Table of Contents

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] Definitive proxy statement.
	[ ] Definitive additional materials.
	[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.

Complete Business Solutions, Inc.

(Name of Registrant as Specified in Its Charter)

Complete Business Solutions, Inc.

(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)(1) 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:

	(4) Date Filed:

Table of Contents

COMPLETE BUSINESS SOLUTIONS, INC.

________________________________________________________________________________

NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS

       The Annual Meeting of Shareholders of Complete Business Solutions, Inc. will be held on Tuesday, July 11, 2000 at 9:30 a.m. at The Detroit Athletic Club, 241 Madison Avenue, Detroit, Michigan 48226, for the following purposes:

	•	100,000 shares of our Series A Voting Convertible Preferred Stock (the “Series A Preferred Stock”),
	•	seven-year warrants to purchase a total of 500,000 shares of our Common Stock at $25.00 per share, and
	•	ten-year warrants to purchase 1,800,000 shares of our Common Stock at $31.00 per share;

	2.	to amend the Company’s 1996 Stock Option Plan to increase the number of shares of common stock that may be issued pursuant to the Plan by 6,000,000 shares to 13,247,454 shares;
	3.	to elect four directors to the Board of Directors;
	4.	to ratify the appointment of Arthur Andersen LLP as our independent auditors for the 2000 fiscal year; and
	5.	to transact any other business that may properly come before the meeting.

      Shareholders who owned their shares as of the close of business on May 15, 2000 are entitled to notice of, and to vote at our Annual Meeting and any adjournments thereof.

      Whether or not you plan to attend the meeting, please sign, date and return the enclosed voting card in the envelope provided.

	By Order of the Board of Directors
	Thomas E. Sizemore
	Secretary and General Counsel

YOUR VOTE IS IMPORTANT

PLEASE MARK, SIGN, AND DATE THE ENCLOSED VOTING CARD AND RETURN

Table of Contents

Dear Complete Business Solutions Shareholder:

      You are cordially invited to attend our annual meeting of shareholders which will be held this year on July 11, 2000 at 9:30 a.m. The meeting will be held at The Detroit Athletic Club, 241 Madison Avenue, Detroit, Michigan 48226. For your convenience, we have included a map and directions to The Detroit Athletic Club on the back page of the attached Proxy Statement.

      The Notice of Annual Meeting of Shareholders and a Proxy Statement which describe the formal business to be conducted at the meeting are attached to this letter. In addition to the items of business, we will also discuss our 1999 performance and answer any questions you may have about our Company. Enclosed with the Proxy Statement are your voting card, a postage-prepaid envelope to return your voting card, your admission ticket to the meeting and our 1999 Annual Report.

      After reading the Proxy Statement, please promptly mark, sign, and return the enclosed voting card in the postage-prepaid envelope to ensure that your shares are represented at the annual meeting. Your shares cannot be voted unless you date, sign, and return the enclosed voting card or attend the meeting in person. Regardless of the number of shares you own, your vote is important.

      The Board of Directors believes that the proposals are in the best interest of Complete Business Solutions and recommends that you vote for all of the proposals at the Annual Meeting. The approval of the first proposal, the Investment, may have certain adverse effects that shareholders should consider. The effects that should be considered, among others, include the further dilution of shareholders’ equity in our Company and our obligation to pay CDR a termination fee of $6,000,000 if our shareholders do not approve the second step of the Investment. You should review the attached Proxy Statement fully in this regard, but we believe you will conclude, as we have, that the importance of this transaction to the Company outweighs these concerns.

      Whether you are able to attend the meeting or not, please sign, date and return the enclosed voting card in the envelope provided. If you decide to attend the meeting and would like to vote in person, you may do so.

      The Board of Directors and Management look forward to seeing you at the meeting.

	Sincerely,
	/s/ RAJENDRA B. VATTIKUTI
	Rajendra B. Vattikuti
	Co-Chairman of the Board of Directors

Table of Contents

      Complete Business Solutions, Inc. is a leading provider of information technology services. We offer our clients flexible global delivery capabilities through our eleven worldwide development centers and 31 branch locations. We employ more than 4,900 people. Our headquarters is located in Farmington Hills, Michigan and our address is 32605 West Twelve Mile Road, Farmington Hills, Michigan 48334. Our telephone number is (248) 488-2088.

Information About Attending the Annual Meeting

      Our Annual Meeting will be held Tuesday, July 11, 2000 at 9:30 a.m. at The Detroit Athletic Club, Detroit, Michigan. If you would like to attend the Annual Meeting please bring your admission ticket with you. Your admission ticket is included with this Proxy Statement and is attached to the proxy card. Simply detach the proxy card from your ticket, sign, date and mail your proxy card in the enclosed envelope and bring your admission ticket to the meeting. If you want to attend the meeting, but your shares are held in the name of a broker or other nominee, please send a written request for an admission ticket to our Director of Investor Relations, Gail Lutey, and include with your request an account statement or letter from the nominee indicating that you were the beneficial owner of the shares at the close of business on May 15, 2000.

Annual Report

      Our annual report for the fiscal year ended December 31, 1999 is enclosed with this Proxy Statement.

Information About this Proxy Statement

      You are receiving this Proxy Statement and the enclosed voting card because our Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting. This Proxy Statement contains the information we are required to provide to you under the rules of the Securities and Exchange Commission. It is designed to assist you in voting your shares. On June 12, 2000, we began mailing these proxy materials to all shareholders of record at the close of business on May 15, 2000.

Information About Voting

      You can vote on the matters to be presented at the Annual Meeting in two ways:

	•	By Proxy — You can vote by signing, dating and returning the enclosed voting card. If you do this, the individuals named on the card (your “proxies”) will vote your shares in the manner you indicate. You may specify on your voting card whether your shares should be voted in favor or against the Investment, in favor or against the increase in the number of shares that may be granted under the Stock Option Plan, for all, some or none of the nominees for director and whether your shares should be voted for or against the ratification of Arthur Andersen LLP as the Company’s auditors. If you do not indicate instructions on the voting card, your shares will be voted for the Investment, for the amendment of the Stock Option Plan, for the election of all the nominees for director and for the ratification of Arthur Andersen as auditors for the 2000 fiscal year.
	•	In Person — You may cast your vote in person when you attend the Annual Meeting.

      You may revoke your proxy at any time before it is exercised at the Annual Meeting by sending a written notice of revocation to our Corporate Secretary, Thomas E. Sizemore, by providing a later dated proxy or by voting in person at the meeting.

      Each share of our common stock is entitled to one vote. As of May 15, 2000, there were 36,452,296 shares of common stock outstanding. In addition, each share of Class A Voting Convertible Preferred Stock is

1

Table of Contents

Quorum Requirement

      To hold a valid meeting, a quorum of shareholders is necessary. If shareholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting are present in person or by proxy, a quorum will exist. Abstentions and broker non-votes are counted as present for establishing a quorum and against the Investment and the Proposal to amend the Stock Option Plan. A broker non-vote occurs when a broker votes on some matter on the proxy card but not on others because the broker does not have the authority to vote on the other matters.

Information About Votes Necessary for Action to be Taken

      If a quorum exists, the passage of the Investment and the Proposal to Amend the Stock Option Plan requires an affirmative vote of the majority of the votes cast at the meeting. Four directors will be elected at the meeting. If a quorum exists, each director must receive the affirmative vote of a majority of the votes cast at the meeting to be elected. The ratification of the appointment of Arthur Andersen as the Company’s auditors requires the affirmative vote of a majority of the votes cast on the matter. Abstentions and non-votes will count as a vote against the Investment and the Proposal to Amend the Stock Option Plan and have no effect on the results of the votes on the election of directors and the ratification of auditors.

Cost and Method of Soliciting Proxies

      The cost of soliciting proxies will be paid by the Company. The Company may use the services of its officers, directors and others to solicit proxies, personally or by telephone, without additional compensation.

Other Matters

      The Board of Directors does not know of any other matter which will be presented at the Annual Meeting other than the proposals discussed in this Proxy Statement. Generally, no business other than the items discussed in this Proxy Statement may be transacted at the meeting. However, if any other matter properly comes before the Annual Meeting, your proxies will act on such proposal in their discretion.

2

Table of Contents

THE INVESTMENT

      The Investment is summarized below. This summary does not purport to be complete and is qualified in its entirety by reference to the Stock Purchase Agreement, attached as Appendix I; the Certificate of Designation for the Series A Preferred Stock, attached hereto as Appendix II; and the Registration Rights Agreement attached hereto as Appendix III, each of which is incorporated by reference. Shareholders are urged to read the appendices to this proxy statement in their entirety.

Introduction

      On March 17, 2000 the Company executed a Stock Purchase Agreement with affiliates of CDR (the “Stock Purchase Agreement”). Under the terms of the Stock Purchase Agreement, subject to certain conditions, CDR is obligated to purchase from the Company and the Company is obligated to sell to CDR for an aggregate purchase price of $200,000,000 the following:

	•	200,000 shares of our Series A Voting Convertible Preferred Stock (the “Series A Preferred Stock”);
	•	seven-year warrants to purchase a total of 3,500,000 shares of common stock at an exercise price of $25 per share (the “seven-year Warrants”); and
	•	ten-year warrants to purchase 1,800,000 shares of common stock at an exercise price of $31 per share (the “ten-year Warrants” and together with the seven-year Warrants, the “Warrants”).

      Under the Stock Purchase Agreement, the purchase and sale of the Series A Preferred Stock, the seven-year Warrants and the ten-year Warrants making up the Investment, is to occur in two steps. The first step, which did not require shareholder approval, closed on April 20, 2000. In that transaction, the Company sold to CDR 100,000 Series A Preferred Shares and seven-year Warrants to purchase 3,000,000 shares of common stock for an aggregate purchase price of $100,000,000. In the second step, which is scheduled to close as soon as practicable after it is approved by shareholders, the Company will sell to CDR an additional 100,000 Series Preferred Shares, seven-year Warrants to purchase an additional 500,000 shares of common stock and all of the ten-year Warrants to purchase 1,800,000 shares of common stock.

