<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMPLETE BUSINESS SOLUTIONS, INC.
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(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
COMPLETE BUSINESS SOLUTIONS, INC.
32605 W. TWELVE MILE ROAD, SUITE 250
FARMINGTON HILLS, MI 48334
------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------------------------------------------------------------
The annual meeting of shareholders of Complete Business Solutions, Inc., a
Michigan corporation ("CBSI") will be held at The Ritz-Carlton Hotel, Fairlane
Plaza, 300 Town Center Drive, Dearborn, Michigan 48126, on May 8, 1998 at 9:00
a.m. (local time) for the following purposes:
1. to elect directors;
2. to consider and act upon a proposal to increase the number of
shares of CBSI Common Stock authorized for issuance pursuant to the CBSI
1996 Stock Option Plan from 3,247,454 shares to 7,247,454 shares of CBSI
Common Stock;
3. to consider and act upon a proposal to approve the CBSI Employee
Stock Purchase Plan;
4. to consider and act upon a proposal to amend the Bylaws of CBSI to
increase the maximum number of directors from 7 to 9;
5. to consider and act upon a proposal to confirm the appointment of
Arthur Andersen LLP as the independent auditors of CBSI for the year ending
December 31, 1998; and
6. to transact any such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting.
A proxy and return envelope are enclosed for your convenience.
By Order of the Board of Directors
Rajendra B. Vattikuti
President and Chief Executive Officer
April , 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED, STAMPED ENVELOPE.
<PAGE> 3
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Complete Business Solutions, Inc. (the "CBSI Annual Meeting") to be held on
May 8, 1998, at 9:00 a.m. at The Ritz-Carlton Hotel, Fairlane Plaza, 300 Town
Center Drive, Dearborn, Michigan 48126.
At the CBSI Annual Meeting, you are being asked to elect directors to the
Board of Directors, to increase the size of the Board of Directors, to amend the
1996 Stock Option Plan, to approve the Employee Stock Purchase Plan along with
other matters to be considered at the CBSI Annual Meeting. All of the matters to
be considered at the CBSI Annual Meeting are described in the enclosed Proxy
Statement.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED RESOLUTIONS CONCERNING EACH
OF THE MATTERS DESCRIBED IN THE ENCLOSED PROXY MATERIALS AND RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOR OF EACH PROPOSAL.
A form of proxy solicited by the Board of Directors is enclosed for your
convenience. PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED ENVELOPE, even if you plan to attend the CBSI Annual Meeting in
person. If you attend the CBSI Annual Meeting, you may vote in person if you
wish, even if you have previously returned your proxy card.
Thank you, and I look forward to seeing you at the meeting.
Very truly yours,
Rajendra B. Vattikuti
President and Chief Executive Officer
<PAGE> 4
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of Complete
Business Solutions, Inc. ("CBSI or the "Company") in connection with the
solicitation of proxies by the Board of Directors of CBSI for use at the CBSI
Annual Meeting to be held May 8, 1998 at 9:00 a.m. local time, at The
Ritz-Carlton Hotel, Fairlane Plaza, 300 Town Center Drive, Dearborn, Michigan
48126. This Proxy Statement, the attached Notice, and the enclosed proxy is
first being mailed to stockholders of CBSI on April 14, 1998. The mailing
address for CBSI is Complete Business Solutions, Inc., 32605 West Twelve Mile
Road, Suite 250, Farmington Hills, Michigan 48334.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the CBSI Annual Meeting the shareholders of CBSI are being asked to
consider and vote upon proposals to: 1) elect directors; 2) increase the number
of shares of CBSI Common Stock authorized for issuance pursuant to the CBSI 1996
Stock Option Plan from 3,247,454 shares to 7,247,454 shares of CBSI Common
Stock; 3) approve the CBSI Employee Stock Purchase Plan; 4) ratify the amendment
of the Bylaws of CBSI by the Board to increase the maximum number of directors
from 7 to 9; 5) confirm the appointment of Arthur Andersen LLP as the
independent auditors of CBSI for the year ending December 31, 1998. See,
"ELECTION OF DIRECTORS OF CBSI," "AMENDMENT TO THE CBSI 1996 STOCK OPTION PLAN,"
"ADOPTION OF THE CBSI EMPLOYEE STOCK PURCHASE PLAN," "AMENDMENT TO BYLAWS OF
CBSI," "CONFIRMATION AND APPOINTMENT OF AUDITORS."
VOTING AND PROXIES
The Board of Directors of CBSI has fixed the close of business on March 31,
1998 as the record date for the determination of shareholders entitled to notice
of and to vote at the CBSI Annual Meeting. Accordingly, only holders of record
of shares of CBSI Common Stock at the close of business on that date will be
entitled to notice of and to vote at the CBSI Annual Meeting or any adjournment
thereof. At the close of business on such date, there were 26,996,408 shares of
CBSI Common Stock outstanding.
