
in the aggregate as a result of the Company's income for the preceding
calendar year. Distributions will be made on a pro-rata basis based upon a
percentage ownership of stock of the Company. Nothing in this Agreement is
intended to create a second class of stock in accordance with Section 1361
(b)(1)(D) of the Internal Revenue Code of 1986 as amended, which would result in
the termination of the Company's S Corporation election. Any provision in this
Agreement which is deemed to create such a second class of stock is null and
void.
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<PAGE> 4
6. Change of Ownership Protection.
If fifty percent (50%) or more of the ownership of the Company
is transferred, sold or otherwise disposed of in one (1) or more
transactions, then as part of such transfer, sale or other disposition, any and
all shares of Common Stock held by Holder shall be simultaneously transferred,
sold or disposed of therewith at a per share price no less than the highest per
share price paid for the other shares of Common Stock then being transferred,
sold or otherwise disposed of.
7. Assignability.
The Option granted herein may not be assigned, transferred,
sold or otherwise disposed of by Holder without the prior written
consent of the Company other than by Will or by the laws of descent and
distribution.
8. Reservation of Shares.
The Company covenants that it will, at all times, reserve and
keep available out of its authorized Common Stock solely for the purpose of
issuance upon exercise of the Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of the Option. The Company agrees
that all Option Shares shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
9. Loss or Mutilation.
Upon receipt by the Company of reasonable evidence of the loss,
theft, destruction, or mutilation of this Agreement, the Company shall execute
and deliver in lieu thereof a new Agreement representing an equal number of
Option Shares exercisable thereunder.
10. Transfer Taxes; Expenses.
The Company shall pay any and all brokerage fees, transfer taxes
and expenses incidental to the sale or exercise of the Option or the sale of
the underlying Option Shares and shall pay all the fees and expenses of any
special attorneys or accountants retained by it in connection therewith.
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<PAGE> 5
11. Employment.
Nothing contained in this Agreement shall confer on Holder any
right to continue in the employ of the Company or any of its subsidaries or
shall interfere in any way with the absolute right of the Company or its
subsidiaries (which is hereby confirmed by Holder) to terminate Holder's
employment or change Holder's responsibilities, duties or compensation at any
time.
12. Notice.
Any notice and other communication given pursuant to the
provisions of this Agreement shall be in writing and shall be given (i) by
mailing the same by certified mail or registered mail, return receipt requested,
postage prepaid, (ii) by hand, providing for receipted delivery, or (iii) by
reputable overnight courier providing for receipted delivery. Except as may be
expressly otherwise provided in this Agreement, any such notice or other
communication given by mail shall be deemed given two (2) business days after
same is mailed and any such notice or other communication given by hand or
overnight courier as aforesaid shall be deemed given when received or when
receipt is refused. If sent to the Company, such notices or other communication
shall be sent to the Company at 32605 West 12 Mile Road, Suite 250, Farmington
Hills, Michigan 48334, or at such other address or addresses as the Company may
hereafter designate by notice to Holder. If sent to Holder, such notices or
other communications shall be sent to (address) or at such other address or
addresses as Holder may hereafter designate by notice to the Company.
13. Governing Law.
This Agreement shall be governed by and construed in accordance
with, the laws of the State of Michigan, without reference to the conflicts of
laws.
14. Nonqualification.
Notwithstanding anything to the contrary contained herein, the
Company shall have no liability, responsibility or obligation of any kind if
any or all of the Option does not qualify as an "Incentive Stock Option" within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, as
amended.
15. Successors and Assigns.
This Agreement shall inure to the benefit of the Company and
Holder and their respective successors and permitted assigns.
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<PAGE> 6
16. Confidentiality
This Agreement and its terms and conditions is deemed to be
Confidential Information. Holder agrees not to disclose any such Confidential
Information to any third party other than to Holder's spouse or to Holder's tax,
financial and legal advisors without the express written consent of the Company.
It is understood that Confidential Information does not include information that
is in or subsequently becomes part of the public domain through no fault of the
Holder or information that is obligated to be produced under order of a court of
competent jurisdiction.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the Company
and Holder as to its subject matter.
18. Counterparts.
This Agreement may be executed in duplicate originals, each of
which when taken together shall be deemed an original.
19. Amendment.
This Agreement may not be modified except in a writing signed by
both parties hereto.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Rajendra B. Vattikuti
----------------------------
Name: Rajendra B. Vattikuti
Title: President
[SIG]
---------------------------
Holder
6
<PAGE> 1
EXHIBIT 10.7
AGREEMENT
This Nonqualified Stock Option Agreement ("Agreement") dated as of
April 25, 1996 by and between COMPLETE BUSINESS SOLUTIONS, INC. ("Company"), a
Michigan corporation, having an office at 32605 West 12 Mile Road, Suite 250,
Farmington Hills, Michigan 48334 and DAN RANKIN ("Holder"), an individual.
WITNESSETH:
WHEREAS, the Company is a privately held Subchapter S corporation;
WHEREAS, the Company has the authority to issue additional shares of
the Company's common stock (all of the Company's shares of common stock being
hereinafter referred to as "Common Stock");
WHEREAS, Holder is an employee of the Company and has provided valuable
services to the Company;
WHEREAS, the Company desires to document its previous commitment to
grant Holder an option to purchase a portion of the Company's Common Stock,
upon the price, terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the terms and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Option.
Holder shall have the right, at his sole and absolute option, to
purchase on terms and conditions hereinafter set forth, all or any part of the
aggregate of 25 shares of Common Stock of the Company (collectively, the "Option
Shares") at the purchase price of $25,000 per share (each an "Option Price")
(the "Option").
2. Exercise; Expiration Date.
(a) EXERCISE: To exercise any portion of the Option, Holder must
remain in the continuous employ of the Company, or a subsidiary of the Company
for at least one year from the date of this Agreement. After each year of such
employment after the date of this Agreement, the Holder may purchase a
cumulative installment of one half of the Option Shares, so that after two
years
<PAGE> 2
of such employment Holder may purchase all of the Option Shares. The Option may
be exercised in whole or in part, at the option of Holder, on or before the
Expiration Date (hereinafter defined) by delivering to the Company written
notice of Holder's exercise ("Exercise Notice") stating the amount of Option
Shares to be purchased thereby, accompanied by either (i) a check ("Check") made
payable to the order of the Company for the aggregate sum due for the Option
Shares then being purchased, or (ii) notice to the Company that Holder elects to
borrow the funds for such purchase in accordance with Paragraph 5 below ("Loan
Notice"). As soon as practicable thereafter, and in any event within ten (10)
business days of the Company's receipt of the Exercise Notice and either a Check
or a Loan Notice, the Company shall issue and deliver to Holder a certificate
representing the Option Shares being purchased pursuant to such Exercise Notice.
Each such certificate shall bear the legend or legends required by applicable
securities laws as well as such other legends the Company requires to be
included on certificates for its Common Stock. Such certificate or certificates
shall be deemed to have been issued and Holder or any other persons so
designated to be named therein shall be deemed for all purposes to have become a
holder of record of such shares as of the date the Exercise Notice is delivered
to the Company. In the case of an exercise for less than all of the Option
Shares permitted to be purchased hereunder, the Holder shall reserve the right
to exercise its Option at any time and from time to time prior to the Expiration
Date for the remainder of the Option Shares.
(b) EXPIRATION DATE: The term "Expiration Date" shall mean
ten (10) years from the date hereof, at 5:00 P.M. Detroit time on such date or
if such date shall be a federal holiday, a Saturday or a Sunday, then 5:00 P.M.
Detroit time the next following day which is not a federal holiday, a Saturday
or a Sunday.
3. Registration Rights.
(a) If the Company determines that it shall file a
registration statement under the Securities Act of 1933 (the "1933 Act") for an
initial public offering of its Common Stock, at such time the Company shall
promptly give Holder written notice of such determination setting forth the date
on which the Company proposes to file such registration statement, which date
shall be no earlier than forty-five (45) days after the date of such notice, and
advising Holder of its right to have its Option Shares included in such
registration, if Holder has exercised its Option or exercises the Option in
conjunction with expressing its intent to participate in the registration. Upon
the written request of Holder received by the Company by the date set forth in
the notice, which such date shall be no later than twenty-five (25) days after
the date of the Company's notice, the Company shall use its best efforts to
cause to be registered under the Act all of the Option Shares that Holder has so
requested to be registered. If, in the good faith written opinion of the
managing underwriter or underwriters (or, in the case of a non-underwritten
offering, in the good faith written opinion of the placement agent, or if there
is none, the Company) the total amount of such securities to be so registered,
including the Option Shares, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to the then
current market value of such securities, or (ii) without otherwise materially
and adversely affecting the entire offering, then the amount of Option Shares to
be offered for the account of Holder shall be reduced pro rata to the extent
necessary to
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<PAGE> 3
reduce the total amount of securities to be included in such offering to the
recommended amount; provided, however, that if securities are being offered for
the account of other persons as well as the Company, such reduction shall not
represent a greater fraction of the number of securities intended to be offered
by Holder than the fraction of similar reductions imposed on such other persons
other than the Company over the amount of securities they intended to offer.
Such an offering which does not include all or any portion of the Option Shares
shall be referred to herein as a "Non-Option Share Registration", and the
Option Shares not included in such an offering shall be hereinafter referred to
as the "Non-Registered Option Shares".
(b) Commencing six (6) months after the date of the closing
of the Non-Option Share Registration, Holder may make a written request to the
Company that the Company file a registration statement under the 1933 Act (or a
similar document pursuant to any other statute then in effect corresponding to
the 1933 Act) covering the registration of the Non-Registered Option Shares. In
such event, the Company shall use its best efforts to cause to be registered
under the 1933 Act all Non-Registered Option Shares that the Holder has
requested be registered.
(c) If the Holder intends to distribute the Non-Registered
Option Shares covered by its request by means of an underwritten offering, it
shall so advise the Company. Such underwriter or underwriters shall be selected
by the Holder and shall be approved by the Company, which approval shall not be
unreasonably withheld or delayed; provided, that all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
Holder and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement shall be conditions
precedent to the obligations of Holder; and provided further, that Holder shall
not be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding Holder, the Non-Registered Option Shares and Holder's
intended method of distribution and any other representation required by law or
reasonably required by the underwriter.
(d) Whenever required under Paragraph 3(b) hereto to use
its best efforts to effect the registration of any Non-Registered Option
Shares, the Company shall, as expeditiously as possible:
(i) prepare and file with the Securities and
Exchange Commission ("Commission"), as soon as practicable after receipt
of a request to file a registration statement with respect to such
Non-Registered Option Shares, a registration statement and use its best
efforts to cause such registration statement to become effective as
promptly as practicable thereafter; provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will (1) furnish to counsel selected by Holder
copies of all such documents proposed to be filed, and (2) notify Holder
of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
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<PAGE> 4
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than one hundred twenty (120) days or such
shorter period which will terminate when all Non-Registered Option Shares
covered by such registration statement have been sold (but not before the
expiration of the forty (40) or ninety (90) day period referred to in Section
4(3) of the 1933 Act and Rule 174 thereunder, if applicable), and comply with
the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(iii) furnish to Holder and any applicable underwriter copies of such
registration statement as filed and each amendment and supplement thereto, the
prospectus included in such registration statement and such other documents as
such Holder may reasonably request in order to facilitate the disposition of
the Non-Registered Option Shares and keep Holder specifically apprised of the
status of such registration, including, without limitation, notice of any
requirements under the 1933 Act relative to any prospectus or otherwise, make
available for inspection by Holder or any participating underwriter and any
attorney, accountant or other agent retained in connection with the
registration, all financial and other records, appurtenant corporate documents
and properties of the Company and supply such other reasonable information as
reasonably requested by any such party from time to time, and furnish such
signed legal opinions and certified public accountant letters as are reasonably
requested by Holder in connection with the registration;
(iv) use its best efforts to register or qualify such Non-Registered
Option Shares under such other securities or blue sky laws of such
jurisdictions as Holder or any applicable underwriter reasonably requests, and
do any and all other acts which may be reasonably necessary or advisable to
enable Holder to consummate the disposition of the Non-Registered Option Shares;
(v) use its best efforts to cause the Non-Registered Option Shares
covered by such registration statement to be registered with or approved by
such other governmental agencies or other authorities as may be necessary by
virtue of the business and operations of the Company to enable the Holder to
consummate the disposition of such Non-Registered Option Shares;
(vi) enter into customary agreements and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Non-Registered Option Shares to be so included in the registration statement;
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<PAGE> 5
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, including, without
limitation, providing earnings statements to satisfy the provisions of
Section 11(a) of the 1933 Act; and
(viii) use its best efforts to cause all such Non-Registered
Option Shares to be listed on the New York Stock Exchange and/or any
other securities exchange on which similar securities issued by the
Company are then listed, or traded on the National Association of
Securities Dealers Automated Quotations System, if such listing or
trading is then permitted under the rules of such exchange or system,
respectively.
(c) All costs and expenses incurred as a result of any
registration under this Paragraph 3 including, without limitation, any and all
fees, costs and expenses charged by an underwriter (other than underwriter's
discount or direct selling expense which shall be borne by all shares sold on a
prorata basis) in connection therewith shall be borne fully by the Company.