      The common stock underlying the Series A Preferred Stock represents approximately 24% of our common stock outstanding on May 15, 2000 and would constitute approximately 19% of our common stock after conversion. The common stock underlying the Series A Preferred Stock and the seven-year Warrants acquired at the first closing represents approximately 19% of our common stock outstanding on May 15, 2000 and would constitute approximately 17% of our common stock after conversion and exercise. After the closing of the second step of the Investment, the common stock underlying the Series A Preferred Stock, the seven-year Warrants and the ten-year Warrants owned by CDR would represent approximately 38.4% of our common stock outstanding on May 15, 2000 and would constitute approximately 28% of our common stock after conversion and exercise.

      At the meeting, shareholders will be asked to consider and act upon only the second step of the Investment. If the second step of the Investment is not approved by the shareholders, it will not occur. The first step of the Investment has been completed and will not be affected by any failure to obtain shareholder approval.

      The Board of Directors has unanimously approved the execution and delivery of the Stock Purchase Agreement. Because the two steps of the Investment may collectively involve the issuance of common stock in excess of 20% of the currently outstanding shares of our common stock, the National Association of Securities Dealers, Inc. (the “NASD”) requires that we obtain the approval of the second step of the Investment by the holders of a majority of the votes present and voting at the meeting. The Board of Directors is submitting the Investment to the Shareholders for approval and unless the required majority of the votes for approval of the Investment is obtained, the second step of the Investment will not be completed. As of the date of this Proxy Statement, the Board of Directors anticipates completing the Investment as soon a practicable after the Annual Meeting, assuming satisfaction or waiver of all conditions to closing. See “SUMMARY OF STOCK PURCHASE AGREEMENT — Closing Conditions.”

3

Table of Contents

Background And Reasons For The Investment

      The Company’s Board of Directors and management have from time to time considered strategic alternatives to improve the Company’s operational performance and enhance shareholder value. A number of the Company’s competitors have substantially greater cash reserves and management depth than the Company. Accordingly, the Board of Directors determined that the Company would be vulnerable to competitive pressures and may have difficulty quickly transitioning its workforce to providing e-commerce solutions without additional cash resources and management expertise. During 1999, the Company began to explore alternatives to strengthen its long-term financial position, quickly transition its workforce, increase the depth of its management team and maximize shareholder value. As a result, during January 2000, representatives of Clayton, Dubilier & Rice and representatives of the Company held discussions regarding a possible transaction involving the Company and CDR.

      In February, the Board of Directors appointed a special committee of directors (the “Special Committee”) comprised of Messrs. Brooks, Machtley, Stanley and Stella to consider and evaluate a possible transaction with CDR. The Special Committee was authorized to (i) consider the transaction proposed by CDR or any alternative transaction proposed by CDR or any third party that might indicate an interest in entering into a transaction with the Company, (ii) make recommendations to the Board of Directors with respect to any proposed transaction, and (iii) to engage such legal counsel and financial advisors as the Special Committee deemed appropriate to assist it in its evaluation process.

      The Special Committee met with representatives of, and retained, Dewey Ballantine LLP as special counsel to the Special Committee, and met with representatives of, and retained, Merrill Lynch, Pierce, Fenner & Smith Incorporated as financial advisors to the Special Committee. The Special Committee discussed with representatives of Dewey Ballantine the role of the Special Committee in the proposed transaction and the fiduciary obligations of the Special Committee to the Company’s shareholders.

      From February 9, 2000 to March 16, 2000, the Special Committee held numerous meetings with representatives of Dewey Ballantine and Merrill Lynch to discuss the financial and legal aspects of CDR’s proposed equity investment. In addition, the Special Committee and its advisors also consulted with, and utilized the services of regular company counsel, Butzel Long, and The Chesapeake Group, an investment banking firm. Douglas Land, a member of the Board of Directors, is also a Managing Director of the Chesapeake Group. During this period, Merrill Lynch conducted due diligence and completed its financial analysis. In addition, Dewey Ballantine and Butzel Long held discussions with CDR’s counsel, Debevoise & Plimpton, during this period regarding the terms of a stock purchase agreement and Dewey Ballantine, Butzel Long and Debevoise & Plimpton revised drafts of the stock purchase agreement and other documents necessary to consummate the proposed equity investment.

      On March 16, 2000, at a meeting of the Special Committee, following presentations by Merrill Lynch, and discussions with Dewey Ballantine, the Special Committee unanimously agreed to recommend that the Board of Directors approve the Investment and related transactions on the terms and subject to the conditions negotiated by the Company and CDR.

      At a meeting of the Board of Directors, held after the Special Committee meeting on March 16, 2000, the Board of Directors (i) concluded that the Investment and related transactions would benefit the Company, (ii) approved the Stock Purchase Agreement and the related agreements and (iii) resolved to recommend to the shareholders of the Company that they approve the transactions at the “Subsequent Closing” contemplated by the Stock Purchase Agreement.

      In considering the Investment and related transactions, the Board of Directors took into account a number of considerations, including (i) the financial presentation of Merrill Lynch & Co., (ii) the Special Committee’s recommendation to the Board of Directors, (iii) the strategic and operational advantages that could result from the Company’s association with CDR and its representatives and (iv) the terms of the Stock Purchase Agreement and related agreements, including (a) the corporate governance rights of CDR and (b) the parties’ respective representations, warranties and covenants and the conditions to their respective obligations, including a provision whereby the Board of Directors could terminate the Stock Purchase Agreement if the Board of Directors determined, in good faith, after consultation with its financial and legal advisors, that the Board of Director’s fiduciary obligations under applicable law so require. The Board of

4

Table of Contents

Certain Risks

      While the Board of Directors believes that the Investment is in the best interests of the Company and its shareholders, the approval of the Investment may have certain adverse effects which shareholders should consider, including adverse effects upon shareholders other than CDR. These potential adverse effects are summarized below.

      Composition of the Company’s Board of Directors Following the Sale.  The Stock Purchase Agreement gives CDR the right to name three members to the Board of Directors until CDR owns less than 25% of the common stock (or common stock equivalents) acquired under the Stock Purchase Agreement (a “Director Termination Date”). CDR named Messrs. Conway, Lautenbach and Wasserman as its nominees to the Board. On April 20, 2000, the Company’s Board of Directors appointed Messrs. Conway, Lautenbach and Wasserman to the Board.

      Super Majority Voting Provisions.  The Company’s Bylaws were changed as required by the Stock Purchase Agreement to require, until the occurrence of a Director Termination Date, a 70% vote of the directors in order for any of the events listed below to occur. Because of the number of directors it can nominate, this gives CDR a veto right over these events:

	(a)  any issuance of equity securities other than (1) pursuant to the 1996 Stock Option Plan or the Employee Stock Purchase Plan (up to a limit of 5% of the fully diluted common stock outstanding immediately following the second closing under the Stock Purchase Agreement), (2) issuances of common stock pursuant to acquisitions or public offerings not exceeding 5% in a single issuance or 20% in the aggregate of the fully diluted common stock outstanding or (3) pursuant to currently outstanding stock options previously disclosed to CDR;
	(b)  any non de minimis purchase or sale of stock, any purchase of assets, any merger, consolidation or other business combination transaction, involving the Company or any of its Subsidiaries and Mr. Vattikuti or affiliates of Mr. Vattikuti;
	(c)  any purchase or other acquisitions of the stock or other assets of another person if the fair market value of the consideration received by the parties other than the Company in all such transactions in any fiscal year of the Company would exceed $35 million;
	(d)  any sale, lease, transfer or other disposition in one transaction or a series of related transactions, of subsidiaries, divisions or assets of the Company, if the fair market value of the consideration received in all such transactions in any fiscal year of the Company would exceed $25 million;
	(e)  any incurrence of indebtedness in excess of $50 million; and
	(f)  any amendment or modification of the Articles of Incorporation or the Bylaws of the Company that modifies, amends or is inconsistent with the terms of the Stock Purchase Agreement or the Certificate of Designation.

      Diminished Ability to Sell the Company.  Due to CDR’s large equity interest, it may be difficult or even impossible for a third party to acquire the Company without the consent of CDR. Accordingly, approval of the Investment could hinder any future sale of the Company.

      Limited Standstill Agreement.  While the Stock Purchase Agreement provides for a limit on the amount of additional voting shares CDR may acquire in the future, CDR may still increase its beneficial ownership of voting shares to 49.9% of all of the voting shares that are outstanding. CDR may therefore increase its equity position through the purchase of additional voting securities, intensifying the effects related to its larger equity interest as set forth in this Proxy Statement.

5

Table of Contents

      Management Entrenchment.  CDR’s right to acquire ownership through the Investment of approximately 28% (including the shares issuable upon the exercise of the Warrants) of the common stock could make it difficult for third parties to cause a change in management of the Company, possibly leading to entrenchment of current management or other management selected by CDR.

      Conversion of Convertible Preferred Stock.  Each share of Series A Preferred Stock converts, at the option of the holder, into Common Stock based upon the following formula:

	the liquidation preference per share ($1,000) divided by a conversion price equal to $23.00 per share of Common Stock.

      The conversion of all of the Series A Preferred Stock could depress the market price of the common stock.

      Registration Rights.  CDR can require the Company to register shares of Common Stock issued upon the conversion of the Series A Preferred Stock and the exercise of the Warrants on up to three occasions such registrations shall be at the Company’s expense. In addition, CDR has certain rights to include its securities in registrations initiated by the Company. See “SUMMARY OF STOCK PURCHASE AGREEMENT — Registration Rights”.