Each holder of record of shares of CBSI Common Stock on the record date is
entitled to cast one vote per share, in person or by properly executed proxy, on
any matter that may properly come before the CBSI Annual Meeting. The presence,
in person or by properly executed proxy, of the holders of a majority of the
shares of CBSI Common Stock outstanding on the record date is necessary to
constitute a quorum at the CBSI Annual Meeting. The affirmative vote of the
holders of a majority of the shares of CBSI Common Stock present and voting,
represented in person or by properly executed proxy, at the CBSI Annual Meeting
is required to amend the CBSI 1996 Stock Option Plan; approve the CBSI Employee
Stock Purchase Plan; amend the Bylaws; and confirm the appointment of Arthur
Andersen LLP as the independent auditors of CBSI for the year ending December
31, 1998. The directors shall be elected by a plurality of the votes cast.
PROXY VOTING, REVOCATIONS, AND ABSTENTIONS
Proxies received pursuant to this solicitation will be voted except as to
matters where authority to vote is specifically withheld and, where a choice is
specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the persons named in the proxy
solicited by the Board of Directors of CBSI intend to vote for the amendment
increasing in the number of shares authorized for issuance under the CBSI 1996
Stock Option Plan, for the approval of the Employee Stock Purchase Plan, for the
election of directors of CBSI as listed herein, and for the confirmation of the
appointment of Arthur Andersen LLP as the independent auditors of CBSI.
Abstentions and broker non-votes are effectively treated as votes against the
proposal.
The CBSI Board of Directors does not know of any matters, other than the
matters described in this Proxy Statement, which are expected to be presented
for consideration at the CBSI Annual Meeting. If any
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other matters are properly presented at the CBSI Annual Meeting, the persons
named in the respective accompanying proxy will have discretion to vote on such
matters in accordance with their best judgment.
Shareholders who execute proxies may revoke them by giving written notice
to the Secretary of CBSI at any time before such proxies are voted. Attendance
at the CBSI Annual Meeting will not have the effect of revoking a proxy unless
the shareholder so attending, in writing, so notifies the Secretary of CBSI at
any time prior to the voting of the proxy.
SOLICITATION
Proxies are being solicited by and on behalf of the CBSI Board of
Directors. CBSI will bear the expenses of this solicitation, including the
expenses of preparing and mailing this Proxy Statement. In addition to
solicitation by mail, directors, officers and regular employees of CBSI may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxies and proxy material to their principals and CBSI will reimburse them for
their expenses.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than election as a director, no officer or director of CBSI has any
substantial interest in any matter to be acted upon at the CBSI Annual Meeting.
RECENT DEVELOPMENTS
On Thursday, April 9, 1998 CBSI announced the signing of a definitive
merger agreement with Claremont Technology Group, Inc. The Company intends to
issue approximately 7.2 million shares of its common stock to acquire all of the
outstanding stock of Claremont Technology Group, Inc. The Company has
tentatively scheduled a Special Meeting of its shareholders on August 10, 1998
to consider the transaction.
PROPOSAL 1
ELECTION OF DIRECTORS OF CBSI
GENERAL
At the CBSI Annual Meeting, Douglas S. Land, Frank D. Stella, John A.
Stanley, Charles Costello and Ronald K. Machtley are to be elected directors of
CBSI to hold office until the end of their term and until their successors have
been elected and qualified. Douglas S. Land, Frank D. Stella and John A. Stanley
are current directors of CBSI. Charles Costello and Ronald K. Machtley are new
nominees. The directors of the CBSI Board of Directors serve staggered terms.
Messrs. Land and Stella are Class II Directors and will serve a new three-year
term. John Stanley was named a Class III director at the May 12, 1997 Board
Meeting. As a Class III director, Mr. Stanley will serve the remaining one-year
of the three-year term of a Class III director. Charles Costello is nominated to
be a Class I Director and will serve the remaining two-year term of a Class I
director. Ronald K. Machtley is nominated as a Class III Director and will serve
the remaining one-year term of a Class III director.
It is the intention of the persons named in the enclosed form of proxy to
vote, unless otherwise instructed, in favor of the election of directors of
Messrs. Land, Stella, Stanley, Costello and Machtley. In case any nominee should
become unavailable for any reason, which management has no reason to anticipate,
the proxy holders reserve the right to substitute another person of their choice
in his place. Set forth below is certain
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information concerning each of the nominees, each of whom is a citizen of the
United States and of no other nation.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING THE PAST YEAR FIRST AMOUNT AND NATURE OF
FIVE YEARS, ANY OFFICE HELD IN CBSI ELECTED A BENEFICIAL OWNERSHIP OF PERCENT
NAME AGE AND OTHER DIRECTORSHIPS DIRECTOR CBSI COMMON STOCK(1) CLASS
---- --- ------------------------------------ ---------- ----------------------- -------
<S> <C> <C> <C> <C> <C>
Douglas S. Land......... 40 Founder and President of Economic 1993 385,382 shares owned 1.4%
Member: Audit Committee, Analysis Group, Ltd. since 1983. directly
Compensation Committee Founder, President and Managing
Director of The Chesapeake Group
since 1985.