4. Anti-Dilution Provisions
(a) The number of shares of Option Shares and the exercise price
per share pursuant to Schedule 1 hereto shall be subject to adjustment from
time to time as provided for in this Section 4(a). Notwithstanding any
provision contained herein, the aggregate Option Price for the total number of
Option Shares issuable pursuant to the Option shall remain unchanged. In case
the Company shall at any time change as a whole, by subdivision, combination,
acquisition or sale in any manner or by the making of a stock split or stock
dividend or by changing the number of outstanding shares of Common Stock into a
different number of shares, (i) the number of shares which Holder shall have
been entitled to purchase pursuant to this Agreement shall be increased or
decreased in direct proportion to such increase or decrease of shares, as the
case may be, and (ii) the Option Price (but not the aggregate Option Price of
all such shares) in effect immediately prior to such change shall be increased
or decreased in inverse proportion to such increase or decrease of shares, as
the case may be. In addition, and without limiting the foregoing, it is the
parties' intention hereto that the Option Price respective to the Option Shares
shall at all times be equal to or less than the lowest price per share for
additional shares of Common Stock hereafter issued at less than fair market
value or deemed to be hereafter issued at less than fair market value upon the
issuance of any warrants, options or other subscription rights with respect to
Common Stock or other securities convertible into Common Stock or the issuance
of any warrants, options or any similar rights with respect to such
convertible securities (all such shares or instruments of the Company being
referred to herein collectively as "Securities"). Accordingly, upon any
issuance or deemed issuance of Securities at a price per share which is less
than the then current fair market value of such securities and less than the
lowest price per share of the Option Shares, the per share price of the Option
Shares shall be forthwith reduced to an amount equal to the lowest price per
share of Securities so issued. If the Company shall in any manner grant, issue
or sell any Securities whether or not same or the right to convert or exchange
any of same are immediately exercisable, the Company will be deemed to have
issued or sold Common Stock.
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<PAGE> 6
(b) If, under this Paragraph 4, the purchase price provided for in any
Securities, the additional consideration, if any, payable upon the conversion
or exchange of any such Securities, or the rate at which any of same are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Option Price in effect at the time of such event shall forthwith
be readjusted to the respective Option Price which would have been in effect at
such time had such Securities still remained outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the purchase
price provided for in any such Securities shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect against
dilution, then, in case of the delivery of Common Stock upon the exercise of
any such Securities or upon conversion or exchange of any such Securities, the
Option Price in effect hereunder shall forthwith be adjusted to such respective
amounts as would have been effective upon the issuance of the shares of Common
Stock delivered as aforesaid.
(c) Upon the expiration of any Securities or the termination of any
right to convert or exchange any Securities without the exercise of a stock
option or right, the Option Price then in effect will be adjusted to the
respective Option Price which would have been in effect at the time of such
expiration or termination had such Securities, the extent outstanding
immediately prior to such expiration or termination never been issued.
(d) In case any shares of Common Stock and Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received upon such issuance or sale, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock and Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock or Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction
in which no specific consideration is allocated to such shares of Common Stock
or Securities by the parties thereto, such shares of Common Stock or Securities
shall be deemed to have been issued at a rate of $.01 per share of Common Stock.
(e) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Paragraph 4.
(f) Upon any adjustment of an Option Price, then and in each such case
the Company shall give written notice thereof to Holder, which notice shall
state the Option Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares of Common Stock purchasable
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<PAGE> 7
at such price upon the exercise of the Option, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
(g) In case of any capital reorganization or any reclassification of
the Common Stock of the Company or in case of the consolidation or merger of the
Company with another corporation (or in the case of any sale, transfer, or other
disposition to another corporation of all or substantially all the property,
assets, business, and goodwill of the Company), Holder shall thereafter be
entitled to purchase the same kind and amount of shares of capital stock which
the Option entitled Holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer, or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provision of this Paragraph 4 with
respect to rights and interests thereafter of Holder to the end that the
provisions of this Paragraph 4 shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
purchasable upon the exercise of the Option.
(h) No certificate for fractional shares shall be issued upon the
exercise of the Option, but in lieu thereof the Company shall purchase any such
fractional shares calculated to the nearest cent.
(i) In addition to the foregoing, if the Company shall acquire any
entity and Holder shall in its sole discretion consider that the acquisition is
made at other than fair value, an adjustment should fairly and appropriately be
made to the Common Stock and the Option Shares so that the value of Common Stock
and Option Shares is, in the agreed opinion of Holder and Company, the same as
it would have been if such acquisition had been made at fair value. Such
adjustment shall become effective (if appropriate) retroactively, on the day on
which the acquisition in question is completed. If Holder and the Company cannot
agree on an appropriate adjustment as required to reflect the fair value, the
independent auditor of the Company shall choose a nationally recognized
valuation firm to make the determination of the required adjustment (if any).
The choice of the valuation firm and the determination of the valuation firm
shall be final and binding.
5. Loan.
At Holder's sole and absolute discretion as exercised by the Loan
Notice, Holder shall have the right from time to time and at any time to borrow
from the Company the necessary funds to purchase the Option Shares. In such
event, the Company shall loan to Holder and Holder shall borrow from the
Company, the aggregate sum of money required to buy the Option Shares then
being purchased ("Loan"), which Loan shall be upon terms and conditions to be
mutually agreed upon by the parties hereto except that the following shall
apply to any and each such Loan: (i) the interest rate shall be no more than
the "prime rate of interest" as set forth in the Wall Street Journal on the
date of the Exercise Notice or if the Wall Street Journal shall not exist at
such time, such comparable publication publishing the "prime rate if interest",
(ii) the Loan shall have a term of not less than five (5) years, or at another
date mutually agreed upon between the Holder and the Company, (iii) the Loan
shall be repaid at "interest only" until the maturity date of the Loan at which
time the principal shall
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<PAGE> 8
be due, such interest to be paid no more frequently than semi-annually but no
interest shall be paid on interest. Interest shall accrue but not be paid prior
to the Option Shares being registered with the Securities and Exchange
Commission in accordance with Paragraph 3 of this Agreement, and (iv) The loan
shall be with recourse to the Holder and the Company shall have a security
interest in Holder's Option Shares.
6. Repurchase Obligation.
At Holder's option the Company shall repurchase any Option Shares
of the Company owned by Holder at any time. The repurchase price shall be
equivalent to the option price as set forth on Schedule 1 of this Agreement.
This repurchase obligation shall be terminated at the time the Company
completes an initial public offering of its common stock.
7. Holder's Income Tax Coverage.
For so long as the Company shall be a Subchapter S corporation, the
Company agrees that notwithstanding any of its distributions, dividends or
payments made to the shareholders of the Company, the Company shall pay to
Holder after any exercise of the Option, an amount not less than Holder's
federal, state and local personal income tax liability in the aggregate as a
result of the Company's income for the preceding calendar year. Distributions
will be made on a pro-rata basis based upon percentage ownership of stock of
the Company. Nothing in this Agreement is intended to create a second class of
stock in accordance with Section 1361 (b)(1)(D) of the Internal Revenue Code of
1986 as amended which would result in the termination of the Company's S
Corporation election. Any provision in this Agreement which is deemed to
create such a second class of stock is null and void.
8. Change of Ownership Protection.
If fifty percent (50%) or more of the ownership of the Company is
transferred, sold or otherwise disposed of in one (1) or more transactions,
then as part of such transfer, sale or other disposition, then, at Holder's
request, any and all shares of Common Stock held by Holder shall be
simultaneously transferred, sold or disposed of therewith at a per share price
no less than the highest per share price paid for the other shares of Common
Stock then being transferred, sold or otherwise disposed of.
9. Assignability.
The Option granted herein may not be pledged, assigned,
transferred, sold or otherwise disposed of by Holder without the prior written
consent of the Company other than by Will or by the laws of descent and
distribution.
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<PAGE> 9
10. Reservation of Shares.
The Company covenants that it will, at all times, reserve and keep
available out of its authorized Common Stock solely for the purposes of
issuance upon exercise of the Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of the Option. The Company agrees that
all Option Shares shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
11. Loss or Mutilation.
Upon receipt by the Company of reasonable evidence of the loss,
theft, destruction, or mutilation of this Agreement, the Company shall execute
and deliver in lieu thereof a new Agreement representing an equal number of
Option Shares exercisable thereunder.
12. Transfer Taxes; Expenses.
The Company shall pay any and all brokerage fees, transfer taxes
and expenses incidental to the sale or exercise of the Option or the sale of
the underlying Option Shares and shall pay all the fees and expenses of any
special attorneys or accountants retained by it in connection therewith.
13. Employment.
Nothing contained in this Agreement shall confer on Holder any
right to continue in the employ of the Company or any of its subsidiaries or
shall interfere in any way with the absolute right of the Company or its
subsidiaries (which is hereby confirmed by Holder) to terminate Holder's
employment or change Holder's responsibilities, duties or compensation at
any time.
14. Notice.
Any notice and other communication given pursuant to the
provisions of this Agreement shall be in writing and shall be given (i) by
mailing the same by certified mail or registered mail, return receipt
requested, postage prepaid, (ii) by hand, providing for receipted delivery, or
(iii) by reputable overnight courier providing for receipted delivery. Except
as may be expressly otherwise provided in this Agreement, any such notice or
other communication given by mail shall be deemed given two (2) business days
after same is mailed and any such notice or other communication given by hand
or overnight courier as aforesaid shall be deemed given when received or when
receipt is refused. If sent to the Company, such notices or other communication
shall be sent to the Company at 32605 West 12 Mile Road, Suite 250, Farmington
Hills, Michigan 48334, or at such other address or addresses as the Company may
hereafter designate by notice to Holder. If sent to Holder, such notices or
other communications shall be sent to Holder at 2540 Sundance Lane, Okemos,
Michigan 48864, or at such other address or addresses as Holder may hereafter
designate by notice to the Company.
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<PAGE> 10
15. Governing Law.
This Agreement shall be governed by and construed in accordance
with, the laws of the State of Michigan, without reference to the conflicts of
laws.
16. Indemnity.
(a) To the full extent permitted by law the Company shall save
Holder harmless from and indemnify Holder and his heirs, executors and
administrators against any and all injury, loss, damage, costs, expenses,
claims, suits, actions or proceedings (including, without limitation,
reasonable attorney's fees) and against any payments in settlement of any such
claims, suits, actions or proceedings or in satisfaction of any related
judgement, fine or penalty caused by or resulting from any act, omission,
negligence or willful conduct of Holder or Holder's agents no matter how caused
from Holder's involvement with the Company its subsidiaries and affiliates,
including, without limitation, being a shareholder, member of board of
directors, trustee of a Company benefit plan, officer or consultant of the
Company its subsidiaries and affiliates.
(b) to the full extent permitted by law the Company shall advance
all reasonable expenses incurred by or on behalf of Holder in connection with
any proceeding by reason of Holder's corporate status within ten (10) days
after the receipt by the Company of a statement or statements from Holder
requesting such advance or advances from time to time, whether prior to or
after final disposition of such proceeding. Such statement or statements shall
reasonably evidence the expenses incurred by Holder and shall include or be
preceded or accompanied by an undertaking by or on behalf of Holder to repay
any expenses advanced if it shall ultimately be determined that Holder is not
entitled to be indemnified against such expenses. Any advances and undertakings
to repay pursuant to this Paragraph 15 shall be unsecured and interest free.
(c) The obligations of the Company contained in this indemnity
clause shall continue during the period Holder is a director or employee of the
Company (or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) and shall continue thereafter so long as Holder
shall be subject to any proceeding by reason of his corporate status, whether
or not he is acting or serving in any such capacity at the time any liability
or expense is incurred for which indemnification can be provided under this
Agreement. Such rights of indemnification and reimbursement shall not be deemed
exclusive of any other rights to which Holder may be entitled under any
statute, agreement, vote of shareholders or otherwise.
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<PAGE> 11
17. Successors and Assigns.
This Agreement shall inure to the benefit of the Company and
Holder and their respective successors and permitted assigns.
18. Entire Agreement.
This Agreement constitutes the entire agreement of the Company and
Holder as to its subject matter.
19. Counterparts.
This Agreement may be executed in duplicate originals, each of
which when taken together shall be deemed an original.
20. Amendment.
This Agreement may not be modified except in a writing signed by
both parties hereto.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Rajendra B. Vattikuti
----------------------------
Name: Rajendra B. Vattikuti
Title: President
Dan Rankin
--------------------------------
Dan Rankin
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<PAGE> 1
EXHIBIT 10.8
AGREEMENT
This Nonqualified Stock Option Agreement ("Agreement") dated as of April
25, 1996 by and between COMPLETE BUSINESS SOLUTIONS, INC. ("Company"), a
Michigan corporation, having an office at 32605 West 12 Mile Road, Suite 250,
Farmington Hills, Michigan 48334 and DOUGLAS S. LAND ("Holder"), an individual.
W I T N E S S E T H :
WHEREAS, the Company is a privately held Subchapter S corporation;
WHEREAS, the Company has the authority to issue additional shares of the
Company's common stock (all of the Company's shares of common stock being
hereinafter referred to as "Common Stock");
WHEREAS, Holder has provided valuable services to the Company, including,
without limitation, serving as a director on its Board of Directors;
WHEREAS, the Company desires to document its previous commitment to grant
Holder an option to purchase a portion of the Company's Common Stock, upon the
price, terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the terms and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Option.
Holder shall have the right, at his sole and absolute option, to purchase
on terms and conditions hereinafter set forth, all or any part of the aggregate
of 40 shares of Common Stock of the Company (collectively, the "Option Shares")
at the purchase price of $25,000 per share (the "Option Price"). Such right is
hereinafter referred to as the "Option".