      Conditions and Termination.  The transactions contemplated by the Stock Purchase Agreement are subject to various conditions, including the approval of the Company’s shareholders. In particular, CDR is not required to close the second step transaction if there has been a material adverse change in the Company’s business or if the representations and warranties of the Company are untrue as of the second closing date in a way which has or is likely to have a material adverse effect on the Company. See “SUMMARY OF STOCK PURCHASE AGREEMENT — Closing Conditions.”

      The Stock Purchase Agreement may be terminated by mutual consent, or by either party if not consummated by August 30, 2000, or if prohibited or enjoined by a final, non-appealable order, decree, ruling or other action. See “SUMMARY OF STOCK PURCHASE AGREEMENT — Termination.”

      Fees and Expenses.  The Company must reimburse CDR for all out of pocket fees and expenses incurred in connection with the transaction. The Company has also paid CDR a transaction fee of $6,000,000. In addition, the Company and have CDR entered into a consulting agreement whereby, for the next five years, the Company will pay CDR $500,000 per year for management consulting services. Finally, if the second step of the Investment does not occur for several reasons, including the failure of shareholder approval to be obtained, the Company will be required to pay CDR a termination fee of $6,000,000. See “SUMMARY OF STOCK PURCHASE AGREEMENT — Fees and Expenses.”

Use of Proceeds

      The net proceeds from the Investment are estimated to be $185,000,000 after deducting the Company’s estimated expenses, CDR’s reimbursable expenses and CDR’s transaction fee of $6,000,000. The Company will use the net proceeds to accelerate the Company’s transition to providing E-commerce solutions, additional repurchases of its outstanding common stock, acquisitions, employee training and hiring and other general corporate purposes. Until so utilized, the net proceeds will be invested in income-producing securities.

Summary Of Stock Purchase Agreement

      The following summary of certain material terms of the Stock Purchase Agreement is qualified in its entirety by reference to the provisions of the Stock Purchase Agreement and the exhibits thereto, which are incorporated by reference herein and attached hereto as Appendix I through Appendix III, respectively, to this Proxy Statement. Capitalized terms have the meanings set forth in the Stock Purchase Agreement or the exhibits thereto.

      Representations and Warranties.  The Stock Purchase Agreement contains certain representations and warranties of the Company and CDR. The Company has made representations and warranties regarding, among other things, its organization, capitalization, authority relative to the Stock Purchase Agreement and

6

Table of Contents

      CDR has made representations and warranties regarding its organization, authority relative to the Stock Purchase Agreement and the Ancillary Agreements, required consents and approvals, financing, identification of brokers or finders, litigation, status of the Preferred Stock and Warrants under securities laws and knowledge regarding the accuracy of the Company’s representations and warranties.

      Covenants of the Company and CDR.  The Company has made certain covenants in connection with the conduct of its business between the signing of the Stock Purchase Agreement and the Subsequent Closing, including to preserve its relationships with its customers and suppliers, not to amend its Articles of Incorporation, Bylaws or other organizational documents, not to declare any dividend or distribution, not to redeem any shares of its capital stock, not to split its capital stock, not to incur any liabilities, obligations or indebtedness for borrowed money or guarantee any such liabilities, obligations or indebtedness other than in the ordinary course of business, not to cancel any material indebtedness and to file the Certificate of Designation with the Department of Consumer and Industry Services of the State of Michigan. In addition, the Company has agreed to allow CDR access to its books and records, and to hold a meeting of its shareholders to vote on the Investment. The Company has also agreed to reserve shares of its Common Stock for the purpose of issuance upon the conversion of the Preferred Shares and exercise of the Warrants. The Company has also agreed to take all necessary steps to increase by at least 4,000,000 shares the number of shares of Common Stock available for grant as Company Stock Options under the 1996 Stock Option Plan.

      The Company and CDR have agreed to cooperate with each other in taking the appropriate actions necessary to consummate the transactions contemplated by the Stock Purchase Agreement, including the issuance of any press releases and/or any filings with agencies or exchanges and to execute and deliver any additional documents, conveyances or assurances as shall be necessary to consummate the transactions contemplated by the Stock Purchase Agreement.

      Closing Conditions.  The obligation of the Company and CDR to consummate the transactions contemplated by the Stock Purchase Agreement is subject to the satisfaction on or before the Initial and Subsequent Closing Date of certain conditions, including, (a) that there is no injunction, law or proceeding which would prohibit the consummation of the Investment, (b) that all applicable governmental approvals and consents including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), have been received and, (c) that the Subsequent Closing be held prior to August 30, 2000.

      The obligation of CDR to consummate the transactions contemplated by the Stock Purchase Agreement is subject to satisfaction on or before the Initial and Subsequent Closing Date of certain conditions, including, (a) the receipt of a certificate signed by an officer of the Company that the representations and warranties of the Company are true and correct in all material respects, (b) the receipt of a certificate signed by an officer of the Company that the Company has complied with all of its obligations and covenants as required by the Stock Purchase Agreement, (c) the execution of the Registration Rights, Indemnification Agreement and the Employment Agreement with Rajendra B. Vattikuti, (d) that the Board of Directors shall be comprised of nine directors, three to be appointed by CDR, (e) the receipt of an opinion from the Company’s counsel and the Special Committee’s Counsel, (f) the receipt of a certificate signed by the Secretary of the Company certifying as to the officers of the Company, the Articles of Incorporation, Bylaws and the resolutions authorizing and approving the Investment and the execution of the Stock Purchase Agreement and the Ancillary Agreements, and (g) payment by the Company to CDR of the $6,000,000 transaction fee.

      The obligation of the Company to consummate the transactions contemplated by the Stock Purchase Agreement is subject to satisfaction on or before the Initial and Subsequent Closing Date of certain conditions, including, (a) the receipt of a certificate signed by an officer of CDR that the representations and warranties of CDR are true and correct in all material respects, (b) the receipt of a certificate signed by an

7

Table of Contents

      Termination.  The Stock Purchase Agreement may be terminated prior to any closing date by the written agreement of the Company and CDR. In addition, CDR may terminate the Stock Purchase Agreement by giving written notice to the Company if the Company has failed to meet any of its closing conditions or if the Board of Directors or the Special Committee withdraws, modifies or changes its recommendation regarding the Second Tranche Transaction or the Stock Purchase Agreement. In addition, the Company may terminate the Stock Purchase Agreement by giving written notice to CDR if CDR has failed to meet any of its closing conditions.

      Except as otherwise contemplated in the Stock Purchase Agreement, in the event of termination of the Stock Purchase Agreement, all costs and expenses incurred in connection with the Stock Purchase Agreement shall be paid by the party incurring such expenses except that the Company shall pay the costs of this Proxy Statement and the filings under the HSR Act. If the Stock Purchase Agreement is terminated for any reason other than a breach of the Stock Purchase Agreement or an Ancillary Agreement by CDR, the Company shall pay a $6,000,000 termination fee to CDR and all of CDR’s out of pocket fees, costs and other expenses incurred in connection with the Stock Purchase Agreement, the Ancillary Agreements and any of the transactions contemplated thereby.

      Indemnification.  The Stock Purchase Agreement provides that the Company shall indemnify CDR against any losses suffered by CDR in excess of $3,400,000 resulting from any breach of any representation or warranty made by the Company in the Stock Purchase Agreement or any Ancillary Agreement. In addition, the Company has indemnified CDR against any losses suffered as a result of any failure of the Company to perform any covenant or agreement in the Stock Purchase Agreement or any Ancillary Agreement.

      The Stock Purchase Agreement provides that the CDR shall indemnify the Company against any losses suffered by the Company in excess of $3,400,000 resulting from any breach of any representation or warranty made by the CDR in the Stock Purchase Agreement or any Ancillary Agreement. In addition, CDR has indemnified the Company against any losses suffered as a result of any failure of CDR to perform any covenant or agreement in the Stock Purchase Agreement or any Ancillary Agreement.

      Registration Rights.  Pursuant to the Registration Rights Agreement, CDR may demand that the Company use its best efforts to register the shares of Common Stock issued or issuable upon conversion of the Convertible Preferred Stock or the exercise of the Warrants for sale in an offering; provided, however, that any such registration may be deferred by the Company for a period of not more than 60 days. The Company may include any other shares of Common Stock in such registration as long as the inclusion of such shares is approved by CDR. The first three registrations undertaken at CDR’s request will be at the Company’s expense.

      In addition, if at any time the Company proposes to register any of its securities under the Securities Act of 1933, either for its own account or for the account of any other shareholder, and the registration form to be used may be used for the registration of secondary sales, the Company must use its best efforts to include, at CDR’s request, any shares of Common Stock owned by CDR in the registration statement. In connection with a firm commitment underwritten offering of shares to be issued by the Company, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be sold, the shares of Common Stock to be included shall be first allocated to the Company for the securities being sold on its own account and then to others including CDR that have registration rights. In addition, the Company is not required to include any CDR shares in a firm commitment underwritten offering unless such shares are to be included in the underwriting on the same terms and conditions as the other shares of Common Stock being sold under such registration.

8

Table of Contents

Summary of The Preferred Stock Certificate Of Designation

      To create and issue shares of the Series A Preferred Stock, the Company is required to file a Certificate of Designation specifying the rights, preferences and privileges of the Series A Preferred Stock. Certain provisions of the Certificate of Designation are summarized below. The following summary does not purport to be complete or to give effect to provisions of statutory or common law. The summary is qualified in its entirety by reference to the Certificate of Designation attached as Appendix II.

      Pursuant to the Stock Purchase Agreement, 200,000 shares of no par value, Series A Convertible Preferred Stock are issuable to entities controlled by CDR upon payment of the purchase price.