Frank D. Stella......... 79 President of F. D. Stella Products 1993 25,750 shares owned *
Member: Audit Committee, Company since 1946. directly
Compensation Committee
John A. Stanley......... 60 President of European Operations 1997 11,300 shares owned *
Member: Compensation Lexmark International since 1991. directly
Committee Director of Kewplace, LTD.
Charles Costello........ 59 Founder, President and CEO of c.w. * 1,291,650 shares owned 4.8%
Costello & Associates, inc. December directly(2)
1986 -- December 1996
Ronald K. Machtley...... 49 President Bryant College since 1996. * -0-
From 1994-1995 he was a partner in
the Washington, D.C. law firm of
Wilkinson, Barker, Knauer & Quinn.
Mr. Machtley was a United States
Congressman from the State of Rhode
Island from 1988-1995.
</TABLE>
(1) Common Stock ownership as of March 13, 1998 reflecting March 19, 1998 2 for
1 Stock Dividend.
(2) Acquired 1,211,222 shares of Common Stock on January 27, 1998 as part of
merger with c.w. Costello & Associates, inc. by CBSI.
* New nominee.
COMPENSATION OF DIRECTORS
Directors are paid $2,000 per month for serving on the Board of Directors.
The Company pays all expenses related to attendance at regular or special
meetings. Directors are eligible to participate in the 1996 Stock Option Plan.
In 1996 the Company awarded a non-qualified option to John Stanley under the
Company's 1996 Stock Option Plan to purchase 20,000 shares of the Company's
Common Stock, at the then current market price of $9.19 per share. The options
vest in three equal annual installments commencing one year after the date of
grant.
During 1997 the Company paid $478,000 to The Chesapeake Group, a company
affiliated with Douglas S. Land, for investment banking services rendered to the
Company.
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PROPOSAL 2
AMENDMENT TO 1996 STOCK OPTION PLAN
PROPOSAL TO INCREASE THE NUMBER OF SHARES ELIGIBLE UNDER THE PLAN
CBSI is presently authorized to issue 3,247,454 shares of Common Stock
under the 1996 Stock Option Plan. A total of 1,774,312 shares of Common Stock
have been issued upon the exercise of options under the plan. As of March 31,
1998, options to purchase 2,570,901 shares of Common Stock were outstanding, and
0 options to purchase shares of Common Stock remained available for future grant
under the 1996 Plan.
The Board of Directors of CBSI has adopted a resolution proposing and
declaring it advisable that the 1996 Stock Option Plan be amended to increase
the number of shares of CBSI Common Stock authorized for issuance under the 1996
Stock Option Plan from 3,247,454 shares to 7,247,454 shares of CBSI Common
Stock.
The following description of the CBSI 1996 Stock Option Plan is a summary
and is qualified in its entirety by reference to the 1996 Stock Option Plan, the
Amended Plan which is attached hereto as Annex 1.
PROVISIONS OF THE PLAN
The 1996 Stock Option 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 Stock Option Plan was
adopted by the Board of Directors on July 10, 1996 and approved prior to the
initial public offering by the sole shareholder on September 10, 1996. Unless
terminated sooner, the 1996 Plan will terminate automatically on December 31,
2006.
PURPOSE
The 1996 Stock Option Plan was created to encourage employees of CBSI and
its subsidiaries to acquire common stock in CBSI through Incentive Stock Options
and to permit CBSI to offer Nonqualified Options to directors, consultants and
employees of CBSI. The 1996 Stock Option Plan is designed to encourage employees
and other persons to have a greater financial investment in the CBSI through the
ownership of its Common Stock, stimulate their efforts on the Company's behalf
and maintain and strengthen their desire to remain with or join CBSI.
ADMINISTRATION
The 1996 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors. The Compensation Committee must be comprised of two or
more independent directors. Subject to the express provisions of the 1996 Stock
Option Plan, the Committee has the 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.
ELIGIBILITY
Only employees of CBSI are eligible to receive Incentive Stock Options
under the 1996 Stock Option Plan. Employees of CBSI and other persons are
eligible to receive Nonqualified Options under the 1996 Stock Option Plan.