2. Exercise; Expiration Date.
(a) EXERCISE: The Option shall be exercisable in full on and after one
year from the date of grant, so that from and after October 27, 1996 the Holder
may purchase all of the Option Shares. If the Company files a registration
statement under the Securities Act of 1933 for an initial public offering of
its Common Stock Holder may purchase all of the Option Shares at such time or
any time thereafter. The Option may be exercised in whole or in part, at the
<PAGE> 2
option of Holder, on or before the Expiration Date (hereinafter defined) by
delivering to the Company written notice of Holder's exercise ("Exercise
Notice") stating the amount of Option Shares to be purchased thereby,
accompanied by either (i) a check ("Check") made payable to the order of the
Company for the aggregate sum due for the Option Shares then being purchased,
or (ii) notice to the Company that Holder elects to borrow the funds for such
purchase in accordance with Paragraph 5 below ("Loan Notice"). As soon as
practicable thereafter, and in any event within ten (10) business days of the
Company's receipt of the Exercise Notice and either a Check or a Loan Notice,
the Company shall issue and deliver to Holder a certificate representing the
Option Shares being purchased pursuant to such Exercise Notice. Each such
certificate shall bear the legend or legends required by applicable securities
laws as well as such other legends the Company requires to be included on
certificates for its Common Stock. Such certificate or certificates shall be
deemed to have been issued and Holder or any other persons so designated to be
named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date the Exercise Notice or Loan Notice is
delivered to the Company. In the case of an exercise for less than all of the
Option Shares permitted to be purchased hereunder, the Holder shall reserve the
right to exercise the Option at any time and from time to time prior to the
Expiration Date for the remainder of the Option Shares.
(b) EXPIRATION DATE: The term "Expiration Date" shall mean ten (10)
years from the date hereof, at 5:00 P.M. Detroit time on such date or if such
date shall be a federal holiday, a Saturday or a Sunday, then 5:00 P.M. Detroit
time the next following day which is not a federal holiday, a Saturday or a
Sunday.
3. Registration Rights.
(a) If the Company determines that it shall file a registration
statement under the Securities Act of 1933 (the "1933 Act") for an initial
public offering of its Common Stock, at such time the Company shall promptly
give Holder written notice of such determination setting forth the date on
which the Company proposes to file such registration statement, which date
shall be no earlier than forty-five (45) days after the date of such notice,
and advising Holder of its right to have its Option Shares included in such
registration, if Holder has exercised its Option or exercises the Option in
conjunction with expressing its intent to participate in the registration. Upon
the written request of Holder received by the Company by the date set forth in
the notice, which such date shall be no later than twenty-five (25) days after
the date of the Company's notice, the Company shall use its best efforts to
cause to be registered under the 1933 Act all of the Option Shares that Holder
has so requested to be registered. If, in the good faith written opinion of the
managing underwriter or underwriters (or, in the case of a non-underwritten
offering, in the good faith written opinion of the placement agent, or if there
is none, the Company) the total amount of such securities to be so registered,
including the Option Shares, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to the then
current market value of such securities, or (ii) without otherwise materially
and adversely affecting the entire offering, then the amount of Option Shares
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<PAGE> 3
to be offered for the account of Holder shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the recommended amount; provided, however, that if securities are
being offered for the account of other persons as well as the Company, such
reduction shall not represent a greater fraction of the number of securities
intended to be offered by Holder than the fraction of similar reductions
imposed on such other persons other than the Company over the amount of
securities they intended to offer. Such an offering which does not include all
or any portion of the Option Shares shall be referred to herein as a "Non
Option Share Registration", and the Option Shares not included in such an
offering shall be hereinafter referred to as the "Non-Registered Option
Shares".
(b) Commencing six (6) months after the date of the closing of the
Non-Option Share Registration, Holder may make a written request to the Company
that the Company file a registration statement under the 1933 Act (or a similar
document pursuant to any other statute then in effect corresponding to the 1933
Act) covering the registration of the Non-Registered Option Shares. In such
event, the Company shall use its best efforts to cause to be registered under
the 1933 Act all Non-Registered Option Shares that the Holder has requested be
registered.
(c) If the Holder intends to distribute the Non-Registered Option
Shares covered by its request by means of an underwritten offering, it shall so
advise the Company. Such underwriter or underwriters shall be selected by the
Holder and shall be approved by the Company, which approval shall not be
unreasonably withheld or delayed; provided, that all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
Holder and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement shall be conditions
precedent to the obligations of Holder; and provided further, that Holder shall
not be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding Holder, the Non-Registered Option Shares and Holder's
intended method of distribution and any other representation required by law or
reasonably required by the underwriter.
(d) Whenever required under Paragraph 3(b) hereto to use its best
efforts to effect the registration of any Non-Registered Option Shares, the
Company shall, as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission
("Commission"), as soon as practicable after receipt of a request to file a
registration statement with respect to such Non-Registered Option Shares, a
registration statement and use its best efforts to cause such registration
statement to become effective as promptly as practicable thereafter;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will (1) furnish to counsel
selected by Holder copies of all such documents proposed to be filed, and
(2) notify
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<PAGE> 4
Holder of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered;
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than one hundred twenty (120) days or such shorter period which
will terminate when all Non-Registered Option Shares covered by such
registration statement have been sold (but not before the expiration of the
forty (40) or ninety (90) day period referred to in Section 4(3) of the 1933
Act and Rule 174 thereunder, if applicable), and comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(iii) furnish to Holder and any applicable underwriter copies of such
registration statement as filed and each amendment and supplement thereto, the
prospectus included in such registration statement and such other documents as
such Holder may reasonably request in order to facilitate the disposition of
the Non-Registered Option Shares and keep Holder specifically apprised of the
status of such registration, including, without limitation, notice of any
requirements under the 1933 Act relative to any prospectus or otherwise, make
available for inspection by Holder or any participating underwriter and any
attorney, accountant or other agent retained in connection with the
registration, all financial and other records, appurtenant corporate documents
and properties of the Company and supply such other reasonable information as
reasonably requested by any such party from time to time, and furnish such
signed legal opinions and certified public accountant letters as are reasonably
requested by Holder in connection with the registration;
(iv) use its best efforts to register or qualify such Non-Registered
Option Shares under such other securities or blue sky laws of such
jurisdictions as Holder or any applicable underwriter reasonably requests, and
do any and all other acts which may be reasonably necessary or advisable to
enable Holder to consummate the disposition of the Non-Registered Option
Shares;
(v) use its best efforts to cause the Non-Registered Option Shares covered
by such registration statement to be registered with or approved by such other
governmental agencies or other authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder to consummate the
disposition of such Non-Registered Option Shares;
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<PAGE> 5
(vi) enter into customary agreements and take such other actions
as are reasonably required in order to expedite or facilitate the
disposition of the Non Registered Option Shares to be so included in the
registration statement;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, including, without
limitation, providing earnings statements to satisfy the provisions of
Section 11(a) of the 1933 Act; and
(viii) use its best efforts to cause all such Non Registered
Option Shares to be listed on the New York Stock Exchange and/or any
other securities exchange on which similar securities issued by the
Company are then listed, or traded on the National Association of
Securities Dealers Automated Quotations System, if such listing or
trading is then permitted under the rules of such exchange or system,
respectively.
(c) All costs and expenses incurred as a result of any registration
under this Paragraph 3 including, without limitation, any and all fees, costs
and expenses charged by an underwriter (other than underwriter's discount or
direct selling expense which shall be borne by all shares sold on a pro-rata
basis) in connection therewith shall be borne fully by the Company.
4. Anti-Dilution Provisions.
(a) The number of shares of Option Shares and the exercise price
per share pursuant to Schedule 1 hereto shall be subject to adjustment from
time to time as provided for in this Section 4(a). Notwithstanding any
provision contained herein, the aggregate Option Price for the total number of
Option Shares issuable pursuant to the Option shall remain unchanged. In case
the Company shall at any time change as a whole, by subdivision, combination,
acquisition or sale in any manner or by the making of a stock split or stock
dividend or by changing the number of outstanding shares of Common Stock into a
different number of shares, (i) the number of shares which Holder shall have
been entitled to purchase pursuant to this Agreement shall be increased or
decreased in direct proportion to such increase or decrease of shares, as the
case may be, and (ii) the Option Price (but not the aggregate Option Price of
all such shares) in effect immediately prior to such change shall be increased
or decreased in inverse proportion to such increase or decrease of shares, as
the case may be. In addition, and without limiting the foregoing, it is the
parties' intention hereto that the Option Price respective to the Option Shares
shall at all times be equal to or less than the lowest price per share for
additional shares of Common Stock hereafter issued at less than fair market
value or deemed to be hereafter issued at less than fair market value upon the
issuance of any warrants, options or other subscription rights with respect to
Common Stock or other securities convertible into Common Stock or the issuance
of any warrants, options or any similar rights with respect to such convertible
securities (all such shares or instruments of the Company being referred to
herein collectively as "Securities"). Accordingly, upon any issuance or deemed
issuance of Securities at a price per share which is less than the then current
fair market value of such Securities and less than the
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<PAGE> 6
lowest price per share of the Option Shares, the per share price of the Option
Shares shall be forthwith reduced to an amount equal to the lowest price per
share of Securities so issued. If the Company shall in any manner grant, issue
or sell any Securities whether or not same or the right to convert or exchange
any of same are immediately exercisable, the Company will be deemed to have
issued or sold Common Stock.
(b) If, under this Paragraph 4, the purchase price provided for in any
Securities, the additional consideration, if any, payable upon the conversion
or exchange of any such Securities, or the rate at which any of same are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Option Price in effect at the time of such event shall forthwith
be readjusted to the respective Option Price which would have been in effect at
such time had such Securities still remained outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the purchase
price provided for in any such Securities shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect against
dilution, then, in case of the delivery of Common Stock upon the exercise of
any such Securities or upon conversion or exchange of any such Securities, the
Option Price in effect hereunder shall forthwith be adjusted to such respective
amounts as would have been effective upon the issuance of the shares of Common
Stock delivered as aforesaid.
(c) Upon the expiration of any Securities or the termination of any
right to convert or exchange any Securities without the exercise of a stock
option or right, the Option Price then in effect will be adjusted to the
respective Option Price which would have been in effect at the time of such
expiration or termination had such Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(d) In case any shares of Common Stock and Securities shall be issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received upon such issuance or sale, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock and Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock or Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction
in which no specific consideration is allocated to such shares of Common Stock
or Securities by the parties thereto, such shares of Common Stock or Securities
shall be deemed to have been issued at a rate of $.01 per share of Common Stock.
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<PAGE> 7
(e) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Paragraph 4.
(f) Upon any adjustment of an Option Price, then and in each such case the
Company shall give written notice thereof to Holder, which notice shall state
the Option Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares of Common Stock purchasable at such price upon
the exercise of the Option, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(g) In case of any capital reorganization or any reclassification of the
Common Stock of the Company or in case of the consolidation or merger of the
Company with another corporation (or in the case of any sale, transfer, or
other disposition to another corporation of all or substantially all the
property, assets, business, and goodwill of the Company), Holder shall
thereafter be entitled to purchase the same kind and amount of shares of
capital stock which the Option entitled Holder to purchase immediately prior to
such capital reorganization, reclassification of capital stock, consolidation,
merger, sale, transfer, or other disposition; and in any such case appropriate
adjustments shall be made in the application of the provisions of this
Paragraph 4 with respect to rights and interests thereafter of Holder to the
end that the provisions of this Paragraph 4 shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter purchasable upon the exercise of the Option.
(h) No certificate for fractional shares shall be issued upon the exercise
of the Option, but in lieu thereof the Company shall purchase any such
fractional shares calculated to the nearest cent.
(i) In addition to the foregoing, if the Company shall acquire any entity
and Holder shall in its sole discretion consider that the acquisition is made
at other than fair value, an adjustment should fairly and appropriately be made
to the Common Stock and the Option Shares so that the value of Common Stock and
Option Shares is, in the agreed opinion of Holder and Company, the same as it
would have been if such acquisition had been made at fair value. Such
adjustment shall become effective (if appropriate) retroactively, on the day
on which the acquisition in question is completed. If Holder and the Company
cannot agree on an appropriate adjustment as required to reflect the fair
value, the independent auditor of the Company shall choose a nationally
recognized valuation firm to make the determination of the required adjustment
(if any). The choice of the valuation firm and the determination of the
valuation firm shall be final and binding.
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<PAGE> 8
5. Loan.
At Holder's sole and absolute discretion as exercised by the Loan
Notice, Holder shall have the right from time to time and at any time to borrow
from the Company the necessary funds to purchase the Option Shares. In such
event, the Company shall loan to Holder and Holder shall borrow from the
Company, the aggregate sum of money required to buy the Option Shares then
being purchased ("Loan"), which Loan shall be upon terms and conditions to be
mutually agreed upon by the parties hereto except that the following shall
apply to any and each such Loan; (i) the interest rate shall be no more than
the "prime rate of interest" as set forth in the Wall Street Journal on the
date of the Exercise Notice or if the Wall Street Journal shall not exist at
such time, such comparable publication publishing the "prime rate of interest",
(ii) the Loan shall have a term of not less than five (5) years, or at another
date mutually agreed upon between the Holder and the Company, (iii) the Loan
shall be repaid at "interest only" until the maturity date of the Loan at which
time the principal shall be due, such interest to be paid no more frequently
than semi-annually but no interest shall be paid on interest. Interest shall
accrue but not be paid prior to the Option Shares being registered with the
Securities and Exchange Commission in accordance with Paragraph 3 of this
Agreement, and (iv) The Loan shall be with recourse to the Holder and the
Company shall have a security interest in Holder's Option Shares.