      Rank.  With respect to rights upon liquidation, winding-up and dilution of the Company, the Series A Preferred Stock ranks senior to all classes of Common Stock and each other class or series of capital stock, the terms of which do not expressly provide that it ranks senior to or on a parity with the Series A Preferred Stock. The Company may at any time authorize shares of capital stock with any rights, including, without limitation, the right to receive dividends junior to or on a parity with the rights of the Series A Preferred Stock without the vote or consent of the Series A Preferred Stock.

      Voting Rights.  The Series A Preferred Stock votes with the Common Stock as a single class. Each share of Series A Preferred Stock has the number of votes equal to the number of votes which the Common Stock into which it is convertible would have been entitled if such shares of Common Stock had been outstanding at the time of the record date for the matter to be voted upon.

      Special Voting Rights.  The Company may not, without having obtained the affirmative vote or written consent of a majority of the outstanding shares of Series A Preferred Stock, amend, alter or repeal any provision of, or add any provision to, its Articles of Incorporation, Bylaws or the Certificate of Designation, if the action would adversely affect the preferences, rights privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock, authorize or issue any new or existing class or classes or series of capital stock having any preference or priority as to liquidation preference or assets superior to the preferences or priorities of the Series A Preferred Stock or authorize or issue shares of stock of any class or any bonds, debentures, notes or other obligations convertible or exchangeable for, or having rights to purchase, any shares of stock of the Company having any preference or priority as to liquidation preference or assets superior to the preferences and priorities of the Series A Preferred Stock.

      Liquidation.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after payment or provision for payment of the Company’s debt obligations and liquidating payment obligations of any Senior Stock, the holders of shares of Series A Preferred Stock (i) shall be entitled, before any distribution or payment is made upon any Junior Stock, to be paid cash in an amount equal to $1,000 per share of Series A Preferred Stock plus the amount of any accrued but unpaid dividends and (ii) shall participate as a single class with the Common Stock, on an as converted basis, in any distribution or payment made upon the Common Stock.

      Dividends.  If the Board of Directors declares a dividend or distribution payable upon the outstanding shares Common Stock, the Board of Directors shall declare at the same time a dividend or distribution, as the case may be, upon the then-outstanding shares of Series A Preferred Stock, payable at the same time and in like kind as the dividend or distribution paid on the Common Stock, in an amount per share of Series A Preferred Stock equal to the amount that would have been payable on the number of shares of Common Stock into which each share of Series A Preferred Stock would have been converted if the Series A Preferred Stock had been converted to Common Stock.

      Conversion.  The Series A Preferred Stock is convertible at the option of the holder, at no charge, at any time, in whole or in part, into fully paid and non-assessable shares of Common Stock. Each share of Series A Preferred Stock shall be convertible into a number of shares of Common Stock equal to the then Liquidation Preference (currently $1,000 per share) divided by the Conversion Price (currently $23).

      Redemption.  At any time from and after the tenth anniversary of the date of issue, each holder of Series A Preferred Stock has the right, in its sole discretion, to require the Company to the extent that it has funds legally available therefor, to redeem all or any portion of its outstanding shares of Series A Preferred Stock at a redemption price equal to the then effective Liquidation Preference.

9

Table of Contents

      Change of Control; Put Price.  Within ten days following a Change of Control, the Company must notify the holders of the Series A Preferred Stock of the Change of Control. The Company is required to make an offer to each holder to purchase for cash, the holder’s shares of Series A Preferred Stock at the Put Price. The Put Price is an amount required to provide the Purchasers with an annually compounded internal rate of return on their initial investment in the Series A Preferred Stock, calculated from the date of purchase of the Series A Preferred Stock being repurchased by the Company, determined as follows:

Board Of Directors’ Recommendations

      The Board of Directors has reviewed and considered the terms and conditions of the Investment and believes that the Investment is fair to, and is advisable and in the best interests of, the Company and its shareholders and has unanimously approved the Investment and unanimously recommends that shareholders vote “for” approval of the Investment.

      The Board of Directors, in recommending shareholder approval of the Investment, considered a number of factors, including (a) the financial presentation of Merrill Lynch, (b) the Special Committee’s recommendation to the Board of Directors, (c) the strategic and operational advantages that could result from the Company’s association with CDR and its representatives (d) the terms of the Stock Purchase Agreement and related agreements, including (i) the corporate governance rights of CDR including veto rights over certain corporate actions (see “INVESTMENT — Certain Risks”) and (ii) the parties’ respective representations, warranties and covenants and the conditions to their respective obligations, including a provision whereby the Board of Directors could terminate the stock purchase agreement if the Board of Directors determined, in good faith, after consultation with its financial and legal advisors, that the Board of Director’s fiduciary obligations under applicable law so require. The Board of Directors concluded that CDR’s substantial experience in providing the companies in which it invests with financial and managerial advisory services would bring substantial value to the Company and improve operational, managerial and financial performance. In addition, the Board of Directors recognized that the consummation of Investment, would: (a) increase in the Company’s cash reserves and management depth and that the likely result of this infusion of cash and management expertise would be that the Company would be able to compete more effectively with its competitors and accelerate its transition to providing e-commerce solutions; (b) the Board of Director’s belief that competition and rapidly changing client demands in the information technology services industry would make it more difficult for it to deliver appropriate value to its shareholders without the additional cash and management infusion and (c) the alternatives to the Investment including likely delays in making the transition to providing e-commerce solutions.

      The Board of Directors believes that the terms of the Series A Preferred Stock and the Warrants pursuant to the Investment constitute the best possible terms that the Company could have received at the time the Company entered into the Stock Purchase Agreement in a sale of securities to a non-affiliated entity. Shareholders should consider, in conjunction with this recommendation, that there may be certain anti-takeover and management entrenchment effects of the Investment, as well as certain other consequences that could adversely affect the interests of shareholders other than CDR. See “INVESTMENT — Certain Risks.”

      THE BOARD OF DIRECTORS BELIEVES THAT THE INVESTMENT IS FAIR TO, ADVISABLE, AND IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED THE INVESTMENT AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE “FOR” APPROVAL OF THE INVESTMENT.

10

Table of Contents

      The Board of Directors reserves its right, pursuant to the Stock Purchase Agreement, to amend the provisions of the Stock Purchase Agreement in all respects before or after approval of the Investment by the Company’s shareholders. However, the Board of Directors will not amend the Stock Purchase Agreement in any material respects without stockholder approval, and, in particular, will not increase the number of shares to be issued or decrease the price per share without such approval. In addition, the Board of Directors reserves the right to terminate the Stock Purchase Agreement in accordance with its terms notwithstanding shareholder approval thereof.

      The affirmative vote of a majority of the votes cast at the Annual Meeting of Shareholders, at which a quorum representing a majority of all outstanding shares of Common Stock of the Company is present, either in person or by proxy, is required for approval of this proposal. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.

INCREASE IN THE NUMBER OF SHARES AUTHORIZED

Introduction

      The Company is presently authorized to issue 7,247,454 shares of Common Stock under the 1996 Stock Option Plan. A total of 3,910,428 shares of Common Stock have been issued upon the exercise of options under the Plan. As of May 15, 1999, options to purchase 4,000,787 shares of Common Stock were outstanding, and no options to purchase shares of Common Stock remained available for future grant under the 1996 Plan.

      The Board of Directors 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 by 6,000,000 to 13,247,454 shares of CBSI Common Stock.

      The following description of the Company’s 1996 Stock Option Plan is a summary and is qualified in its entirety by reference to the Restated 1996 Stock Option Plan which is attached as Appendix IV to this Proxy Statement.

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 our 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 the Company and its subsidiaries to acquire our common stock through Incentive Stock Options and to permit us to offer Nonqualified Options to our directors, consultants and employees. The 1996 Stock Option Plan is designed to encourage employees and other persons to have a greater financial investment in the Company through the ownership of common stock, stimulate their efforts on our behalf and maintain and strengthen their desire to remain with or join us.

Administration

      The 1996 Stock Option Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee is comprised of two or more non-employee 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

11

Table of Contents

Eligibility

      Only employees of the Company or a subsidiary are eligible to receive Incentive Stock Options under the 1996 Stock Option Plan. Employees 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 issued upon exercise of an Incentive Stock Option granted pursuant to the 1996 Stock Option Plan shall be a price not less than the fair market value of the stock on the date the Incentive Stock Option is granted. No Incentive Stock Option can be granted under the 1996 Stock Option Plan to any individual who, immediately before such option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of our stock.

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 RECOMMENDS THAT YOU 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 common stock present and entitled to vote at the Annual Meeting is required to approve the amendment to the 1996 Stock Option Plan.

ELECTION OF DIRECTORS

      Our Board of Directors is divided into classes and, as a result, the terms of our directors are staggered. Each director class serves a three-year term. Since the terms of our Class I directors end this year, they are nominated to be re-elected. Each re-elected director will serve until the end of his term and until his qualified successor has been elected. Currently, Rajendra B. Vattikuti is a Class I director and if re-elected will serve a new three-year term. In addition, Ned Lautenbach, Kevin Conway and David Wasserman were elected to the Board by the other directors on April 20, 2000 to fill vacant seats on the Board and have been nominated for re-election. If re-elected, Mr. Lautenbach will serve a three year term as a Class I director, Mr. Conway will serve the remaining two year term of a Class II directors and Mr. Wasserman will serve the remaining one year term of a Class III director. If a nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected at the Annual Meeting.

      The following information is furnished with respect to all of our directors. The ages of the directors are as of December 31, 1999.