STOCK OPTIONS
The purchase price of a share of Common Stock granted under each Incentive
Stock Option pursuant to the 1996 Stock Option 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 the Incentive Stock Option is granted. No Incentive Stock
Option can
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<PAGE> 8
be granted under the 1996 Stock Option 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 CBSI. Shares of
CBSI Common Stock issued pursuant to the exercise of an Incentive Stock Option
under the 1996 Stock Option 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 the option was granted.
NONTRANSFERABILITY OF OPTIONS
Options granted pursuant to the 1996 Stock Option Plan are not transferable
other than by will or by the laws of descent and distribution. Options granted
pursuant to the 1996 Stock Option Plan may not be pledged or hypothecated in any
way. During the lifetime of a recipient, plan awards may be exercised only by
the recipient or the recipient's personal representative or guardian.
AMENDMENT AND TERMINATION OF THE PLAN
Unless it is previously terminated by the Board of Directors, the 1996
Stock Option Plan shall terminate on December 31, 2006. No options may be
granted after December 31, 2006.
THE BOARD OF DIRECTORS OF CBSI RECOMMENDS THAT THE CBSI SHAREHOLDERS VOTE
IN FAVOR OF THE AMENDMENT TO THE 1996 STOCK OPTION PLAN.
The affirmative vote of the holders of at least a majority of the shares of
CBSI Common Stock present and entitled to vote at the CBSI Annual Meeting is
required to approve the amendment to the 1996 Stock Option Plan.
PROPOSAL 3
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The following description of the CBSI Employee Stock Purchase Plan is a
summary and is qualified in its entirety be reference to the Employee Stock
Purchase Plan, which is attached hereto as Annex 2. The Employee Stock Purchase
Plan was adopted by the Board of Directors on December 3, 1997.
PURPOSE OF THE EMPLOYEE STOCK PURCHASE PLAN
The CBSI Employee Stock Purchase Plan authorizes for issuance up to
1,000,000 shares of CBSI's Common Stock. The purpose of the Employee Stock
Purchase Plan is to provide employees of CBSI and its subsidiaries the
opportunity to purchase shares of CBSI Common Stock at a price that is up to 15%
less than the fair market value of CBSI Common Stock on the date of purchase
without paying the commissions of a stock broker. The Employee Stock Purchase
Plan is designed to provide a means of giving all CBSI employees an increased
opportunity to acquire a proprietary interest in CBSI, thereby, maintaining and
strengthening their desire to remain with, or for prospective employees, to
join, CBSI.
ADMINISTRATION
The Employee Stock Purchase Plan is administered by the CBSI Compensation
Committee as appointed by the CBSI Board of Directors. The members of the
Compensation Committee serve at the will of the Board of Directors.
DURATION OF THE PLAN
Offerings of the Common Stock of CBSI are scheduled to continue until
1,000,000 shares of Common Stock have been issued under the CBSI Employee Stock
Purchase Plan.
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PARTICIPATION
Any employee of CBSI and its subsidiaries who has completed 90 days of
service prior to the start of the offering period and is customarily employed
for a minimum of twenty hours per week may participate in the CBSI Employee
Stock Purchase Plan. No employee may participate in the Plan if immediately
after the option to participate in the Employee Stock Purchase Plan the employee
would own stock or options to purchase stock representing 5% or more of the
total combined voting power of the Company. No employee is permitted to acquire
Common Stock with a fair market value greater than $25,000 in any year.
An eligible employee may become a participant in the Employee Stock
Purchase Plan by completing a payroll deduction authorization and filing it with
the plan administrator before the commencement date of the offering. Payroll
deductions can be no less than 1% and no more than 10% of the employee's pre-tax
regular straight-time earnings, overtime, shift differentials, bonuses, cost of
living allowances and sales commissions. Payroll deductions commence with the
first regular payroll date after the commencement of the offering.
PURCHASE PRICE
Participants in the Employee Stock Purchase Plan are deemed to have been
granted an option to purchase, on the applicable offering termination date, the
number of shares of Common Stock as can be purchased by dividing the amount of
money in the participant's payroll deduction account by the lower of the listed
price of CBSI Common Stock in The Wall Street Journal on either the offering
commencement date or the offering termination date. The listed prices may be
discounted by up to 15% at the discretion of the Compensation Committee.
TRANSFERABILITY
Neither payroll deductions credited to a participant's account nor any
right to purchase stock under the Employee Stock Purchase Plan may be assigned,
transferred, pledged, or otherwise disposed of in any way other than by will or
the laws of descent and distribution. Any attempted assignment, transfer,
pledge, or other disposition shall be without effect, except that CBSI may treat
such an act as an election to withdraw from the Employee Stock Purchase Plan.
AMENDMENT AND TERMINATION OF THE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of CBSI may amend or terminate the Employee Stock
Purchase Plan at any time. However, no termination can affect an option
previously granted, nor may any amendment adversely change any option previously
granted.