6. Repurchase Obligation.
At Holder's option the Company shall repurchase any Option Shares
of the Company owned by Holder at any time. The repurchase price shall be
equivalent to the option price as set forth on Schedule I of this Agreement.
This repurchase obligation shall be terminated at the time the Company
completes an initial public offering of its common stock.
7. Holder's Income Tax Coverage.
For so long as the Company shall be a Subchapter S corporation, the
Company agrees that notwithstanding any of its distributions, dividends or
payments made to the shareholders of the Company, the Company shall pay to
Holder after any exercise of the Option, an amount not less than Holder's
federal, state and local personal income tax liability in the aggregate as a
result of the Company's income for the preceding calendar year. Distributions
will be made on a pro-rata basis based upon percentage ownership of stock of
the Company. Nothing in this Agreement is intended to create a second class of
stock in accordance with Section 1361 (b)(1)(D) of the Internal Revenue Code of
1986 as amended which would result in the termination of the Company's S
Corporation election. Any provision in this Agreement which is deemed to create
such a second class of stock is null and void.
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<PAGE> 9
8. Change of Ownership Protection.
If fifty percent (50%) or more of the ownership of the Company is
transferred, sold or otherwise disposed of in one (1) or more transactions,
then as part of such transfer, sale or other disposition; then, at Holder's
request, any and all shares of Common Stock held by Holder shall be
simultaneously transferred, sold or disposed of therewith at a per share price
no less than the highest per share price paid for the other shares of Common
Stock then being transferred, sold or otherwise disposed of.
9. Assignability.
The Option granted herein may not be pledged, assigned, transferred,
sold or otherwise disposed of by Holder without the prior written consent of
the Company other than to parties who have a financial interest in Chesapeake
Group Inc. or Economic Analysis Group or Holder's family trusts, family members,
household members, estate trusts, retirement plans or by Will or by the laws of
descent and distribution.
10. Reservation of Shares.
The Company covenants that it will, at all times, reserve and keep
available out of its authorized Common Stock solely for the purpose of issuance
upon exercise of the Option, such number of shares of Common Stock as shall
then be issuable upon the exercise of the Option. The Company agrees that, upon
issuance in accordance with the terms and conditions or this Agreement, all
Option Shares shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof.
11. Loss of Mutilation.
Upon receipt by the Company of reasonable evidence of the loss,
theft, destruction, or mutilation of this Agreement, the Company shall execute
and deliver in lieu thereof a new Agreement representing an equal number of
Option Shares exercisable thereunder.
12. Transfer Taxes; Expenses.
The Company shall pay any and all brokerage fees, transfer taxes and
expenses incidental to the exercise of the Option and shall pay all the fees
and expenses of any special attorneys or accountants retained by it in
connection therewith.
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<PAGE> 10
13. Notice.
Any notice and other communication given pursuant to the
provisions of this Agreement shall be in writing and shall be given (i) by
mailing the same by certified mail or registered mail, return receipt
requested, postage prepaid, (ii) by hand, providing for receipted delivery, or
(iii) by reputable overnight courier providing for receipted delivery. Except
as may be expressly otherwise provided in this Agreement, any such notice or
other communication given by mail shall be deemed given two (2) business days
after same is mailed and any such notice or other communication given by hand
or overnight courier as aforesaid shall be deemed given when received or when
receipt is refused. If sent to the Company, such notices or other communication
shall be sent to the Company at 32605 West 12 Mile Road, Suite 250, Farmington
Hills, Michigan 48334, or at such other address or addresses as the Company may
hereafter designate by notice to Holder. If sent to Holder, such notices or
other communications shall be sent to Holder at 598 Madison Avenue, 6th Floor,
New York, New York 10022, or at such other address or addresses as Holder may
hereafter designate by notice to the Company.
14. Governing Law.
This Agreement shall be governed by and construed in accordance
with, the laws of the State of Michigan, without giving effect to any conflicts
of laws.
15. Indemnity.
(a) To the full extent permitted by law the Company shall
save Holder harmless from and indemnify Holder and his heirs, executors and
administrators against any and all injury, loss, damage, costs, expenses,
claims, suits, actions or proceedings (including, without limitation,
reasonable attorney's fees) and against any payments in settlement of any such
claims, suits, actions or proceedings or in satisfaction of any related
judgement, fine or penalty caused by or resulting from any act, omission,
negligence or willful conduct of Holder or Holder's agents no matter how caused
from Holder's involvement with the Company its subsidiaries and affiliates,
including, without limitation, being a shareholder, member of board of
directors, trustee of a Company benefit plan, officer or consultant of the
Company its subsidiaries and affiliates.
(b) To the full extent permitted by law the Company shall
advance all reasonable expenses incurred by or on behalf of Holder in
connection with any proceeding by reason of Holder's corporate status within
ten (10) days after the receipt by the Company of a statement or statements
from Holder requesting such advance or advances from time to time, whether
prior to or after final disposition of such proceeding. Such statement or
statements shall reasonably evidence the expenses incurred by Holder and shall
include or be preceded or accompanied by an undertaking by or on behalf of
Holder to repay any expenses advanced if it shall ultimately
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<PAGE> 11
be determined that Holder is not entitled to be indemnified against such
expenses. Any advances and undertakings to repay pursuant to this Paragraph 15
shall be unsecured and interest free.
(c) The obligations of the Company contained in this
indemnity clause shall continue during the period Holder is a director or
employee of the Company (or is or was serving at the request of the Company as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise) and shall continue thereafter so long
as Holder shall be subject to any proceeding by reason of his corporate status,
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided
under this Agreement. Such rights of indemnification and reimbursement shall
not be deemed exclusive of any other rights to which Holder may be entitled
under any statute, agreement, vote of shareholders or otherwise.
16. Successors and Assigns.
This Agreement shall inure to the benefit of the Company and
Holder and their respective successors and permitted assigns.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the Company
and Holder as to its subject matter and supersedes any previous written or oral
agreement or understanding between the Company and Holder with respect to such
subject matter.
18. Counterparts.
This Agreement may be executed in duplicate originals, each of
which when taken together shall be deemed an original.
19. Amendment.
This Agreement may not be modified except in a writing signed
by both parties hereto.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Rajendra B. Vattikuti
-------------------------------
Name: Rajendra B. Vattikuti
Title: President
Douglas S. Laud
-------------------------------
Douglas S. Laud
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<PAGE> 1
EXHIBIT 10.9
AGREEMENT
This Nonqualified Stock Option Agreement ("Agreement") dated as of
April 25, 1996 by and between COMPLETE BUSINESS SOLUTIONS, INC. ("Company"), a
Michigan corporation, having an office at 32605 West 12 Mile Road, Suite 250,
Farmington Hills, Michigan 48334 and TIMOTHY S. MANNEY ("Holder"), an
individual.
W I T N E S S E T H :
WHEREAS, the Company is a privately held Subchapter S corporation;
WHEREAS, the Company has the authority to issue additional shares of
the Company's common stock (all of the Company's shares of common stock being
hereinafter referred to as "Common Stock");
WHEREAS, Holder is an employee of the Company and has provided valuable
services to the Company, including, without limitation, servicing as a director
on its Board of Directors;
WHEREAS, the Company desires to document its previous commitment to
grant Holder an option to purchase a portion of the Company's Common Stock,
upon the price, terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the terms and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Option.
Holder shall have the right, at his sole and absolute option, to
purchase on terms and conditions hereinafter set forth, all or any part of the
aggregate of 45 shares of Common Stock of the Company (collectively, the
"Option Shares") at the purchase price of $25,000 per share (the "Option
Price"). Such right is hereinafter referred to as the "Option".
2. Exercise; Expiration Date.
(a) EXERCISE: The Option shall be exercisable in full on and after
one year from the date of grant, so that from and after October 27, 1996 the
Holder may purchase all of the Option Shares. If the Company files a
registration statement under the Securities Act of 1933 for an initial public
offering of its Common Stock Holder may purchase all of the Option Shares at
such time or any time thereafter. The Option may be exercised in whole or in
part, at the
<PAGE> 2
option of Holder, on or before the Expiration Date (hereinafter defined) by
delivering to the Company written notice of Holder's exercise ("Exercise
Notice") stating the amount of Option Shares to be purchased thereby,
accompanied by either (i) a check ("Check") made payable to the order of the
Company for the aggregate sum due for the Option Shares then being purchased,
or (ii) notice to the Company that Holder elects to borrow the funds for such
purchase in accordance with Paragraph 5 below ("Loan Notice"). As soon as
practicable thereafter, and in any event within ten (10) business days of the
Company's receipt of the Exercise Notice and either a Check or a Loan Notice,
the Company shall issue and deliver to Holder a certificate representing the
Option Shares being purchased pursuant to such Exercise Notice. Each such
certificate shall bear the legend or legends required by applicable securities
laws as well as such other legends the Company requires to be included on
certificates for its Common Stock. Such certificate or certificates shall be
deemed to have been issued and Holder or any other persons so designated to be
named therein shall be deemed for all purposes to have become a holder of
record of such shares as of the date the Exercise Notice or Loan Notice is
delivered to the Company. In the case of an exercise for less than all of the
Option Shares permitted to be purchased hereunder, the Holder shall reserve the
right to exercise the Option at any time and from time to time prior to the
Expiration Date for the remainder of the Option Shares.
(b) EXPIRATION DATE: The term "Expiration Date" shall mean ten (10)
years from the date hereof, at 5:00 P.M. Detroit time on such date or if such
date shall be a federal holiday, a Saturday or a Sunday, then 5:00 P.M. Detroit
time the next following day which is not a federal holiday, a Saturday or a
Sunday.
3. Registration Rights.
(a) If the Company determines that it shall file a registration
statement under the Securities Act of 1933 (the "1933 Act") for an initial
public offering of its Common Stock, at such time the Company shall promptly
give Holder written notice of such determination setting forth the date on
which the Company proposes to file such registration statement, which date
shall be no earlier than forty-five (45) days after the date of such notice,
and advising Holder of its right to have its Option shares included in such
registration, if Holder has exercised its Option or exercises the Option in
conjunction with expressing its intent to participate in the registration. Upon
the written request of Holder received by the Company by the date set forth in
the notice, which such date shall be no later than twenty-five (25) days after
the date of the Company's notice, the Company shall use its best efforts to
cause to be registered under the 1933 Act all of the Option Shares that Holder
has so requested to be registered. If, in the good faith written opinion of the
managing underwriter or underwriters (or, in the case of a non-underwritten
offering, in the good faith written opinion of the placement agent, or if there
is none, the Company) the total amount of such securities to be so registered,
including the Option Shares, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to the then
current market value of such securities, or (ii) without otherwise materially
and adversely affecting the entire offering, then the amount of Option Shares
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<PAGE> 3
to be offered for the account of Holder shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the recommended amount; provided, however, that if securities are
being offered for the account of other persons as well as the Company, such
reduction shall not represent a greater fraction of the number of securities
intended to be offered by Holder than the fraction of similar reductions
imposed on such other persons other than the Company over the amount of
securities they intended to offer. Such an offering which does not include all
or any portion of the Option Shares shall be referred to herein as a
"Non-Option Share Registration", and the Option Shares not included in such an
offering shall be hereinafter referred to as the "Non-Registered Option
Shares".
(b) Commencing six (6) months after the date of the closing of the
Non-Option Share Registration, Holder may make a written request to the Company
that the Company file a registration statement under the 1933 Act (or a similar
document pursuant to any other statute then in effect corresponding to the 1933
Act) covering the registration of the Non-Registered Option Shares. In such
event, the Company shall use its best efforts to cause to be registered under
the 1933 Act all Non-Registered Option Shares that the Holder has requested be
registered.
(c) If the Holder intends to distribute the Non-Registered Option Shares
covered by its request by means of an underwritten offering, it shall so advise
the Company. Such underwriter or underwriters shall be selected by the Holder
and shall be approved by the Company, which approval shall not be unreasonably
withheld or delayed; provided, that all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of Holder and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement shall be conditions precedent to
the obligations of Holder; and provided further, that Holder shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding Holder, the Non-Registered Option Shares and Holder's intended method
of distribution and any other representation required by law or reasonably
required by the underwriter.