      Rajendra B. Vattikuti, founder of CBSI, has served as President and Chief Executive Officer and as a director since its formation in February 1985. From 1983 to 1985, Mr. Vattikuti was Director of M.I.S. for Yurika Foods Corporation. From 1977 to 1983, he was an M.I.S. Project Leader for Chrysler Corporation.

12

Table of Contents

      William C. Brooks, has served as a director since August 1998. Mr. Brooks is Chairman of the Board of The Brooks Group International, a human resource and workforce development firm. He retired as Vice President of Corporate Affairs of General Motors in 1997 where he had served for 25 years in various positions. He is member of the Board of Directors of United American Healthcare Corporation, Louisiana-Pacific Corporation and DTE Energy Corporation. Mr. Brooks was nominated by President Clinton and served from February 1996 to January 1998 on the Social Security Advisory Board. Mr. Brooks was nominated by President Bush and served from July 1989 to November 1990 as the Assistant Secretary of Labor for the Employment Standards Administration. Mr. Brooks holds a Bachelor of Arts degree from Long Island University and a Master’s Degree in Business Administration from the University of Oklahoma. Age 66. Term expires 2002.

      Kevin J. Conway, was elected a director of the Company on April 20, 2000 in connection with the first step of the Investment. Mr. Conway has been a principal of Clayton, Dubilier & Rice since 1994. Prior to joining CDR, Mr. Conway worked for 10 years at Goldman, Sachs & Co., where he was elected partner and was a senior member of the Mergers and Acquisitions Department. Mr. Conway also served as Chief of Staff of the Investment Banking Division at Goldman Sachs. Mr. Conway also serves as a director of Allied Worldwide, Riverwood International Corporation and U.S. Office Products Company. Mr. Conway is a graduate of Amherst College, and has received his M.B.A. from Columbia University School of Business and a J.D. from Columbia Law School. Age 41. Nominee for Re-election.

      Douglas S. Land, has served as a director since November 1993 and as an advisor since 1988. Mr. Land is the founder and a director 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 to start-up and middle-market firms since 1985 and a director of IQ4hire.com, Inc. Mr. Land holds a Bachelor of Science degree in Economics and a Master of Business Administration degree in Finance from the Wharton School and a Master of Arts degree in International Relations from the University of Pennsylvania. Age 42. Term expires 2001.

      Ned C. Lautenbach, was elected Co-Chairman of the Company on April 20, 2000 in connection with the closing of the first step in Investment. Mr. Lautenbach joined Clayton, Dubilier & Rice from IBM Corporation where he served as Senior Vice President and Group Executive of worldwide sales and services. During his career at IBM, he held a variety of other senior executive positions in several divisions, including President of National Distribution Division of the United States, President of Asia Pacific, and Chairman of IBM World Trade Corporation. Mr. Lautenbach also serves as the Chairman and CEO of Dynatech Corporation and as a director of Fidelity Investments and Eaton Corporation. Mr. Lautenbach received his M.B.A. from Harvard University after having received his B.A. in economics at the University of Cincinnati. Age 56. Nominee for Re-election.

      Ronald K. Machtley, has served as a director since May 1998. Mr. Machtley has been the President of Bryant College since 1996. From 1994 to 1995, Mr. Machtley was a partner in the Washington D.C. law firm of Wilkinson, Barker, Knauer & Quinn. From 1988 to 1995, Mr. Machtley was a United States Congressmen from the State of Rhode Island. Mr. Machtley holds a Juris Doctorate from Suffolk University and is a graduate of the U.S. Naval Academy. Age 51. Term expires 2001.

      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

13

Table of Contents

      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. Age 62. Term expires 2002.

      David H. Wasserman, was elected director of the Company on April 20, 2000 in connection with the first step of the Investment. Mr. Wasserman has been a principal of Clayton, Dubilier & Rice since 1998. Prior to joining CDR, Mr. Wasserman worked in the Principal Investment Area of Goldman, Sachs & Co. He has also worked for Fidelity Capital and as a management consultant for Monitor Company. Mr. Wasserman also serves as a director of kinkos.com. Mr. Wasserman is a graduate of Amherst College and has received an M.B.A. from Harvard Business School. Age 33. Nominee for Re-election.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES.

APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

      Upon the recommendation of the Audit Committee, the Board of Directors has appointed Arthur Andersen LLP to serve as the independent public accountants of CBSI for its fiscal year ending December 31, 2000. The Board seeks to have the shareholders ratify the appointment of Arthur Andersen which has served as the independent public accountants of CBSI since 1990. Arthur Andersen will be present at the Annual Meeting to respond to questions and to make a statement if they desire to do so. If the appointment of Arthur Andersen is not ratified by the shareholders, the Board of Directors may appoint other independent public accountants based upon the recommendation of the Audit Committee.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2000.

      The Board of Directors met five times during the fiscal year. In addition to meetings of the full Board, directors also attended meetings of Board Committees. Attendance by directors at meetings of the Board and Board committees during the year was in excess of 95%. The Board of Directors has standing audit, compensation, executive and nominating committees.

      Audit Committee.  The Audit Committee is responsible for reviewing with management our financial controls, accounting, audit and reporting activities. 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 met two times during the year. The current members of the Audit Committee are Messrs. Wasserman, Land and Stella.

      Compensation Committee.  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 Stock Option Plan and the Employee Stock Purchase Plan. The Compensation Committee met five times during the year. The current members of the Compensation Committee are Messrs. Conway, Machtley, Stanley and Stella. Mr. Conway does not vote on stock option grants or awards.

      Executive Committee.  The Executive Committee exercises the authority of the Board on such matters as are delegated to by the Board of Directors and exercises the authority of the Board between meetings of the

14

Table of Contents

      Nominating Committee.  The Nominating Committee is responsible for identifying, and recruiting highly qualified candidates to serve as directors of the Company. The Nominating Committee also recommends to the Board of Directors and shareholders worthy candidates to serve as directors of the Company. The Nominating Committee met two times during the year. The current members of the Nominating Committee are Messrs. Conway, Land, Lautenbach, Stella and Vattikuti.

      Directors who are not employees or consultants of CBSI are paid $2,000 per month for serving on the Board of Directors. Committee Chairman receive an additional $1,000 per month. Each member also receives $1,000 per each meeting they attend. CBSI pays all expenses related to attendance at regular or special meetings.

      Directors are also eligible to participate in the 1996 Stock Option Plan. New Board members receive an initial grant of non-qualified stock options to purchase 5,000 shares of CBSI common stock. Each member receives an annual award of non-qualified stock options to purchase 3,000 shares of CBSI stock with an exercise price equal to the fair market value of CBSI common stock as quoted by Nasdaq.

      On April 1, 1999, grants of non-qualified stock options were made to non-employee members of the Board of Directors at an exercise price of $17.75 per share. The options vest in four equal annual installments commencing one year from the date of grant. The following are the number of options granted to each director during the year:

      During 1999, CBSI paid fees for investment banking and advisory services to The Chesapeake Group, of which Douglas Land is Founder, President and Managing Director in the amount of $425,000.

15

Table of Contents

      This table indicates how much common stock the executive officers and directors beneficially owned as of May 15, 2000. In general, “beneficial ownership” includes those shares a director or executive officer has the power to vote, or the power to transfer, and stock options that are exercisable currently or become exercisable within 60 days. Except as otherwise noted, the persons named in the table below have sole investment power with respect to all shares shown as beneficially owned by them.

      Based upon filings with the Securities and Exchange Commission, the following table lists those persons known to us to hold more than five percent of our outstanding common stock as of December 31, 1999.

16

Table of Contents

	open or closed-end investment companies or other managed accounts which are advised by direct or indirect investment advisory subsidiaries of Franklin Resources, Inc.

      In connection with the Investment, on April 20, 2000, CDR acquired 100,000 shares of Series A Voting Preferred Stock which is convertible into 4,347,826 shares of common stock.

Report of the Compensation Committee on 1999 Executive Compensation

      The CBSI compensation committee is comprised of three directors who are not employees of the company. The Compensation Committee is responsible for the approval and administration of compensation programs for CBSI’s executive officers. In conducting its review of executive compensation matters, the committee utilizes the compensation data and advisory services of an independent compensation consultant. CBSI’s compensation policy for executive officers is intended to:

	•	provide competitive compensation packages in order to attract and retain superior executive talent;
	•	link a significant portion of an executive’s overall compensation to financial results as reflected in the value returned to shareholders; and
	•	provide long-term equity compensation to align the interests of executive officers with those of shareholders and reward successful performance.

Cash Compensation

      Cash compensation for CBSI executive officers is based primarily on an analysis of competitive executive compensation. The Compensation Committee relies upon general business compensation surveys to determine appropriate compensation ranges. The Committee also relies upon the analysis of an independent compensation consultant to determine the appropriate level of cash compensation for executive officers.

      CBSI’s policy is to pay its executive officers at the competitive averages for comparable positions. Compensation levels for individual executive officers, may be greater 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.

Equity Compensation

      CBSI provides equity compensation to its executive officers principally through its 1996 Stock Option Plan (the “Plan”). Option awards under the Plan are determined based upon the achievement of various predetermined goals of CBSI relating to budgeted financial performance or the achievement of operating targets and goals. Generally, awards under the Plan vest over a four year period to ensure that the decisions made by officers consider the long-term best interests and continued financial and operational growth and achievement of CBSI.

      Awards of stock options to executive officers during the year under the Plan are made at the then current fair market value of CBSI common stock as quoted on the Nasdaq National Market. Making awards at the then current fair market value ensures that the options only become valuable upon the continued appreciation of the CBSI stock price. In administering the Plan in this manner, the Compensation Committee strives to align the interests of executive officers with the interests of shareholders.