THE BOARD OF DIRECTORS OF CBSI RECOMMENDS THAT THE CBSI SHAREHOLDERS VOTE
IN FAVOR OF APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN.
The affirmative vote of the holders of at least a majority of the shares of
CBSI Common Stock present and entitled to vote at the CBSI Annual Meeting is
required to approve the approval of the CBSI Employee Stock Purchase Plan.
PROPOSAL 4
AMENDMENT TO THE BYLAWS OF CBSI
PROPOSAL TO INCREASE THE SIZE OF THE BOARD OF DIRECTORS
The Board of Directors of CBSI is currently authorized to be comprised of 7
members, and, with the election of the directors nominated herein all 7 of such
positions will be filled. The Board of Directors of CBSI has adopted a
resolution amending the Bylaws to increase the maximum size of the CBSI Board of
Directors by two, increasing the maximum size of the Board to nine directors.
The proposed increase in the maximum size of the CBSI Board of Directors
would allow CBSI to continue to attract high quality individuals to serve as
members of its Board of Directors. In addition, CBSI
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<PAGE> 10
may want to offer a directorship as part of the acquisition of a business where
an owner seeks to become a director of CBSI after the acquisition. An increase
in the maximum size of the Board of Directors would allow CBSI to satisfy such a
request. CBSI does not have any present plans to name any person, nor has the
Company identified any person to fill the two newly created directorships.
THE BOARD OF DIRECTORS OF CBSI RECOMMENDS THAT CBSI SHAREHOLDERS VOTE IN
FAVOR OF THE AMENDMENT TO THE BYLAWS OF CBSI.
The affirmative vote of the holders of at least a majority of the shares of
CBSI Common Stock present and entitled to vote at the CBSI Annual Meeting is
required to approve the amendment to the Bylaws of CBSI.
COMPENSATION COMMITTEE REPORT
The Company's compensation policies for executive officers, as determined
by the Compensation Committee, are to (a) provide competitive compensation
packages in order to attract and retain superior executive talent, (b) link a
significant portion of compensation to financial results as reflected in
returning value to shareholders in order to reward successful performance, and
(c) provide long-term equity compensation, to further align the interests of
executive officers with those of shareholders and further reward successful
performance. The principal components of the Company's compensation program are
base salary, annual cash bonuses, and long-term incentive awards under which
stock options may be earned if performance goals are met.
CASH COMPENSATION
The primary factor used to set cash compensation for the Company's
executive officers is an analysis of competitive executive compensation based
upon general business compensation surveys. An independent compensation
consultant hired by the Compensation Committee assists the Company with the
analysis of competitive compensation. Base salary compensation for the President
and Chief Executive Officer and Executive Vice President of Finance and
Administration for 1997 was determined by the Committee with reference to the
Employment Agreements with both officers dated December 1996. Both agreements
call for the payment of a base salary with the potential to earn additional cash
bonuses.
The Company's policy is to pay its executive officers at the competitive
averages for comparable positions. Compensation levels for individual executive
officers, may be more or less than competitive averages, depending upon a
subjective assessment of individual factors such as the executive's position,
skills, achievements, tenure with the Company and other historical factors. In
addition, compensation levels for individual executive officers often reflect
the Company's recent status as a private company prior to the March 5, 1997
initial public offering.
EQUITY COMPENSATION
The Company provides equity compensation to its executive officers
principally through its 1996 Stock Option Plan. Option awards under the 1996
Stock Option Plan are determined based on the achievement of various
predetermined goals relating to budgeted financial performance or the
achievement of operating targets and goals. Generally, awards under the 1996
Stock Option Plan vest over a four year period to insure that the decisions made
by the officer considers the long-term best interests and continued financial
and operational growth and achievements of the Company.
In addition, stock option awards to executive officers under the 1996 Stock
Option Plan are made at the then current fair market value of the Company's
common stock as quoted on the NASDAQ National Market. Such awards ensure that
the options only become valuable upon the continued appreciation of the
Company's stock price. In administering the 1996 Stock Option Plan in this
manner, the Compensation Committee strives to align the interests of the
executive officers with the interests of shareholders.
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CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. Vattikuti's salary for 1997 was $350,000, which is based in part on the
employment agreement signed in 1996. Mr. Vattikuti also received a cash bonus of
$350,000 in 1997. The Cash bonus was based on the achievement of certain
earnings per share targets.