(d) Whenever required under Paragraph 3(b) hereto to use its best efforts
to effect the registration of any Non-Registered Option Shares, the Company
shall, as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission
("Commission"), as soon as practicable after receipt of a request to file a
registration statement with respect to such Non-Registered Option Shares, a
registration statement and use its best efforts to cause such registration
statement to become effective as promptly as practicable thereafter;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will (1) furnish to counsel
selected by Holder copies of all such documents proposed to be filed, and
(2) notify
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<PAGE> 4
Holder of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to
remove it if entered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than one hundred twenty (120) days or such
shorter period which will terminate when all Non-Registered Option Shares
covered by such registration statement have been sold (but not before the
expiration of the forty (40) or ninety (90) day period referred to in Section
4(3) of the 1933 Act and Rule 174 thereunder, if applicable), and comply with
the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(iii) furnish to Holder and any applicable underwriter copies of such
registration statement as filed and each amendment and supplement thereto,the
prospectus included in such registration statement and such other documents as
such Holder may reasonably request in order to facilitate the disposition of the
Non-Registered Option Shares and keep Holder specifically apprised of the
status of such registration, including, without limitation, notice of any
requirements under the 1933 Act relative to any prospectus or otherwise, make
available for inspection by Holder or any participating underwriter and any
attorney, accountant or other agent retained in connection with the
registration, all financial and other records, appurtenant corporate documents
and properties of the Company and supply such other reasonable information as
reasonably requested by any such party from time to time, and furnish such
signed legal opinions and certified public accountant letters as are reasonably
requested by Holder in connection with the registration;
(iv) use its best efforts to register or qualify such Non-Registered
Option Shares under such other securities or blue sky laws of such
jurisdictions as Holder or any applicable underwriter reasonably requests,
and do any and all other acts which may be reasonably necessary or advisable to
enable Holder to consummate the disposition of the Non-Registered Option
Shares;
(v) use its best efforts to cause the Non-Registered Option Shares
covered by such registration statement to be registered with or approved by
such other governmental agencies or other authorities as may be necessary by
virtue of the business and operations of the Company to enable the Holder to
consummate the disposition of such Non-Registered Option Shares;
-4-
<PAGE> 5
(vi) enter into customary agreements and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Non-Registered Option Shares to be so included in the
registration statement;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, including, without
limitation, providing earnings statements to satisfy the provisions of Section
11(a) of the 1933 Act; and
(viii) use its best efforts to cause all such Non-Registered
Option Shares to be listed on the New York Stock Exchange and/or any other
securities exchange on which similar securities issued by the Company are then
listed, or traded on the National Association of Securities Dealers Automated
Quotations System, if such listing or trading is then permitted under the rules
of such exchange or system, respectively.
(e) All cost and expenses incurred as a result of any registration
under this Paragraph 3 including, without limitation, any and all fees, costs
and expenses charged by an underwriter (other than underwriter's discount or
direct selling expense which shall be borne by all shares sold on a pro-rata
basis) in connection therewith shall be borne fully by the Company.
4. Anti-Dilution Provisions.
(a) The number of shares of Option Shares and the exercise price per
share pursuant to Schedule 1 hereto shall be subject to adjustment from time to
time as provided for in this Section 4(a). Notwithstanding any provision
contained herein, the aggregate Option Price for the total number of Option
Shares issuable pursuant to the Option shall remain unchanged. In case the
Company shall at any time change as a whole, by subdivision, combination,
acquisition or sale in any manner or by the making of a stock split or stock
dividend or by changing the number of outstanding shares of Common Stock into a
different number of shares, (i) the number of shares which Holder shall have
been entitled to purchase pursuant to this Agreement shall be increased or
decreased in direct proportion to such increase or decrease of shares, as the
case may be, and (ii) the Option Price (but not the aggregate Option Price of
all such shares) in effect immediately prior to such change shall be increased
or decreased in inverse proportion to such increase or decrease of shares, as
the case may be. In addition, and without limiting the foregoing, it is the
parties' intention hereto that the Option Price respective to the Option Shares
shall at all times be equal to or less than the lowest price per share for
additional shares of Common Stock hereafter issued at less than fair market
value or deemed to be hereafter issued at less than fair market value upon the
issuance of any warrants, options or other subscription rights with respect to
Common Stock or other securities convertible into Common Stock or the issuance
of any warrants, options or any similar rights with respect to such convertible
securities (all such shares or instruments of the Company being referred to
herein collectively as "Securities"). Accordingly, upon any issuance or deemed
issuance of Securities at a price per share which is less than the then current
fair market value of such Securities and less than the
-5-
<PAGE> 6
lowest price per share of the Option Shares, the per share price of the Option
Shares shall be forthwith reduced to an amount equal to the lowest price per
share of Securities so issued. If the Company shall in any manner grant, issue
or sell any Securities whether or not same or the right to convert or exchange
any of same are immediately exercisable, the Company will be deemed to have
issued or sold Common Stock.
(b) If, under this Paragraph 4, the purchase price provided for in any
Securities, the additional consideration, if any, payable upon the conversion
or exchange of any such Securities, or the rate at which any of same are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Option Price in effect at the time of such event shall forthwith
be readjusted to the respective Option Price which would have been in effect at
such time had such Securities still remained outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the purchase
price provided for in any such Securities shall be reduced at any time under or
by reason of provisions with respect thereto designed to protect against
dilution, then, in case of the delivery of Common Stock upon the exercise of
any such Securities or upon conversion or exchange of any such Securities, the
Option Price in effect hereunder shall forthwith be adjusted to such respective
amounts as would have been effective upon the issuance of the shares of Common
Stock delivered as aforesaid.
(c) Upon the expiration of any Securities or the termination of any
right to convert or exchange any Securities without the exercise of a stock
option or right, the Option Price then in effect will be adjusted to the
respective Option Price which would have been in effect at the time of such
expiration or termination had such Securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued.
(d) In case any shares of Common Stock and Securities shall be issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received upon such issuance or sale, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock and Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of Common
Stock or Securities shall be issued in connection with the issue and sale of
other securities of the Company, together comprising one integral transaction
in which no specific consideration is allocated to such shares of Common Stock
or Securities by the parties thereto, such shares of Common Stock or Securities
shall be deemed to have been issued at a rate of $.01 per share of Common
Stock.
-6-
<PAGE> 7
(e) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company, and
the disposition of any such shares shall be considered an issue or sale of
Common Stock for the purposes of this Paragraph 4.
(f) Upon any adjustment of an Option Price, then and in each such case the
Company shall give written notice thereof to Holder, which notice shall state
the Option Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares of Common Stock purchasable at such price upon the
exercise of the Option, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(g) In case of any capital reorganization or any reclassification of the
Common Stock of the Company or in case of the consolidation or merger of the
Company with another corporation (or in the case of any sale, transfer, or other
disposition to another corporation of all or substantially all the property,
assets, business, and goodwill of the Company), Holder shall thereafter be
entitled to purchase the same kind and amount of shares of capital stock which
the Option entitled Holder to purchase immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
transfer, or other disposition; and in any such case appropriate adjustments
shall be made in the application of the provisions of this Paragraph 4 with
respect to rights and interests thereafter of Holder to the end that the
provisions of this Paragraph 4 shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
purchasable upon the exercise of the Option.
(h) No certificate for fractional shares shall be issued upon the exercise
of the Option, but in lieu thereof the Company shall purchase any such
fractional shares calculated to the nearest cent.
(i) In addition to the foregoing, if the Company shall acquire any entity
and Holder shall in its sole discretion consider that the acquisition is made at
other than fair value, an adjustment should fairly and appropriately be made to
the Common Stock and the Option Shares so that the value of Common Stock and
Option Shares is, in the agreed opinion of Holder and Company, the same as it
would have been if such acquisition had been made at fair value. Such adjustment
shall become effective (if appropriate) retroactively, on the day on which the
acquisition in question is completed. If Holder and the Company cannot agree on
an appropriate adjustment as required to reflect the fair value, the independent
auditor of the Company shall choose a nationally recognized valuation firm to
make the determination of the required adjustment (if any). The choice of the
valuation firm and the determination of the valuation firm shall be final and
binding.
-7-
<PAGE> 8
5. Loan.
At Holder's sole and absolute discretion as exercised by the Loan
Notice, Holder shall have the right from time to time and at any time to borrow
from the Company the necessary funds to purchase the Option Shares. In such
event, the Company shall loan to Holder and Holder shall borrow from the
Company, the aggregate sum of money required to buy the Option Shares then being
purchased ("Loan"), which Loan shall be upon terms and conditions to be mutually
agreed upon by the parties hereto except that the following shall apply to any
and each such Loan; (i) the interest rate shall be no more than the "prime rate
of interest" as set forth in the Wall Street Journal on the date of the
Exercise Notice or if the Wall Street Journal shall not exist at such time, such
comparable publication publishing the "prime rate of interest", (ii) the Loan
shall have a term of not less than five (5) years, or at another date mutually
agreed upon between the Holder and the Company, (iii) the Loan shall be repaid
at "interest only" until the maturity date of the Loan at which time the
principal shall be due, such interest to be paid no more frequently than
semi-annually but no interest shall be paid on interest. Interest shall accrue
but not be paid prior to the Option Shares being registered with the Securities
and Exchange Commission in accordance with Paragraph 3 of this Agreement, and
(iv) The Loan shall be with recourse to the Holder and the Company shall have a
security interest in Holder's Option Shares.
6. Repurchase Obligation.
At Holder's option the Company shall repurchase any Option Shares of
the Company owned by Holder at any time. The repurchase price shall be
equivalent to the option price set forth on Schedule 1 of this Agreement. This
repurchase obligation shall be terminated at the time the Company completes an
initial public offering of its common stock.
7. Holder's Income Tax Coverage.
For so long as the Company shall be a Subchapter S corporation, the
Company agrees that notwithstanding any of its distributions, dividends or
payments made to the shareholders of the Company, the Company shall pay to
Holder after any exercise of the Option, an amount not less than Holder's
federal, state and local personal income tax liability in the aggregate as a
result of the Company's income for the preceding calendar year. Distributions
will be made on a pro-rata basis based upon percentage ownership of stock of the
Company. Nothing in this Agreement is intended to create a second class of stock
in accordance with Section 1361(b)(1)(D) of the Internal Revenue Code of 1986 as
amended which would result in the termination of the Company's S Corporation
election. Any provision in this Agreement which is deemed to create such a
second class is null and void.
-8-
<PAGE> 9
8. Change of Ownership Protection.
If fifty percent (50%) or more of the ownership of the Company
is transferred, sold or otherwise disposed of in one (1) or more transactions,
then as part of such transfer, sale or other disposition; then, at Holder's
request, any and all shares of Common Stock held by Holder shall be
simultaneously transferred, sold or disposed of therewith at a per share price
no less than the highest per share price paid for the other shares of Common
Stock then being transferred, sold or otherwise disposed of.
9. Assignability.
The Option granted herein may not be pledged, assigned,
transferred, sold or otherwise disposed of by Holder without the prior written
consent of the Company other than to Holder's family trusts, family members,
estate trusts, retirement plans or by Will or by the laws of descent and
distribution.
10. Reservation of Shares.
The Company covenants that it will, at all times, reserve and
keep available out of its authorized Common Stock solely for the purpose of
issuance upon exercise of the Option, such number of shares of Common Stock as
shall then be issuable upon the exercise of the Option. The Company agrees
that, upon issuance in accordance with the terms and conditions of this
Agreement, all Option Shares shall be duly and validly issued and fully paid
and non-assessable and free from all taxes, liens and charges with respect to
the issue thereof.
11. Loss or Mutilation.
Upon receipt by the Company of reasonable evidence of the loss,
theft, destruction, or mutilation of this Agreement, the Company shall execute
and deliver in lieu thereof a new Agreement representing an equal number of
Option Shares exercisable thereunder.
12. Transfer Taxes; Expenses.
The Company shall pay any and all brokerage fees, transfer
taxes and expenses incidental to the exercise of the Option and shall pay all
the fees and expenses of any special attorneys or accountants retained by it in
connection therewith.
13. Notice.
Any notice and other communication given pursuant to the
provisions of this Agreement shall be in writing and shall be given (i) by
mailing the same by certified mail or
-9-
<PAGE> 10
registered mail, return receipt requested, postage prepaid, (ii) by hand,
providing for receipted delivery, or (iii) by reputable overnight courier
providing for receipted delivery. Except as may be expressly otherwise provided
in this Agreement, any such notice or other communication given by mail shall
be deemed given two (2) business days after same is mailed and any such notice
or other communication given by hand or overnight courier as aforesaid shall be
deemed given when received or when receipt is refused. If sent to the Company,
such notices or other communication shall be sent to the Company at 32605 West
12 Mile Road, Suite 250, Farmington Hills, Michigan 48334, or at such other
address or addresses as the Company may hereafter designate by notice to
Holder. If sent to Holder, such notices or other communications shall be sent
to Holder at 44749 Fordway, Novi, Michigan 48375, or at such other address or
addresses as Holder may hereafter designate by notice to the Company.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with,
the laws of the State of Michigan, without giving effect to any conflicts of
laws.
15. Indemnity.
(a) To the full extent permitted by law the Company shall save
Holder harmless from and indemnify Holder and his heirs, executors and
administrators against any and all injury, loss, damage, costs, expenses,
claims, suits, actions or proceedings (including, without limitation, reasonable
attorney's fees) and against any payments in settlement of any such claims,
suits, actions or proceedings or in satisfaction of any related judgement, fine
or penalty caused by or resulting from any act, omission, negligence or willful
conduct of Holder or Holder's agents no matter how caused from Holder's
involvement with the Company its subsidiaries and affiliates, including, without
limitation, being a shareholder, member of board of directors, trustee of a
Company benefit plan, officer or consultant of the Company its subsidiaries and
affiliates.
(b) To the full extent permitted by law the Company shall advance all
reasonable expenses incurred by or on behalf of Holder in connection with any
proceeding by reason of Holder's corporate status within ten (10) days after the
receipt by the Company of a statement or statements from Holder requesting such
advance or advances from time to time, whether prior to or after final
disposition of such proceeding. Such statement or statements shall reasonably
evidence the expenses incurred by Holder and shall include or be preceded or
accompanied by an undertaking by or on behalf of Holder to repay any expenses
advanced if it shall ultimately be determined that Holder is not entitled to be
indemnified against such expenses. Any advances and undertakings to repay
pursuant to this Paragraph 15 shall be unsecured and interest free.