Chief Executive Officer’s Compensation

      Mr. Vattikuti’s salary for 1999 was $500,000, which is based in part on the employment agreement signed in 1996. Mr. Vattikuti also was granted options to purchase 15,000 shares of common stock at an exercise price of $17 3/4 per share. The options vest in 4 equal annual installments. On March 17, 2000 CBSI and Mr. Vattikuti entered into a new, five year employment agreement as Co-Chairman of the Board of Directors

17

Table of Contents

	Compensation Committee
	John Stanley
	Ronald Machtley
	Frank Stella

Employment Agreements

      In December 1996, the Company entered into agreements with Rajendra B. Vattikuti and Timothy S. Manney.

      The agreement with Mr. Vattikuti provided for his employment as President and Chief Executive Officer for an initial term and automatic renewals so that the term of the agreement is always five years unless either party elects not to extend the term. The agreement provided for an annual base salary of not less than $350,000, a bonus in an amount not to exceed 100% 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 are also included. The agreement also provides, among other things, that if Mr. Vattikuti’s employment is terminated by the Company without cause, 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 base salary in effect immediately prior to such termination and the greater of his most recent bonus or bonus received immediately prior to such to his most recent bonus. The agreement contains a restrictive covenant that prohibits Mr. Vattikuti from competing anywhere in the world with the Company’s business during any period in which he receives compensation and for one year after the cessation of such compensation. On March 17, 2000 CBSI and Mr. Vattikuti entered into a new, five year employment agreement which provides for his employment as Co-Chairman of the Board of Directors for an initial term and automatic renewals so that the term of the agreement is always five years unless either party elects not to extend the term. The agreement provides that Mr. Vattikuti will receive a base salary in 2000 of $500,000 and a bonus of up to 100% of his base salary. The base salary and bonus may be adjusted by the Compensation Committee.

      The agreement with Mr. Manney provides for his employment as Executive Vice President of Finance and Administration for an initial term and automatic renewals so that the term of the agreement is always five years unless either party elects not 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 are also 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 the sum of his base salary in effect immediately prior to such termination plus the greater of his most recent bonus or bonus received immediately prior to his most recent bonus. The agreement contains a restrictive covenant that prohibits Mr. Manney from competing anywhere in the world with the Company’s business during any period in which he receives compensation and for one year after the cessation of such compensation.

18

Table of Contents

Indebtedness of Management

      From time to time, the Company has made loans to the following persons to enable them to exercise stock options as permitted by the Company’s 1996 Stock Option Plan and to make any estimated tax liability payments incurred as a result of such exercise:

Compensation Committee Interlocks and Insider Participation

      During 1999, the Company had no compensation committee interlocks.

Performance Graph

      The chart below compares the Company’s Common Stock Performance with the performance of the Standard and Poor’s 500 Composite Stock Index (“S&P 500”) and Russell 2000 Technology Index (“Russell 2000 Technology”). The chart assumes $100 was invested on March 5, 1997 in each of the Company’s Common Stock, the S&P 500 and the Russell 2000 Technology.

Comparison of Cumulative Total Return

[PERFORMANCE GRAPH]

19

Table of Contents

Executive Compensation Table

      The table below shows the compensation paid to Rajendra B. Vattikuti, Chief Executive Officer and President and the next four highly compensated executive officers of CBSI.

Options Granted During 1999

% of Total Options

Number of Securities

Granted to

Underlying Option

Employees in

Exercise

Expiration

Name

Granted

Fiscal Year

Price(2)(3)

Date

Rajendra B. Vattikuti

15,000

.63

$

17 3/4

4/1/09

Timothy S. Manney

10,000

.42

$

17 3/4

4/1/09

Karen Fast

12,000

.50

$

17 3/4

4/1/09

Venu Vaishya

12,000

.50

$

17 3/4

4/1/09

[Additional columns below]

[Continued from above table, first column(s) repeated]

		Potential Realizable Value at
		Assumed Annual Rates of Stock
		Appreciation For
		Option Term(1)
Name		5%				10%
Rajendra B. Vattikuti		$	167,443			$	424,000
Timothy S. Manney		$	111,629			$	282,667
Karen Fast		$	133,954			$	339,200
Venu Vaishya		$	133,954			$	339,200

20

Table of Contents

Option Exercises and 1999 Year-End Values

      The following table shows the number and value of stock options (exercised and unexercised) for the listed Executive Officers who exercised options during 1999.

      During 1999, CBSI paid $425,000 for consulting services provided by the Chesapeake Group, an entity affiliated with Douglas S. Land.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

      Section 16(a) of the Securities Exchange Act of 1934 requires the executive officers, directors and persons who own more than 10% of the Company’s stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The regulations of the Securities and Exchange Commission require CBSI to identify anyone who filed a required report late during 1999. Based solely on review of reports furnished to CBSI and written representations that no other reports were required during 1999, all Section 16(a) filing requirements were met except that                          .

Shareholder Proposals

      Shareholders of CBSI that want to present a proposal to be considered at the 2001 annual meeting should send the proposal to Thomas E. Sizemore, Secretary of CBSI at 32605 West Twelve Mile Road, Suite 250, Farmington Hills, MI 48334 by registered, certified or express mail. Proposals must be received prior to December 31, 2000.

21

Table of Contents

Appendix I

by and among

COMPLETE BUSINESS SOLUTIONS, INC.

and

CDR-COOKIE ACQUISITION L.L.C.

and

CDR-COOKIE ACQUISITION VI-A L.L.C.

as Purchasers

Dated as of March 17, 2000

Table of Contents

i

Table of Contents

ii

Table of Contents

iii

Table of Contents

      THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of March 17, 2000, is entered into by and among CD&R-Cookie Acquisition, L.L.C., a Delaware limited liability company (“CDR-Cookie VI”) that is wholly-owned by Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited partnership (“Fund VI”) and CDR-Cookie Acquisition VI-A, L.L.C., a Delaware limited liability company (“CDR-Cookie VI-A”) that is wholly-owned by Clayton, Dubilier & Rice Fund VI-A Limited Partnership, a Cayman Islands exempted limited partnership (“Fund VI-A”), as purchasers (the “Purchasers”), and Complete Business Solutions, Inc., a Michigan corporation (the “Company”).

W I T N E S S E T H:

      WHEREAS, pursuant to the terms and conditions hereof, the Company desires to sell to the Purchasers and the Purchasers desire to purchase from the Company at the Initial Closing (i) an aggregate of 100,000 shares of the Company’s Series A voting convertible preferred stock, without par value (the “Preferred Shares”), having the terms set forth in the certificate of designation attached hereto as Exhibit A (the “Certificate of Designation”), and (ii) one or more warrants, each substantially in the form of Exhibit B hereto, to purchase an aggregate of three million shares of the Company’s common stock, without par value (the “Common Stock”), in accordance with the terms of such warrant at an exercise price of $25 per share (the “25 Warrant”);

      WHEREAS, subject to the approval of the holders of a majority of the shares of Common Stock present at the annual meeting of the Company’s shareholders (the “Annual Meeting”) duly convened by the Board of Directors of the Company (the “Board” and such approval, the “Shareholder Approval”) and pursuant to the terms and conditions hereof, the Company desires to sell to the Purchasers and the Purchasers desire to purchase from the Company at the Subsequent Closing (i) an aggregate of an additional 100,000 Preferred Shares, (ii) one or more warrants, each substantially in the form of Exhibit C hereto, to purchase an aggregate of 1.8 million shares of Common Stock in accordance with the terms of such warrant at an exercise price of $31 per share (the “31 Warrant” and, together with the 25 Warrant, the “Warrants”), and (iii) an additional 25 Warrant to purchase an additional 500,000 shares of Common Stock;

      WHEREAS, the Board, based on the unanimous recommendation of a special committee of independent directors of the Company (the “Special Committee”), has approved, and deems it advisable and in the best interests of the shareholders of the Company to consummate, the transactions contemplated by this Agreement, upon the terms and subject to the conditions set forth herein; and

      WHEREAS, the Company has, as of the date hereof, entered into an agreement (the “Consulting Agreement”) with CD&R pursuant to which CD&R has agreed to provide to the Company financial and management advisory services as may be requested from time to time in accordance with the terms of such agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties agree as follows:

ARTICLE I

STOCK PURCHASE

      1.1  Sale and Purchase of the Preferred Shares.  Subject to the terms and conditions hereof at the Initial Closing and the Subsequent Closing, the Company agrees to sell to the Purchasers and the Purchasers agree, jointly and severally, to purchase from the Company, for an aggregate purchase price of $200 million (the “Purchase Price”), an aggregate of 200,000 Preferred Shares and the Warrants. The Purchasers shall purchase the Preferred Shares and the Warrants hereunder on a pro rata basis.

Table of Contents

      1.2  Initial Closing.

      (a)  Time and Place of Initial Closing.  Unless this Agreement shall have been terminated and the transactions contemplated herein shall have been abandoned pursuant to Article 9 hereof, the initial closing (the “Initial Closing”) shall take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York, 10022, at 10:00 A.M., New York time, on the second Business Day after the satisfaction or waiver of all of the conditions to the Initial Closing (other than those conditions that by their nature are to be satisfied at the Initial Closing, but subject to the satisfaction or waiver of those conditions). The “Initial Closing Date” shall be the date the Initial Closing occurs.

      (b)  Transactions at the Initial Closing.  At the Initial Closing, subject to the terms and conditions of this Agreement:

	(i)  The Company shall (i) issue to the Purchasers an aggregate of 100,000 of the Preferred Shares and (ii) deliver to the Purchasers one or more certificates registered in the name of the Purchasers representing the 25 Warrant with respect to three million shares of Common Stock; and
	(ii)  The Purchasers shall pay to the Company an aggregate of $100 million of the Purchase Price, by wire transfer of immediately available funds to an account or accounts designated by the Company at least five Business Days prior to the Closing Date.