Compensation Committee
Frank D. Stella
John A. Stanley
Douglas S. Land (non-voting member)
PERFORMANCE GRAPH
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
5-Mar-97 31-Dec-97
-------- ---------
<S> <C> <C>
Complete Business Solutions $100.00 $355.10
S&P 500 $100.00 $122.75
Russell 2000 Technology $110.00 $110.28
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 15, 1998 were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Rajendra B. Vattikuti................ 47 President, Chief Executive Officer and Director
Timothy S. Manney.................... 39 Executive Vice President of Finance and Administration,
Treasurer and Director
Daniel S. Rankin..................... 43 Vice President of Technical Services
Gena M. Lodolo....................... 49 Vice President of Sales
Nanjappa S. Venugopal................ 45 Director of Human Resources
Douglas S. Land...................... 40 Director
Frank D. Stella...................... 79 Director
John A. Stanley...................... 60 Director
</TABLE>
Rajendra B. Vattikuti, founded the Company and has been its President and
Chief Executive Officer since February 1985.
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<PAGE> 12
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. Mr. Manney joined CBSI in
1990.
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. Mr. Rankin joined CBSI in 1994.
Gena Lodolo has served as Vice President of Sales since June 1997. From
April 1995 to June 1997, Ms. Lodolo was an independent marketing consultant to
manufacturing companies. From January 1986 to April 1995, Ms. Lodolo held
various sales related positions at Data General Corporation, including positions
as Sales Director, Reseller Division and District Manager, Midwest Division. Ms.
Lodolo joined the Company in 1997.
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. Mr.
Venugopal joined the Company in 1991.
Douglas S. Land has served as a Director since November 1993 and as an
advisor to the Company since 1988. Mr. Land is the founder and President of
Economic Analysis Group, Ltd., a Washington DC-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 services 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.
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 the Federal Home Loan 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.
John A. Stanley has served as a Director since June 1997. Mr. Stanley has
served as President of European Operations of Lexmark International since March
1991. Previously, he was employed by IBM for 22 years. Mr. Stanley is a graduate
of FitzWilliam College, University of Cambridge, England with a Master of Arts
degree, and holds a degree in Personnel Management from The London School of
Economics.
9
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table set forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 13, 1998 (i) for 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
OWNERSHIP
--------------------
NUMBER OF
NAME SHARES(8) PERCENT
---- --------- -------
<S> <C> <C>
Rajendra B. Vattikuti(1)(9)................................. 9,984,550 37%
Putnam Investments Inc.(2).................................. 2,300,200 9%
Charles Costello(7)......................................... 1,405,484 5%
Timothy S. Manney(1)........................................ 449,004 2%
Douglas S. Land(3).......................................... 356,860 1%
Daniel S. Rankin(1)(4)...................................... 227,114 1%
Frank D. Stella(5).......................................... 51,596 *
Nanjappa S. Venugopal(1).................................... 19,806 *
John A. Stanley(6).......................................... 11,300 *
Gena Lodolo(1).............................................. -- *
All directors and executive officers as a group (8
persons).................................................. 11,100,230 41%
</TABLE>
- -------------------------
* Less than 1%.
(1) The address of Mr. Vattikuti, Mr. Manney, Mr. Rankin, Mr. Venugopal and Ms.
Lodolo is c/o Complete Business Solutions, Inc., 32605 West Twelve Mile
Road, Suite #250, Farmington Hills, MI 48334.
(2) The address of Putnam Investments, Inc. is One Post Square, Boston, MA
02109.
(3) The address of Mr. Land is c/o the Chesapeake Group, 515 Madison Avenue,
21st Floor, New York, NY, 10022. Does not include 28,522 shares transferred
to certain family members. Mr. Land disclaims beneficial ownership of such
shares.
(4) Includes 207,114 shares subject to options immediately exercisable.
(5) The address of Mr. Stella is c/o F. D. Stella Products Company, 7000
Fenkell, Detroit, MI 48238. Includes 25,846 shares subject to options
immediately exercisable.
(6) The address of Mr. Stanley is c/o Lexmark International, Immeuble Jean
Monnet, 11 Place des Vosques, Paris La Defense, France 92061.
(7) The address of Mr. Costello is 5583 Golf Pointe Dr., Sarasota, FL 34243.
Includes 113,834 shares owned by his spouse.
(8) Adjusted for the March 19, 1998 2 for 1 stock dividend.
(9) Does not include 40,580 shares owned by his spouse. Mr. Vattikuti disclaims
beneficial ownership of such shares.