(c) The obligations of the Company contained in this indemnity clause
shall continue during the period Holder is a director or employee of the Company
(or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation.
-10-
<PAGE> 11
partnership, joint venture, trust or other enterprise) and shall continue
thereafter so long as Holder shall be subject to any proceeding by reason of
his corporate status, whether or not he is acting or serving in any such
capacity at the time any liability or expense is incurred for which
indemnification can be provided under this Agreement. Such rights of
indemnification and reimbursement shall not be deemed exclusive of any other
rights to which Holder may be entitled under any statue, agreement, vote of
shareholders or otherwise.
16. Successors and Assigns.
This Agreement shall insure to the benefit of the Company and Holder
and their respective successors and permitted assigns.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the Company and
Holder as to its subject matter and supersedes any previous written or oral
agreement of understanding between the Company and Holder with respect to such
subject matter.
18. Counterparts.
This Agreement may be executed in duplicate originals, each of which
when taken together shall be deemed an original.
19. Amendment.
This Agreement may not be modified except in a writing signed by both
parties hereto.
COMPLETE BUSINESS SOLUTIONS, INC.
By: Rajendra B. Vattikuti
-----------------------------
Name: Rajendra B. Vattikuti
Title: President
Timothy S. Manney
-----------------------------
Timothy S. Manney
-11-
<PAGE> 1
EXHIBIT 10.10
[ANDERSEN CONSULTING LOGO] U.S. License Agreement
Dated 11/3/95
--------------------------------
Andersen Consulting LLP ("Andersen"),
69 West Washington Street, Chicago, Illinois 60602 and
COMPLETE BUSINESS SOLUTIONS, INC. ("Client")
-------------------------------------------------------------
agree to the following provisions.
- --------------------------------------------------------------------------------
1. GRANT OF LICENSE
1.1 This Agreement, together with the associated Schedule(s) for computer
software and related materials (the "Products"), describe the provisions of
Andersen's grant of license to Client to use the Products.
1.2 Client may make a reasonable number of copies of the Products for use as
expressly permitted in this Agreement and for back-up and archival purposes.
Client will reproduce and include the copyright notices and other
restrictive and proprietary legends from the original on all copies, partial
copies, and derivative works, all of which will be subject to the provisions
of this Agreement.
2. MAINTENANCE SERVICES
2.1 Maintenance is comprised of the following:
2.1.1 Program and Documentation additions, changes, corrections,
improvements, modifications, and refinements that are generally made
available for no additional fee by Andersen to its clients receiving
Maintenance ("Enhancements"); and
2.1.2 Telephone assistance for problem identification, problem diagnosis,
and usage concerns ("Telephone Support").
2.2 For the Products that have a Maintenance Term specified in the applicable
Schedule, Andersen will provide Maintenance during the Maintenance Term and
the associated Maintenance Fee will be specified in the Schedule. Following
the expiration of a Maintenance Term, Maintenance, if then available, may be
provided according to the provisions of a separate Schedule.
2.3 Client is responsible for the installation of the Products and the
Enhancements, all of which will be subject to the provisions of this
Agreement.
3. WARRANTY
3.1 For the Products that have a Warranty Term specified in the applicable
Schedule, Andersen warrants that the Products will operate in substantial
conformance with the applicable user documentation during the Warranty Term.
Andersen's warranty obligation is to use its best efforts to correct any
such nonconformance.
3.2 This warranty is contingent on the installation of all Enhancements provided
by Andersen. Client agrees to provide reasonable assistance to Andersen to
support Andersen's investigation of a problem or error related to the
Products. This warranty applies whether or not the Products have been
modified, as long as the nonconformance also exists in the unmodified
Products or Enhancements supplied by Andersen, but does not apply to
combinations of routines that are not stated in the applicable user
documentation.
3.3 PRODUCTS THAT HAVE NO WARRANTY TERM SPECIFIED IN THE APPLICABLE SCHEDULE ARE
PROVIDED "AS IS" WITH NO WARRANTY OF ANY KIND. THE WARRANTY STATED IN THIS
SECTION IS THE ONLY WARRANTY MADE BY ANDERSEN IN CONNECTION WITH THE
PRODUCTS. ANDERSEN MAKES NO OTHER EXPRESS OR IMPLIED WARRANTIES OF ANY KIND,
INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
4. OWNERSHIP AND USE
4.1 The Products are either proprietary to Andersen and include trade secrets
(and may include Products for which a patent has been applied for or issued)
or they are Products that are proprietary to third parties that Andersen has
the right to distribute. All copyrights, patents, trade secrets, and any
other intellectual property rights related to the Products, and related to
all copies, partial copies, adaptations, additions, collective works,
compilations, derivative works, enhancements, modifications, and
translations of the Products, will remain in or are assigned to Andersen.
4.2 Client agrees to hold the Products in confidence and to safeguard them from
disclosure to third parties and from unauthorized reproduction and use.
However, Client may disclose the Products to third parties performing
services for Client, provided the third parties sign a nondisclosure
agreement with Andersen prior to their use or access. If provided in object
code form, the Products may not be decompiled, disassembled, or reverse
engineered.
4.3 The license for the Products is non-exclusive and may not be assigned,
leased, sublicensed, or otherwise transferred, whether or not incorporated
or merged into other programs or materials. The Products may only be used
in the conduct of Client's internal data processing operations, and may not
be used for the U.S. Government or to provide services (such as systems
management or time-sharing) for a third party.
5. INTELLECTUAL PROPERTY RIGHTS AND INDEMNIFICATION
5.1 Andersen will defend any claim against Client and pay the damages and costs
finally awarded against Client by a court of competent jurisdiction to the
extent the Products supplied by Andersen constitute an infringement of any
copyright, trade secret, or presently existing U.S. patent. This obligation
is contingent on Client's prompt written notification to Andersen of the
claim, Andersen's retention of sole control of the defense and settlement
negotiations related to the claim and Client's assistance (at Andersen's
expense) in the defense or settlement of the claim.
<PAGE> 2
5.2 Where a Product is held to be infringing or where Andersen believes it may
be infringing, Andersen may, at its expense and option: obtain for Client
the right to continue using the Product; replace the Product with a
non-infringing product of similar functionality; modify the Product so it is
not infringing; or terminate Client's license for the Product and return the
associated License Fee paid, prorated equally over a five-year period from
the license date.
5.3 Andersen will not be liable to Client if an infringement claim is based on:
use of the Products in combination with any product, software or system not
supplied by Andersen; modification of the Products supplied by Andersen in a
manner causing them to become infringing; or use of any version or release
of the Products where use of the most current version or release would have
avoided the claim of infringement.
5.4 Client is responsible for the use and operation of the Products and Client
will hold Andersen harmless from any claims by a third party related to the
use or operation of the Products by Client or a third party, except for
claims that are Andersen's responsibility in this Section.
5.5 THE REMEDIES STATED IN THIS SECTION ARE THE SOLE AND EXCLUSIVE REMEDIES OF
CLIENT WITH RESPECT TO ANY CLAIM OF INFRINGEMENT RELATED TO THE PRODUCTS.
6. PAYMENT
The License Fee and any Maintenance Fee for the Products will be specified
in the Schedules. The License Fee is payable by Client within 30 days of
the effective date of the applicable Schedule and the Maintenance Fee is
payable by Client prior to the start of the applicable Maintenance Term.
Client agrees to pay all applicable taxes resulting from any transaction
under this Agreement, except taxes based on Andersen's income.
7. TERM AND TERMINATION
7.1 This Agreement and each Schedule will be effective on the date each is
signed by both parties. The license term for each Product will be 20 years
and is renewable by mutual agreement for no additional fee.
7.2 Either party may terminate any or all Schedules if the other party
materially breaches a provision of this Agreement or any Schedule and fails
to correct the breach within 30 days following written notice of the breach.
Upon termination of a Schedule or expiration of a license, Client agrees to
cease using the Products licensed under the Schedule and agrees to destroy
all copies of the Products in all forms, partial and complete, in all types
of media and computer memory, whether or not modified or merged into other
programs or materials. The provisions of Sections 4, 5, and 8 will survive
the termination of this Agreement or any Schedule.
8. LIMITATION OF LIABILITY
Andersen's liability for any claim related to a Product, regardless of the
form of action (whether in contract or tort, including negligence, or by
statute) will in no event exceed the License Fee paid for the Product or, to
the extent the claim relates to Maintenance, the fee paid for Maintenance.
In no event will Andersen be liable for any indirect, incidental, special,
consequential, or punitive damages, including lost profits or savings, even
if Client has advised Andersen of their possibility.
9. GENERAL
9.1 The laws of the State of Illinois will govern this Agreement.
9.2 Any provision of this Agreement that is held to be invalid, illegal,
unenforceable, or void will in no way affect any other provision.
9.3 Neither party will be liable to any other party for any delay, error,
failure in performance, or interruption of performance resulting directly or
indirectly from causes beyond that party's reasonable control.
9.4 No waiver of any provision of this Agreement or any right or obligation of a
party will be effective unless there is a signed writing evidencing the
waiver. The failure of a party to enforce a right will not constitute a
waiver of the right.
9.5 The provisions of this Agreement will be binding on the parties' successors
and assigns. Client may not assign or transfer this Agreement, in whole or
in part, without the prior written consent of Andersen and any assignment,
transfer or attempt to assign or transfer by Client without consent will be
void. Andersen reserves the right to assign this Agreement.
9.6 This Agreement will not be amended or modified other than in a writing
signed by both parties. The provisions in each Schedule will govern
conflicts between this Agreement and the Schedule for the Products licensed
in the Schedule. Any purchase order or other form supplied by Client is for
its administrative convenience only and will not bind either party.
9.7 The provisions set forth in this Agreement constitute all the
understandings and agreements between the parties with respect to the
Products. Any prior agreements, letters, negotiations, promises,
proposals, quotations, representations, or statements that are not
expressly set forth in this Agreement are of no force or effect.
941201
- -------------------------------------------------------------------------------
ANDERSEN CONSULTING LLP Complete Business Solutions, Inc.
By Martin R. Brown By Daniel Rankin
-------------------------------- ----------------------------------
Printed Name Martin R. Brown Printed Name Daniel Rankin
---------------------- ------------------------
Title Managing Director Foundation Title VP TECHNOLOGY
Software Organization ------------------------------
----------------------------
Date November 28, 1995 Date 11/3/95
----------------------------- ---------------------------------
<PAGE> 3
METHOD/1(R) SCHEDULE DATED
----------------------
TO THE
ANDERSEN CONSULTING U.S. LICENSE AGREEMENT DATED NOVEMBER 3, 1995
---------------------------
PRODUCT
X METHOD/1 Methodology, V9.5
- ---
X METHOD/1 Guide, V9.5
- ---
X METHOD/1 Tools, V3.0
- ---
- Project Bridge Modeler Component Enablements Files
- Project Workbench for Windows Component Enablement Files
X METHOD/1 Methods Architect Enablement Files, V1.0
- ---
LICENSE FEE: $59,000, plus tax if applicable, payable within 30 days of
the delivery of the Product.
<TABLE>
<CAPTION>
RESTRICTED USE
Product Components Licensed Number Permitted Use
- ------------------ --------------- -------------
<S> <C> <C>
METHOD/1 Methodology Users Licensed: 1-10 The Methodology may be used at any Client locations by
------ the Licensed Number of Users, where a User is defined as
any person who accesses or otherwise makes use of the
Methodology
METHOD/1 Guide METHOD/1 Guide: 10 The METHOD/1 Guide, Tools, and Methods Architect
------ Enablement Files may only be used on the Licensed
METHOD/1 Tools METHOD/1 Tools: 4 Number of Workstations, where a Workstation is defined
------ as a personal computer with stand-alone or network access
METHOD/1 Methods METHOD/1 Methods Architect to the Product, at the following site(s):
Architect Enablement Enablement Files: 1
Files --------- -------------------------------------------------------------
</TABLE>
TERMS
License Term: 20 years, renewable for 5 year terms with Andersen's consent
for no additional fee.
Warranty Term: 6 months for no additional fee, starting on the date of
delivery of the Products.
Maintenance Term: 6 months for no additional fee, starting on the date of
delivery of the Products.
ABT PRODUCTS
X Project Workbench Professional (includes Project Bridge Modeler and
- --- Project Workbench for Windows components). The use of Project
Workbench Professional is limited to one Workstation for each METHOD/1 Tools
Workstation licensed.
X Methods Architect - the use of Methods Architect is limited to one
- --- Workstation for each METHOD/1 Tools Methods Architect Enablement Files
Workstation licensed.
In conjunction with this license, Andersen will arrange for the procurement and
delivery of the products that are proprietary to Applied Business Technology
Corporation (the "ABT Products") as specified above and the fees for the ABT
Products are included in the METHOD/1 license fee. Subject to the use
restrictions above, Client's license for the ABT Products is governed by the
license agreement accompanying them. Andersen will provide telephone support for
the ABT Products as part of METHOD/1 Maintenance, however the ABT Products are
provided from Andersen "as is" without any kind of warranty (although defect
corrections may be available under the separate ABT license agreement).
ANDERSEN CONSULTING LLP COMPLETE BUSINESS SOLUTIONS, INC.