      1.3  Subsequent Closing.

      (a)  Time and Place of Subsequent Closing.  Unless this Agreement shall have been terminated and the transactions contemplated herein shall have been abandoned pursuant to Article 9 hereof, the subsequent closing (the “Subsequent Closing”) shall take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, at 10:00 a.m., New York time, no later than the second Business Day after the satisfaction or waiver of all of the conditions set forth in Article 8 hereof (other than those conditions that by their nature are to be satisfied at the Subsequent Closing, but subject to the satisfaction or waiver of those conditions). The “Subsequent Closing Date” shall be the date the Subsequent Closing actually occurs.

      (b)  Transactions at the Subsequent Closing.  At the Subsequent Closing, subject to the terms and conditions of this Agreement:

	(i)  The Company shall (i) issue to the Purchasers an aggregate of 100,000 of the Preferred Shares, (ii) deliver to the Purchasers one or more certificates registered in the name of the Purchasers representing the 31 Warrant with respect to 1.8 million shares of Common Stock and (iii) deliver to the Purchasers one or more certificates registered in the name of the Purchasers representing the additional 25 Warrant with respect to 500,000 shares of Common Stock ; and
	(ii)  The Purchasers shall pay to the Company an aggregate of $100 million of the Purchase Price, by wire transfer of immediately available funds to an account or accounts designated by the Company at least five Business Days prior to the Subsequent Closing Date.

      1.4  Allocation.  For all Tax purposes, the parties agree to allocate (i) $100 million of the Purchase Price as follows: $72,102,036 and $27,897,964 to the Preferred Shares and the 25 Warrant, respectively, acquired at the Initial Closing, and (ii) $100 million of the Purchase Price as follows: $75,420,295, $4,863,646 and $19,716,059 to the Preferred Shares the 31 Warrant and the additional 25 Warrant, respectively, acquired at the Subsequent Closing. Except as required by applicable Law, no party shall take any position for any Tax purpose inconsistent with this allocation.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

      Except as disclosed in (i) the Company disclosure schedule (which shall set forth with reasonable specificity by reference to Sections of this Agreement the disclosure matters contained therein) delivered on or prior to the date hereof (the “Company Disclosure Schedule”) or (ii) the Filed Company SEC

2

Table of Contents

      2.1  Organization.  Each of the Company and its Subsidiaries is a corporation or other entity duly organized, validly existing, and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the laws of the jurisdiction of its incorporation or organization, and has all requisite corporate power and authority to own, lease, use and operate its properties and to carry on its business as it is now being conducted, except where the failure to be in good standing of any Subsidiary would not have a Material Adverse Effect. Each of the Company and its Subsidiaries is qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize the concept of good standing) in each jurisdiction in which it owns real property or in which the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed in the aggregate would not have a Material Adverse Effect. None of the Company or any of its Subsidiaries is in breach or violation of any of its certificate of incorporation, by-laws or other organizational documents. The Company has previously delivered to the Purchasers a complete and correct copy of each of its restated articles of incorporation, as amended (the “Articles of Incorporation”) and By-Laws, as currently in effect. Schedule 2.1 of the Company Disclosure Schedule sets forth a complete and correct list of the Subsidiaries of the Company and their respective jurisdictions of incorporation or organization. Pursuant to the By-Laws of the Company and resolutions duly adopted by the Board thereunder, the Executive Committee of the Board currently has the authority to appoint and terminate the Chief Executive Officer of the Company.

      2.2  Capitalization.

      (a)  The authorized capital stock of the Company consists of 200,000,000 shares of Common Stock and 1,000,000 Preferred Shares. At the close of business on March 10, 2000: (i) 37,834,202 shares of Common Stock were issued and outstanding; (ii) 3,393,782 shares of Common Stock were reserved for issuance pursuant to the 1996 Stock Option Plan and the Employee Stock Purchase Plan, of which 4,096,511 shares are subject to outstanding options to purchase Common Stock (the “Company Stock Options”); and (iii) no Preferred Shares have been designated or issued prior to the date hereof. All outstanding shares of capital stock of the Company are, and all shares thereof which may be issued will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as expressly provided in this Agreement and except for changes since March 10, 2000 resulting from the issuance of shares of Common Stock upon exercise of Company Stock Options granted prior to the date hereof pursuant to the Plans, (x) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities of the Company, (B) any securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company, (C) any warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries or any obligation of the Company or any of its Subsidiaries to issue, or cause to be issued, any capital stock, voting securities or securities or options convertible into or exchangeable or exercisable for capital stock or voting securities of the Company, (y) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or options other than those described in the second sentence of this Section 2.2(a) and (z) there are no voting trusts or similar agreements to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company or any of its Subsidiaries.

      (b)  The Preferred Shares being issued at each Closing have been duly authorized by all necessary corporate action on the part of the Company (except for the filing with the Department of Consumer and Industry Services of the State of Michigan or any successor agency or administrator of the Certificate of Designation), and at each Closing the Preferred Shares issued thereat will have been validly issued and, assuming payment therefor has been made, will be fully paid and nonassessable, and the issuance of such Preferred Shares will not be subject to preemptive or subscription rights of any other shareholder of the Company. The Company has validly reserved for issuance a number of shares of Common Stock that will be sufficient to permit the conversion in full of the Preferred Shares into shares of Common Stock, and, upon conversion, such shares of Common Stock (the “Conversion Shares”) will be validly issued and outstanding, fully paid and nonassessable. The shares issuable upon exercise of the Warrants (the “Warrant Shares”) have

3

Table of Contents

      (c)  All of the outstanding shares of capital stock (or equivalent equity interests of entities other than corporations) of each of the Company’s Subsidiaries are beneficially owned, directly or indirectly, by the Company and neither the Company nor any of its Subsidiaries owns any shares of capital stock or other securities of, or interest in, any other Person (other than any Subsidiaries listed on Schedule 2.1 of the Company Disclosure Schedule or other Persons listed in Schedule 2.2(c) of the Company Disclosure Schedule), or is obligated to make any capital contribution to or other investment in any such Person.

      2.3  Authorization Validity of Agreement.  The Company has the requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate (i) the transactions contemplated for the Initial Closing (the “First Tranche Transactions”), (ii) subject to the Shareholder Approval as contemplated by Section 6.3 hereof, the transactions contemplated for the Subsequent Closing (the “Second Tranche Transactions”) and (iii) the transactions contemplated by the Ancillary Agreements to which it is a party. The execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly recommended by the Special Committee and duly authorized by the Board and, other than the Shareholder Approval of the Second Tranche Transactions, no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party by the Company and the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of this Agreement by the Purchasers, is a valid and binding obligation of the Company in accordance with its terms. Each Ancillary Agreement to which it is a party, when executed and delivered, assuming due authorization, execution and delivery of such Ancillary Agreements by the counterparties thereto, will constitute a valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

      2.4  No Violations; Consents and Approvals.

      (a)  Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) violate any provision of the Articles of Incorporation or By-Laws of the Company, (ii) conflict with, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration, or to the imposition of any Lien) under, or result in the acceleration or trigger of any payment, time of payment, vesting or increase in the amount of any compensation or benefit payable pursuant to, the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee or other evidence of indebtedness, or any lease, license, contract, agreement, plan or other instrument or obligation, to which the Company or any of its Subsidiaries is a party or by which any of them or any of their assets may be bound or (iii) conflict with or violate any Laws applicable to the Company, any of its Subsidiaries or any of their properties or assets; except in the case of clause (ii) for such conflicts, violations, breaches or defaults which in the aggregate would not have a Material Adverse Effect or materially impair or delay the consummation of the transactions contemplated hereby.

      (b)  No filing or registration with, declaration or notification to, or order, authorization, consent or approval of, any federal, state, local or foreign court, legislative, executive or regulatory authority or agency (a “Governmental Authority”) or any other Person is required in connection with the execution, delivery and performance of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except (i) the Shareholder Approval of the Second Tranche Transactions, (ii) pursuant to applicable requirements under the Exchange Act and the HSR Act, and (iii) such other consents,

4

Table of Contents

      2.5  SEC Reports and Financial Statements.

      (a)  Since the date of its initial public offering, the Company has timely filed with the SEC all forms and documents required to be filed by it under the Securities Act and the Exchange Act (collectively, the “Company SEC Documents”). As of their respective dates, the Company SEC Documents (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) complied as to form in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as applicable, and the applicable rules and regulations of the SEC thereunder.

      (b)  The consolidated financial statements included in the Company SEC Documents have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as otherwise noted therein and except that the quarterly financial statements are subject to year end adjustment and do not contain all footnote disclosures required by GAAP) and fairly present in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as at the dates thereof or for the periods presented therein.

      (c)  Schedule 2.5(c) of the Company Disclosure Schedule sets forth a draft consolidated balance sheet of the Company dated as of and as at December 31, 1999 (the “Balance Sheet”) and draft consolidated statements of income, draft consolidated statements of cash flow and draft consolidated statements of stockholders’ equity for the year ended December 31, 1999 (such financial statements, including the notes thereto, the “Financial Statements”). The Balance Sheet and the Financial Statements have been prepared in accordance with GAAP and consistent with the Company’s past practices. The Balance Sheet and the Financial Statements, when presented in final audited form, together with the Company’s independent accountant’s report thereon and notes thereto shall present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates and for the periods indicated therein, shall have been prepared in accordance with GAAP consistently applied with the financial statements and balance sheets contained in the Filed Company SEC Documents and shall be consistent with the Balance Sheet and Financial Statements set forth in Schedule 2.5(c) of the Company Disclosure Schedule.