10
<PAGE> 14
EXECUTIVE COMPENSATION TABLE
The following table sets forth the cash compensation paid by the Company to
the Chief Executive Officer and the four other most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER OPTIONS(#)(5) COMPENSATION(3)
--------------------------- ------ ----- ----- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Rajendra B. Vattikuti............ 1997 $350,000 $350,000 $16,788(1) -- $3,800
President and Chief Executive 1996 411,000 288,000 14,729(2) -- 3,800
Officer
Timothy S. Manney................ 1997 180,000 108,000 -- -- 3,800
Executive Vice President of 1996 150,000 50,000 2,746(4) -- 3,800
Finance and Administration,
Treasurer
Daniel S. Rankin................. 1997 180,000 50,000 -- -- 2,980
Vice President of Technical 1996 160,000 35,000 -- -- 3,800
Services
Gena M. Lodolo................... 1997 78,750 62,473 -- 50,000 --
Vice President of Sales 1996 -- -- -- -- --
Nanjappa S. Venugopal............ 1997 125,000 40,000 -- -- 692
Director of Human Resources 1996 100,000 35,000 -- 59,422 3,240
</TABLE>
- -------------------------
(1) Includes $4,688 representing the imputed value of certain health and life
insurance benefits provided by the Company to Mr. Vattikuti and $12,100
representing the personal use of corporate cars.
(2) Includes $3,576 representing the imputed value of certain health and life
insurance benefits provided by the Company to Mr. Vattikuti and $11,153
representing the personal use of corporate cars. It does not include
benefits from certain non-interest bearing loans outstanding during 1996.
(3) Represents amount of contribution by the Company on behalf of such
individual to the Company's 401(k) Plan.
(4) Represents the imputed value of certain health and life insurance benefits
provided by the Company.
(5) Adjusted for the March 19, 1998 2 for 1 stock dividend
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR OPTION
SECURITIES GRANTED TO TERM(1)
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME OPTION GRANTED FISCAL YEAR PRICE(2) DATE 5% 10%
---- -------------- ------------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gena M. Lodolo(3)(4)........... 50,000 10% $9.19 9/12/06 $253,335 $623,977
</TABLE>
- -------------------------
(1) The potential realizable value is calculated based on the term of the option
at the time of grant (nine years). Assumed stock price appreciation of 5%
and 10% is based on the fair value at the time of grant.
(2) The exercise price equals the fair market value of the Common Stock as of
the grant date as determined by the Board of Directors.
(3) Ms. Lodolo's options are exercisable in four equal annual installments
commencing on June 3, 1998.
(4) Share numbers and the exercise prices of Stock Options are adjusted to
reflect the March 19, 1998 2 for 1 stock dividend.
11
<PAGE> 15
The following table sets forth certain information with respect to the stock
options held at December 31, 1996 by the Named Executive Officers below who
exercised options during 1997:
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR END(#) YEAR END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel S. Rankin............ 70,000 $841,400 78,556 148,556 $1,708,637 $3,231,093
Nanjappa S. Venugopal....... 19,806 198,951 -- 39,616 -- 861,648
Gena M. Lodolo.............. -- -- -- 50,000 -- 628,000
</TABLE>
- -------------------------
(1) Calculated based on December 31, 1997 stock price of $21.75 as adjusted for
March 19, 1998 2 for 1 stock dividend.
BOARD COMMITTEES AND MEMBERSHIP
CBSI has a Compensation Committee which 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 Stock Option Plan and the Employee Stock
Purchase Plan. The Compensation Committee held 4 meetings during 1997. The
members of the Compensation Committee are Messrs. Stella and Stanley. Mr. Land
is a non-voting member of the Compensation Committee.
CBSI has an Audit Committee which is responsible for reviewing with
management the financial controls, accounting, audit and reporting activities of
CBSI. The Audit Committee reviews the qualifications of CBSI'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
Audit Committee is also responsible for reviewing any transactions between CBSI
and its directors, officers, or significant shareholders. The Audit Committee
held 1 meeting during 1997. The members of the Audit Committee are Messrs.
Stella and Land.
CBSI does not have a nominating committee.
The Board of Directors held 2 regular meetings and 8 special meetings
during 1997. During 1997, all of the directors attended 100% of the aggregate of
(i) the total number of meetings of the CBSI Board of Directors and (ii) the
total number of meetings of all committees of the Board on which such director
served.
CERTAIN TRANSACTIONS WITH MANAGEMENT
During 1996, CBS India loaned approximately $100,000 to Vanaja Gangavarupu,
the mother-in-law of Rajendra Vattikuti. This loan was short-term, payable on
demand and noninterest bearing. This loan and accrued interest were repaid
during 1997.
The Company paid approximately $478,000 and $182,000 for the years ended
December 31, 1997 and 1996, respectively, for consulting services provided by
The Chesapeake Group, an entity affiliated with Douglas Land. No consulting
services were provided to the Company by The Chesapeake Group during 1995.
In August 1997, in connection with the Company's secondary offering,
Rajendra Vattikuti paid the Company approximately $300,000 as required under
Section 16(b) of the Exchange Act of 1934. This amount has been included in
additional paid-in capital in the accompanying consolidated balance sheets.