BY BY Daniel Rankin
---------------------------------- --------------------------------------
PRINTED NAME PRINTED NAME Dan Rankin
------------------------ ----------------------------
TITLE TITLE Vice President, Technology
------------------------------- -----------------------------------
DATE DATE 11/21/95
------------------------------- -----------------------------------
<PAGE> 4
METHOD/1(R) SCHEDULE DATED DECEMBER 28, 1995
TO THE
ANDERSEN CONSULTING LICENSE AGREEMENT DATED NOVEMBER 3, 1995
<TABLE>
<S><C>
PRODUCT
X METHOD/1 Methodology, Version and Release V.5
- -----
X METHOD/1 Guide, Version and Release V.5
- -----
METHOD/1 Tools, Version and Release
- ----- ---------
Project Bridge Modeler Component Enablements Files
- -----
Project Workbench for Windows Component Enablement Files
- -----
METHOD/1 Methods Architect Enablement Files, Version and Release
- ----- -----
LICENSE FEE: $33,000 plus tax if applicable, payable within 30 days of the
delivery of the Product.
RESTRICTED USE
Product Components Licensed Number Permitted Use
- ------------------ --------------- -------------
METHOD/1 Methodology Users Licensed: 11-50 The Methodology may be used at any Client locations by
the Licensed Number of Users, where a User is defined as
any person who accesses or otherwise makes use of the
Methodology.
*METHOD/1 Guide METHOD/1 Guide: 15 The METHOD/1 Guide, Tools, and Methods Architect
Enablement Files may only be used on the Licensed
METHOD/1 Tools METHOD/1 Tools: Number of Workstations, where a Workstation is defined as
a personal computer with stand-alone or network access to
METHOD/1 Methods METHOD/1 Methods Architect the Product, at the following site(s):
Architect Enablement Files Enablement Files:
---------- ----------------------------------------------------------
TERMS
License Term: 20 years, renewable for 5 year terms with Andersen's consent for no additional fee.
Warranty Term: 6 months for no additional fee, starting on the date of delivery of this Schedule.
Maintenance Term: 6 months for no additional fee, starting on the date of delivery of this Schedule.
ABT PRODUCTS
Project Workbench Professional (includes Project Bridge Modeler and Project Workbench for Windows components).
- -------- The use of the Project Workbench Professional is limited to one Workstation for each METHOD/1 Tools Workstation licensed.
Methods Architect - the use of the Methods Architect product is limited to one Workstation for each METHOD/1 Tools
- -------- Methods Architect Enablement Files Workstation licensed
In conjunction with this license, Andersen has or will arrange for the procurement and delivery of the products that are
proprietary to Applied Business Technology Corporation (the "ABT Products") as specified above and the fees for the ABT
Products are included in the METHOD/1 license fee. Subject to the use restrictions above, Client's license for the ABT
Products is governed by the license agreement accompanying them. Andersen will provide telephone support for the ABT
Products as part of METHOD/1 Maintenance, however the ABT Products are provided from Andersen "as is" without any
kind of warranty (although defect corrections may be available under the separate ABT license agreement).
ANDERSEN CONSULTING LLP COMPLETE BUSINESS SOLUTIONS, INC.
BY BY DANIEL RANKIN
----------------------------------------------- ---------------------------------------------------
PRINTED NAME PRINTED NAME DANIEL RANKIN
----------------------------------------------- ---------------------------------------------------
TITLE TITLE VICE PRESIDENT, TECHNOLOGY
----------------------------------------------- ---------------------------------------------------
DATE DATE DECEMBER 28, 1995
----------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE> 5
ADDENDUM
TO ANDERSEN CONSULTING LICENSE AGREEMENT
WITH
COMPUTER BUSINESS SOLUTIONS, INC.
This Addendum, dated Nov 3, 1995, hereby amends, to the extent specified
herein, the terms and conditions of the Andersen Consulting License Agreement,
date Nov 3, 1995, (the "Agreement") with Computer Business Solutions, Inc.
("CBSI") and the Schedule for METHOD/1 dated Nov 3, 1995 (the
"Schedule"). In the event any term or condition of this Addendum conflicts
with any term of the above referenced documents, the provisions of this
Addendum shall control.
Notwithstanding the site address set forth in the Restricted Use portion
of the Schedule, Andersen agrees that CBSI may use the METHOD/1 Guide at
its client sites worldwide subject to the following restrictions:
(1) Only one (1) copy of the METHOD/1 Guide is permitted to be used at
each CBSI client site by CBSI's Project Manager;
(2) CBSI will not install or use the METHOD/1 Guide on a client's
computer [e.g. a Local Area Network (LAN) or other server] and the
METHOD/1 Guide may only be installed and used on a single
stand-alone workstation or lap top computer. However, CBSI's
Project Manager may use a stand alone or lap top computer that is
connected to a client's LAN or other server, so long as the
METHOD/1 Guide is not installed on, or accessible through, the
client's LAN or other server;
(3) CBSI's use of the METHOD/1 Guide at all locations shall not exceed
the total restriction on the number of workstations in the
Schedule; and
(4) CBSI agrees to be responsible for all import and export laws,
regulations, taxes and/or other rules applicable to the transport
or use of the METHOD/1 Guide as permitted in this Addendum.
Upon Andersen's reasonable request, CBSI will provide Andersen with written
confirmation of all of its client sites using the METHOD/1 Guide and of the
total number of its workstations using the METHOD/1 Guide.
In addition to using the METHOD/1 Guide as set forth in the Agreement and
this Addendum, CBSI may use any workplans, in the form of computer
printouts and spreadsheets, that it develops from the METHOD/1
Product and the ABT Project Workbench software portion of the METHOD/1
Product, in diskette or electronic form, at its customers' locations in
order to perform engagements at those locations for its customers and to
train its customers' employees, provided the workplans do not contain any
portion of the METHOD/1 Product.
<PAGE> 6
Andersen agrees to provide Maintenance Services for the METHOD/1 Product
through a single, central, CBSI point of contact location. Such
Maintenance Services shall consist of the provision by Andersen of (a) one
copy of the METHOD/1 Product Enhancements to CBSI whereby CBSI shall be
responsible for distribution of such to all of its locations, and (b)
Telephone Support for all CBSI locations through a single, central, CBSI
point of contact location.
This Addendum shall be effective when signed by both Andersen and CBSI.
ANDERSEN CONSULTING LLP COMPUTER BUSINESS SOLUTIONS, INC.
By: Martin R. Brown By: Daniel Rankin
------------------------------- ---------------------------------
DANIEL RANKIN
Title: Managing Director, Title: VP TECHNOLOGY
Foundation Software Organization -----------------------------
---------------------------------
Date: November 29, 1995 Date: 11/6/95
----------------------------- ------------------------------
<PAGE> 7
DESIGN/1(R) SCHEDULE DATED
------------------
TO THE
ANDERSEN CONSULTING LICENSE AGREEMENT DATED NOVEMBER 3, 1995
--------------------
<TABLE>
<S><C>
PRODUCT: DESIGN/1, VERSION AND RELEASE 7.1
-----
X
----- DOS/Windows Platform
DESIGN/1 elements are:
- 25
---- set(s) of Programs (provided in object code form only) and 2 set(s) of
Documentation. ---
- Tutorial
- Participant guides for any training courses attended
LICENSE FEE: Total: $99,875, plus tax if applicable, payable within 30 days of the effective date of this
------
Schedule.
RESTRICTED USE: The Products may only be used on the number of Workstations specified below at the site
specified below (Workstations are defined as personal computers with stand-alone or network
access to the Products).
Site:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Number of Workstations licensed under this schedule 25
----
Number of Workstations previously licensed 0
---
Total number of Workstations licensed 25
====
LICENSE TERM: 20 years, renewable for 5 year terms with Andersen's consent for no additional fee.
WARRANTY TERM: 6 months, starting on the effective date of this Schedule, for no additional fee.
MAINTENANCE
SERVICES TERM: 6 months, starting on the effective date of this Schedule, for no additional fee.
TERMINATION
OPTION: Client may terminate schedule on or before September 30, 1996 by sending written notice no later than
September 30, 1996.
ANDERSEN CONSULTING LLP COMPLETE BUSINESS SOLUTIONS, INC.
By Martin R. Brown By Daniel Rankin
------------------------------------- --------------------------------------
Printed Name Martin R. Brown Printed Name Dan Rankin
---------------------------- ----------------------------
Title Partner Title Vice President, Technology
---------------------------------- -----------------------------------
Date September 30, 1996 Date 08/30/96
----------------------------------- ------------------------------------
</TABLE>
<PAGE> 8
METHOD/1(R) SCHEDULE DATED DECEMBER 28, 1995
-----------------
TO THE
ANDERSEN CONSULTING LICENSE AGREEMENT DATED NOVEMBER 3, 1995
----------------
PRODUCT
X METHOD/1 Methodology, Version and Release V.5
- ----- ----
X METHOD/1 Guide, Version and Release V.5
- ----- ---------
METHOD/1 Tools, Version and Release
- ----- ---------
Project Bridge Modeler Component Enablement Files
Project Workbench for Windows Component Enablement Files
METHOD/1 Methods Architect Enablement Files, Version and Release
- ----- ------
LICENSE FEE: $33,000 plus tax if applicable, payable within 30 days of the
--------- delivery of the Product.
RESTRICTED USE
<TABLE>
<CAPTION>
Product Components Licensed Number Permitted Use
- ------------------ --------------- -------------
<S> <C> <C>
METHOD/1 Methodology Users Licensed: 11.0 The Methodology may be used at any Client locations by
----- the Licensed Number of Users, where a User is defined as
any person who accesses or otherwise makes use of the
Methodology.
METHOD/1 Guide METHOD/1 Guide: 5 The METHOD/1 Guide, Tools, and Methods Architect
----- Enablement Files may only be used on the Licensed
METHOD/1 Tools METHOD/1 Tools: Number of Workstations, where a Workstation is defined as
a personal computer with stand-alone or network access to
METHOD/1 Methods METHOD/1 Methods Architect the Product, at the following site(s):
Architect Enablement Enablement Files:
Files ------ ---------------------------------------------------------
</TABLE>
TERMS
License Term: 20 years, renewable for 5 year terms with Andersen's consent
for no additional fee.
Warranty Term: 6 months for no additional fee, starting on the date of
delivery of this Schedule.
Maintenance Term: 6 months for no additional fee, starting on the date of
delivery of this Schedule.
ABT PRODUCTS
_____Project Workbench Professional (Includes Project Bridge Modular and Project
Workbench for Windows components). The use of the Project Workbench
Professional is limited to one Workstation for each METHOD/1 Tools Workstation
licensed.
_____Methods Architect- the use of the Methods Architect product is limited to
one Workstation for each METHOD/1 Tools Methods Architect Enablement Files
Workstation licensed.
In conjunction with this license, Andersen has or will arrange for the
procurement and delivery of the products that are proprietary to Applied
Business Technology Corporation (the "ABT Products") as specified above and the
fees for the ABT Products are included in the METHOD/1 license fee. Subject to
the use restrictions above, Client's license for the ABT Products is governed by
the license agreement accompanying them. Andersen will provide telephone
support for the ABT Products as part of METHOD/1 Maintenance, however the ABT
Products are provided from Andersen "as is" without any kind of warranty
(although defect corrections may be available under the separate ABT license
agreement).
ANDERSEN CONSULTING LLP COMPLETE BUSINESS SOLUTIONS, INC.
By Emerson G. Dickey, Jr. By Daniel Rankin
--------------------------------- -------------------------------------
Printed Name Emerson G. Dickey, Jr. Printed Name Daniel Rankin
----------------------- ---------------------------
Title Managing Partner, Software Title Vice President, Technology
Products ----------------------------------
------------------------------
Date January 2, 1996 Date December 28, 1995
------------------------------- -----------------------------------
<PAGE> 9
<TABLE>
<S><C>
U.S. NONDISCLOSURE AGREEMENT
[ANDERSEN
CONSULTING LOGO]
Recipient: CBSI - Complete Business Solutions, Inc.
Address: 32605 West Twelve Mile Road, Suite 250, Farmington Hills, Michigan 48334-3339
Materials:
/ / FOUNDATION(R) Design /X/ METHOD/1(R) / / MAC-PAC(R) OPEN
/ / FOUNDATION(R) Construction / / DESIGN/1(R) /X/ OTHER METHOD/1 TOOLS
/ / FOUNDATION(R) Production / / INSTALL/1/(R) ABT's Project Bridge Modeler Software
/ / PLAN/1(TM) ABT's Project Workbench Software
Methods Architect Software
Components: /X/ Documentation /X/ Software (if left blank, documentation and software will be provided)
Version/Release: 9.5 Hardware Platform: PC Systems Software: WINDOWS
Modules: ______________________________________________________________________________________________________
PERMITTED USE:
/X/ To evaluate the features and functions of the Materials
/ / To assist in performing services for the benefit of ___________________________________, a licensee of the
Materials, but subject to the quantity-related use restrictions (CPU, workstation, number of users, etc.) in licensee's
license agreement
/ / To provide data processing services for the benefit of ________________________________, a licensee of the
Materials, but subject to the quantity-related use restrictions (CPU, workstation, number of users, etc.) in licensee's
license agreement
/ / For internal training purposes of Recipient
/ / For business discussions between Recipient and Andersen regarding: ___________________________________________________________
______________________________________________________________________________________________________________________________
USE PERIOD:
Until July 14, 1995 (if left blank, the Use Period is 30 days from receipt of the Materials).
USE RESTRICTIONS:
additions, modifications and derivative works of the Materials
(including all intellectual property rights) and Recipient
Andersen Consulting LLP ("Andersen") agrees to provide Recipient agrees to sign the appropriate documentation to achieve the
with the proprietary and trade secret Materials for the objectives of this provision.
Permitted Use at the Address during the Use Period;
Recipient agrees not to use the Materials for any other purpose. The Materials are provided "as is" and without any express or
implied warranties, maintenance services or support services.
Recipient agrees that only its employees may use the Materials. In exchange for access to the Materials, Recipient waives any
Recipient will use reasonable efforts to prevent the disclosure claim for loss or damage against Andersen in connection with
of the Materials to any third party and will treat the Materials the Materials and Andersen will not be liable for any damages
in the same way it treats its own confidential information of such as direct, consequential, incidental or indirect damages,
like kind. This provision will not apply to information which even if it has been advised of their possibility.
is in the public domain, is previously known to Recipient
without an obligation of confidentiality, is independently This Agreement will be effective on Recipient's first receipt
developed by Recipient, or is obtained by Recipient from a of the Materials and will continue after Recipient returns the
third party that does not have an obligation to keep the Materials to Andersen. All forms of the Materials will be
information confidential. returned to Andersen by Recipient at the end of the Use Period
or if Recipient breaches this Agreement. Recipient cannot
Recipient will not make any copies of the Materials without transfer or assign this non-exclusive Agreement any attempt
written permission from Andersen and Recipient agrees that any to do so is void. This Agreement can only be amended or
copies and partial copies of the Materials will include the modified in writing, supersedes any prior agreements regarding
copyright and other proprietary notices from the original. All the Materials and is the only agreement between the parties
rights in the Materials will remain in or are assigned to regarding the Materials.
Andersen or its third party suppliers, including all rights in
copies, partial copies, translations, adaptions,
RECIPIENT: COMPLETE BUSINESS SOLUTIONS, INC. ANDERSEN CONSULTING LLP
BY Daniel Rankin BY
__________________________________________________ _________________________________________________________
PRINTED NAME DANIEL RANKIN PRINTED NAME
_________________________________________________________
TITLE VP TECHNOLOGY TITLE
__________________________________________________ _________________________________________________________
DATE 6/28/95 DATE
__________________________________________________ _________________________________________________________
</TABLE>
<PAGE> 10
<TABLE>
<S><C>
U.S. NONDISCLOSURE AGREEMENT
RECIPIENT: COMPLETE BUSINESS SOLUTIONS, INC. (CBSI)
_____________________________________________________________________________________________________________________
ADDRESS: _____________________________________________________________________________________________________________________
MATERIALS:
/ / FOUNDATION(R) Design / / METHOD/1(R) / / MAC-PAC(R) OPEN
/ / FOUNDATION(R) Construction /X/ DESIGN/1(R) / / OTHER ________________________________________________
/ / FOUNDATION(R) Production / / INSTALL/1(R) ________________________________________________
/ / PLAN/1(TM) ________________________________________________
Components: / / Documentation / / Software (if left blank, documentation and software will be provided)
Version/Release: 7.1 Hardware Platform: ______________________________ Systems Software: _________________________
Modules: ______________________________________________________________________________________________________
PERMITTED USE:
/X/ To evaluate the features and functions of the Materials
/ / To assist in performing services for the benefit of ___________________________________, a licensee of the
Materials, but subject to the quantity-related use restrictions (CPU, workstation, number of users, etc.) in licensee's
license agreement
/ / To provide data processing services for the benefit of ________________________________, a licensee of the
Materials, but subject to the quantity-related use restrictions (CPU, workstation, number of users, etc.) in licensee's
license agreement
/ / For internal training purposes of Recipient
/ / For business discussions between Recipient and Andersen regarding: ___________________________________________________________
______________________________________________________________________________________________________________________________
USE PERIOD:
Until 30 Days (if left blank, the Use Period is 30 days from receipt of the Materials).
USE RESTRICTIONS:
additions, modifications and derivative works of the Materials
(including all intellectual property rights) and Recipient
Andersen Consulting LLP ("Andersen") agrees to provide Recipient agrees to sign the appropriate documentation to achieve the
with the proprietary and trade secret Materials for the Permitted objectives of this provision.
Use at the Address during the Use Period; Recipient agrees not to
use the Materials for any other purpose. The Materials are provided "as is" and without any express or
implied warranties, maintenance services or support services.
Recipient agrees that only its employees & subcontractors may In exchange for access to the Materials, Recipient waives any
use the Materials. Recipient will use reasonable efforts to claim for loss or damage against Andersen in connection with
prevent the disclosure of the Materials to any third party and the Materials and Andersen will not be liable for any damages
will treat the Materials in the same way it treats its own such as direct, consequential, incidental or indirect damages,
confidential information of like kind. This provision will even if it has been advised of their possibility.
not apply to information which is in the public domain, is
previously known to Recipient without an obligation of This Agreement will be effective on Recipient's first receipt
confidentiality, is independently developed by Recipient, of the Materials and will continue after Recipient returns the
or is obtained by Recipient from a third party that does not Materials to Andersen. All forms of the Materials will be
have an obligation to keep the information confidential. returned to Andersen by Recipient at the end of the Use Period
or if Recipient breaches this Agreement. Recipient cannot
Recipient will not make any copies of the Materials without transfer or assign this non-exclusive Agreement any attempt
written permission from Andersen and Recipient agrees that any to do so is void. This Agreement can only be amended or
copies and partial copies of the Materials will include the modified in writing, supersedes any prior agreements regarding
copyright and other proprietary notices from the original. All the Materials and is the only agreement between the parties
rights in the Materials will remain in or are assigned to regarding the Materials.
Andersen or its third party suppliers, including all rights in
copies, partial copies, translations, adaptions,
RECIPIENT: COMPLETE BUSINESS SOLUTIONS, INC. ANDERSEN CONSULTING LLP
BY Daniel Rankin BY
__________________________________________________ _________________________________________________________
PRINTED NAME DANIEL RANKIN PRINTED NAME
_________________________________________ _________________________________________________________
TITLE VP TECHNOLOGY TITLE
__________________________________________________ _________________________________________________________
DATE 8/13/96 DATE
__________________________________________________ _________________________________________________________
</TABLE>
<PAGE> 11
U.S. NONDISCLOSURE AGREEMENT
INSTRUCTIONS FOR USE
RECIPIENT:
This should be the recipient's full legal name (the full legal name should
include the word "corporation", "company", "incorporated", "limited" or an
abbreviation of one of these).
ADDRESS:
This should be the specific address including street number, street name, city
and state where the recipient will use the materials.
MATERIALS:
Indicate which materials will be provided by checking the appropriate box for
the product. If the materials are not listed, indicate a detailed description
of what will be provided in the space marked "Other".
Components: If only documentation or only software is to provided,
indicate which will be provided by checking the appropriate box. If no
component box is checked, both documentation and software will be
provided.
Version/Release: If applicable, specify the available version and
release, e.g. V1.0, of the materials to be provided.
Hardware Platform: If applicable, specify the computer hardware on
which the materials will operate, e.g. IBM AS/400.
Systems Software: If appropriate, specify the systems software with
which the software is compatible, e.g. DOS-Windows or OS/2.
Modules: If applicable, specify all of the modules that will be
provided, e.g. Accounts Payable, Accounts Receivable, Bill of Documents,
etc.
Important Note: No agreement should be submitted to a client or signed by
either party until the specific materials referenced in the agreement are
available for delivery. If the materials are still under development, the
contract should not be delivered to the client until the materials are actually
developed, manufactured/copied and made ready for shipment.
PERMITTED USE:
This form is designed for several uses:
- "To evaluate the features and functions...." This use allows the
client to evaluate the materials. For software products, the
appropriate internal approval should be secured prior to presenting the
agreement to the recipient: the Area Software Partner (or the ASP's
designee) should approve an evaluation.
- "To assist in performing services....." This use allows a third party
contractor to use materials licensed by a client on behalf of the
client. For software products, this use requires prior approval by the
Area Software Partner and Product Executive. Note: The licensed
client's full legal name should be included in the text of this option.
- "To provide data processing services...." This use allows a third
party service bureau to use the materials licensed by a client on behalf
of the client. For software products, this use requires prior approval
by the Area Software Partner and Product Executive. Note: The
licensed client's full legal name should be included in the text of this
option.
- "For internal training purposes of Recipient." This use allows a
clients employees to receive training for an unlicensed product or
nodule. Note: This does not apply to third-party contractors hired by
a client.
- "For business discussions...." This use is for situations where the
parties are only discussing the possibility of doing business. A
complete and detailed description of the business purpose should be
included in the text of this option, e.g. "future product sales plans,
product marketing efforts, product research and development plans and
future product direction related to the Materials."
If the desired use by the recipient is not one of these described uses, please
contact Martin P. Delano in the Software Contracts group (phone 1.312.507.8408
or fax 1.312.507.2470) to discuss the use of a different form that is more
appropriate for the situation.
USE PERIOD:
The length of time the recipient may use the materials should be indicated,
i.e. 30, 60 or 90 days. If no time period is stated, the time period will be
30 days.
RECIPIENT:
The recipient's name on the signature line should be identical to the name that
is included in the identification of the recipient on the first line of the
document.
For questions or comments relating to the U.S. Nondisclosure Agreement, please
contact Martin P. Delano in the Software Contracts group (phone 1.312.507.8408
or fax 1.312.507.2470).
<PAGE> 1
EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
PRO FORMA NET INCOME PER COMMON SHARE
(Dollars in thousands, except, share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended -----------------------------------
December 31, September 30,
1995 1995 1996
------------------- -----------------------------------
<S> <C> <C> <C>
Weighted average common stock
outstanding 10,000,000 10,000,000 10,000,000
Common stock equivalents calculated
using the weighted average stock price
per share for the periods presented 8,929 - 380,362
Stock options and convertible stock
issued during twelve months
immediately preceding the offering date
(using the treasury stock method and
the estimated mid-point of the proposed
initial public offering price per share) 1,129,689 1,129,689 1,129,689
Stock issued to satisfy S corporation
distribution based upon the estimated
initial public offering price per share 891,837 891,837 891,837
---------------------------------------------------------
Pro forma weighted average shares 12,030,455 12,021,526 12,401,888
=========================================================
Pro forma net income $ 887 $ 771 $ 2,056
=========================================================
Pro forma net income per common share $ 0.07 $ 0.06 $ 0.17
=========================================================
</TABLE>
Note A: The pro forma fully-diluted computations for the year ended December
31, 1995 and the nine months ended September 30, 1995 and 1996, are not
reported as the calculation did not exceed 3% of the pro forma primary
calculation.
<PAGE> 2
EXHIBIT 11.1(A) - COMPUTATION OF PER SHARE EARNINGS
COMPLETE BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
SUPPLEMENTAL NET INCOME PER COMMON SHARE
(DOLLARS IN THOUSANDS, EXCEPT, SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended --------------------------
December 31, September 30,
1995 1995 1996
----------------- --------------------------
<S> <C> <C> <C>
Weighted average common stock
outstanding 10,000,000 10,000,000 10,000,000
Common stock equivalents calculated
using the weighted average stock price
per share for the periods presented 8,929 - 380,362
Stock options and convertible stock
issued during twelve months
immediately preceding the offering date
(using the treasury stock method and
the estimated mid-point of the proposed
initial public offering price per share) 1,129,689 1,129,689 1,129,689
Stock issued to satisfy S corporation
distribution based upon the estimated
initial public offering price per share 891,837 891,837 891,837
Stock issued to repay indebtedness
based upon the estimated initial public
offering price per share 904,762 904,762 904,762
------------------------------------------------------------
Supplemental weighted average shares 12,935,217 12,926,288 13,306,650
============================================================
Supplemental net income $ 1,515 $ 1,258 $ 2,355
============================================================
Supplemental net income per common
share $ 0.12 $ 0.10 $ 0.18
============================================================
</TABLE>
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries of Complete Business Solutions, Inc.
Name of Subsidiary Jurisdiction of Incorporation
CBS Complete Business Solutions Mauritius
(Mauritius) Limited
Complete Business Solutions India
(India) Private Limited
<PAGE> 1
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
December 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 3,461 830
<SECURITIES> 0 0
<RECEIVABLES> 19,990 16,921
<ALLOWANCES> 184 162
<INVENTORY> 0 0
<CURRENT-ASSETS> 25,949 18,654
<PP&E> 9,293 6,882
<DEPRECIATION> 4,418 3,311
<TOTAL-ASSETS> 31,938 23,423
<CURRENT-LIABILITIES> 16,303 12,855
<BONDS> 7,016 6,316
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 13,365 9,188
<TOTAL-LIABILITY-AND-EQUITY> 31,938 23,423
<SALES> 0 0
<TOTAL-REVENUES> 61,499 67,399
<CGS> 0 0
<TOTAL-COSTS> 46,539 53,609
<OTHER-EXPENSES> 10,996 11,719
<LOSS-PROVISION> 90 105
<INTEREST-EXPENSE> 446 692
<INCOME-PRETAX> 3,428 1,274
<INCOME-TAX> 127 0
<INCOME-CONTINUING> 3,121 1,022
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,121 1,022
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