During 1997, Timothy Manney repaid $181,000 of a promissory note which was
issued in 1996 in conjunction with the exercise of Nonqualified Stock Options.
12
<PAGE> 16
During 1997, Mr. Land repaid $126,000 of a promissory note which was issued
in 1996 in conjunction with the exercise of Nonqualified Stock Options.
During 1997, Nanjappa Venugopal exercised a portion of his stock options
and the Company issued 19,806 shares of Common Stock for an aggregate purchase
price of $83,000. Pursuant to the terms of the Incentive Stock Option Agreement
between Mr. Venugopal and the Company, the Company loaned Mr. Venugopal $83,000
to purchase shares. The promissory note executed by Mr. Venugopal provides that
the loan matures in October 1999 and bears interest at the rate of 6% per annum,
payable semi-annually.
Subsequent to March 5, 1997, the Company made partial distributions of
$10,600,000 to certain shareholders as part of the termination of the Company's
S corporation status.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Land and Stella have served on the Compensation Committee since
March 5, 1997. Mr. Stanley joined the Committee in June 1997. No person who
served as a member of the Compensation Committee was a current or former officer
of the Company. Mr. Land is affiliated with the Cheasapeake Group, an investment
banking firm engaged by the Company to provide financial advisory services.
During 1997, the Company had no compensation committee interlocks.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, CBSI's directors, executive
officers, and any persons holding more than 10% of the outstanding CBSI Common
Stock are required to report their ownership of CBSI Common Stock and any
changes in that ownership on a timely basis to the Securities and Exchange
Commission. Based on material provided to CBSI, all such required reports were
filed on a timely basis in 1997 except that one director and one officer
inadvertently filed one late report each.
PROPOSAL 5
CONFIRMATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS OF CBSI RECOMMENDS THAT THE SHAREHOLDERS OF CBSI
CONFIRM THE APPOINTMENT OF ARTHUR ANDERSEN LLP TO AUDIT THE BOOKS AND ACCOUNTS
OF CBSI FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
Representatives of Arthur Andersen LLP are expected to be available at the
CBSI Annual Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if they so desire.
SHAREHOLDER PROPOSALS
Shareholders of CBSI wishing to include proposals in the proxy material in
relation to the Annual Meeting of Shareholders to be held in 1999 must submit
the proposal in writing so as to be received at the executive office of CBSI
prior to December 31, 1998. Such proposals must also meet the other requirements
of the rules of the Commission relating to proposals of shareholders.
13
<PAGE> 17
COMPLETE BUSINESS SOLUTIONS, INC.
P Annual Meeting of Stockholders - May 8, 1998
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X The undersigned stockholder of Complete Business Solutions, Inc. does
hereby nominate, constitute and appoint Rajendra B. Vattikuti and
Y Timothy S. Manney or either of them the true and lawful proxies, agents
and attorneys of the undersigned, with full power of substitution, to
vote for the undersigned all of the common stock of said corporation
standing in the name of the undersigned on its books at the close of
business on March 31, 1998 at the Annual Meeting of Stockholders to be
held at the Ritz-Carlton Hotel located at Fairlane Plaza, 300 Town Center
Drive, Dearborn, MI 48126 on Friday, May 8, 1998 at 9:00 a.m., local time,
or any adjournment thereof, with all of the powers which could be
possessed by the undersigned if personally present as follows on the
reverse side.
NOMINEES: Douglas S. Land, Frank D. Stella, John A. Stanley,
Charles Costello, Ronald K. Machtley
CONTINUED AND TO BE SIGNED ON THE OTHER SIDE
<PAGE> 18
<TABLE>
<S><C>
__
/X/ Please mark your |
votes as in this
example.
FOR WITHHELD
1. Election of / / / /
Directors
For, except vote withheld from the following nominee(s):
________________________________________________________
FOR AGAINST ABSTAIN
2. Amend Complete / / / / / /
Business Solutions, Inc.
1996 Stock Option Plan
FOR AGAINST ABSTAIN
3. Approve Complete / / / / / /
Business Solutions,
Inc. Employee Stock
Purchase Plan
FOR AGAINST ABSTAIN
4. Amend Bylaws to increase / / / / / /
Size of Board
FOR AGAINST ABSTAIN
5. Ratify appointment of Arthur / / / / / /
Andersen LLP as Auditors
for 1998
6. In their discretion, the Proxies are authorized to vote upon such matters
as may properly come before the meeting.
The Undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith.
PLEASE FILL IN DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
Note: Please sign name exactly as your name appears on the Stock
Certificate. When signing as attorney, executor, administrator,
trustee or guardian please give full title. If more than one trustee,
all should sign. All joint owners must sign.
_______________________________________________________________________________
_______________________________________________________________________________
SIGNATURE(S) DATE
</TABLE>