      2.6  Absence of Certain Changes.  Since December 31, 1999, (i) no event, occurrence, fact, condition, change, development or effect exists or has occurred or is threatened that, individually or in the aggregate, has had or would have a Material Adverse Impact (other than a Material Adverse Impact resulting primarily and directly from the announcement of the transactions contemplated hereby and compliance by the Company with the terms of this Agreement, or solely from the failure by the Company to meet internal projections or forecasts due to causes that would not otherwise constitute a Material Adverse Impact); (ii) the Company and its Subsidiaries have conducted their respective operations only in the ordinary course consistent with past practices and (iii) the Company and its Subsidiaries have not taken any action that if, taken after the date hereof would constitute a breach of any of the provisions of Article VI.

      2.7  Absence of Undisclosed Liabilities.  Except: (i) as and to the extent reflected on and reserved against in the Balance Sheet, (ii) as disclosed in the Company SEC Documents filed with the SEC and publicly available prior to the date hereof and in any amendments filed with respect thereto prior to the date hereof (the “Filed Company SEC Documents”) or (iii) for Liabilities that would not in the aggregate have a Material Adverse Effect, the Company and its Subsidiaries have not incurred any Liabilities that would be required to be reflected or reserved against in a consolidated balance sheet of the Company prepared in accordance with GAAP consistently applied with the financial statements and balance sheets contained in the Filed Company SEC Documents or reflected on the notes thereto.

5

Table of Contents

      2.8  Information in Proxy Statement.  The Proxy Statement (and any amendment thereof or supplement thereto) at the date mailed to Company shareholders and at the time of the Annual Meeting, (i) will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading and (ii) will comply in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder; except that no representation is made by the Company with respect to statements made in the Proxy Statement based on information supplied by the Purchasers specifically for inclusion in the Proxy Statement.

      2.9  Employee Benefit Plans; ERISA.

      (a)  Each “employee benefit plan” (as defined in Section 3(3) of ERISA) and each employment agreement, collective bargaining agreement, consulting agreement, severance agreement, bonus, incentive or deferred compensation, stock option or other equity based, severance, termination, change in control, retention, employment, vacation, medical, dental, life, disability, death benefit, other welfare, profit-sharing, retirement, pension, post-retirement benefits, or other compensation or benefit plan, agreement, policy or arrangement in respect of which the Company or any of its Subsidiaries has any material liability (collectively, the “Plans”) has been filed with the Filed Company SEC Documents or is listed on Schedule 2.9(b) of the Company Disclosure Schedule. Except as disclosed in the Filed Company SEC Documents, the Company has not incurred or become subject to any material liability under Title I or IV of ERISA, the penalty or excise tax provisions of the Code relating to employee plans or any similar Laws of a foreign jurisdiction. To the knowledge of the Company, no condition exists or event has occurred that presents a risk to the Company of incurring or becoming subject to any such material liability.

      (b)  All amounts payable under the Plans are deductible for federal income tax purposes and none of the Company and its Subsidiaries will, as a result of the transactions contemplated by this Agreement (either alone or together with other events), make or become obligated to make any “excess parachute payment” as defined in Section 280G of the Code. No current or former employee, director, agent, independent contractor or officer of the Company or any Subsidiary is or will become entitled to any severance pay or unemployment compensation, or any additional or new compensation, benefits or other compensatory payment or an increase in the amount of any compensation, benefits or other compensatory payment in connection with or as a result of the consummation of the transactions contemplated by this Agreement. Neither the vesting nor the timing of the payment of any such compensation, benefit or other compensatory payment in respect of any such employee or director has been or will be accelerated in connection with or as a result of the consummation of the transactions contemplated by this Agreement.

      2.10  Litigation; Compliance with Law.

      (a)  There is no suit, claim, action, arbitration, proceeding or investigation or other Litigation (as defined below) pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries or any of their properties or assets which, individually or in the aggregate, if determined adversely to the Company or any such Subsidiary, would have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to any settlement or similar agreement with any Governmental Authority, or to any order, judgment, decree, injunction or award of any Governmental Authority or arbitrator, that individually or in the aggregate, would have a Material Adverse Effect. “Litigation” means any action, cause of action, claim, demand, suit, proceeding, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or threatened, by or before any court, tribunal, arbitrator or other Governmental Authority.

      (b)  The Company and each of its Subsidiaries is in compliance in all material respects with all Laws applicable to it, and neither the Company nor any of its Subsidiaries has received any notice alleging noncompliance. The Company and each of its Subsidiaries has all material licenses, permits, variances, consents, authorizations, waivers, grants, franchises, concessions, exemptions, orders, registrations and approvals of Governmental Authorities or other Persons (collectively, “Permits”) that are required in order to permit each to carry on its business as it is presently conducted except where failure to hold such Permits in the aggregate would not have a Material Adverse Effect. All such Permits are in full force and effect and the

6

Table of Contents

      (c)  There is no Litigation pending or, to the knowledge of the Company, threatened, that would result in the termination, modification or nonrenewal of any Permit, and, to the knowledge of the Company, neither the Company nor any of its Subsidiaries has received notice that any Permit will be terminated or modified or cannot be renewed in the ordinary course of business, and there is no reasonable basis for any such termination, modification or nonrenewal, except for such terminations, modifications or nonrenewals as in the aggregate would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not violate any Permit, or result in any termination, modification or nonrenewal thereof, except for such violations, terminations, modifications or nonrenewals thereof as in the aggregate would not have a Material Adverse Effect.

      2.11  Intellectual Property.

      (a)  The Company and its Subsidiaries own (beneficially and as of record), or possess valid and legally enforceable licenses to use Intellectual Property used or held for use in connection with, necessary for the conduct of, or otherwise material to, their business and operations as currently conducted (the “Company Intellectual Property”).

      (b)  The conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe or conflict with any Intellectual Property of any Person, and neither the Company nor any of its Subsidiaries has received notice or has actual knowledge of any such current infringement or conflict, except, in each case, for such infringements or conflicts thereof as in the aggregate would not have a Material Adverse Effect. To the knowledge of the Company, no Person is infringing or allegedly infringing any Intellectual Property of the Company or its Subsidiaries. As of the date hereof, no claim or demand of any Person has been made or, to the knowledge of the Company or any Subsidiary, threatened, nor is there any Litigation that is pending or, to the knowledge of the Company, threatened, that (i) challenges the rights of the Company or any Subsidiary in respect of any Company Intellectual Property, or (ii) asserts that the Company or any Subsidiary is infringing or otherwise in conflict with, any Intellectual Property, except in each case for such challenges, assertions or claims that in the aggregate would not have a Material Adverse Effect. None of the Company Intellectual Property is or has been the subject of any Litigation within the last five years, whether or not resolved in favor of the Company or any Subsidiary.

      (c)  Except as would not in the aggregate have a Material Adverse Effect, all Owned Software, when delivered or made available to customers does not contain any viruses or defects that would prevent it from performing in all respects the tasks and functions that it was intended to perform.

      (d)  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in the loss of, or creation of any Lien on, the rights of the Company or any Subsidiary with respect to the Intellectual Property owned or used by them, except where such losses and such Liens in the aggregate would not have a Material Adverse Effect.

      2.12  Material Contracts; Registration Rights Agreements.

      (a)  Schedule 2.12(a) of the Disclosure Schedule sets forth a complete and accurate list of Contracts that would be required to be filed as an exhibit to the Company’s Annual Report on Form 10-K, if such Annual Report were required to be filed on the date hereof, a copy of each of which Contract has been provided to the Purchasers (the “Material Contracts”).

      (b)  Each of the Material Contracts is in full force and effect, and neither the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any other Person, is in breach of, or default under, any such Material Contract, and no event has occurred that with notice or passage of time or both would constitute such a breach or default thereunder by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other Person, except for such failures to be in full force and effect and such conflicts, violations,

7

Table of Contents

      (c)  Section 2.12(c) of the Company Disclosure Schedule sets forth a complete and accurate list of each Contract the Company has entered into with any Person, pursuant to which Contract such Person has the right to request or to cause the Company to effect registrations under the Securities Act of Equity Securities held by such Person (each, a “Registration Rights Agreement”) and the number of demand registration rights outstanding thereunder on the date hereof. On or prior to the date hereof the Company has provided the Purchasers a complete and accurate copy of each such Registration Rights Agreement. There are no agreements between Rajendra Vattikuti and the Company with respect to employment, share ownership, indemnification, standstill, equity or voting matters other than the R Employment Agreement, the R Subscription Agreement, the R Indemnification Agreement or as set forth in Section 2.12 of the Disclosure Schedule.

      2.13  Taxes.

      (a)  Each of the Company, its Subsidiaries, and any Consolidated Group (as defined below) has timely filed all material Tax Returns (as defined below) required to be filed by it and has timely paid all Taxes shown on such Tax Returns, and all such Tax Returns are correct and complete in all material respects. All material Taxes required to be withheld by the Company or any of its Subsidiaries have been timely withheld and so paid to the proper taxing authority or properly set aside in accounts for such purpose.

      (b)  No audits or other administrative proceedings or court proceedings are presently pending with regard to any material Taxes or Tax Return of any of the Company, its Subsidiaries or any Consolidated Group. None of the Company or any of its Subsidiaries has received any notice of deficiency or assessment from any taxing authority with respect to liabilities for income or any material other Taxes which has not been fully paid or finally settled.

      (c)  There is no liability for Taxes for which the Company or any of its Subsidiaries would be held liable solely by reason of Section 1.1502-6 of the Treasury Regulations or any comparable provisions of any other Tax law or as a successor or transferee. Neither the Company nor any of its Subsidiaries is a party to or bound by or has any obligation under any Tax sharing, allocation, indemnity or other similar agreement or arrangement entered into with any person (other than the Company and its Subsidiaries).

      (d)  “Consolidated Group” shall mean any consolidated, combined, unitary or aggregate group for Tax purposes of which the Company or any of its Subsidiaries is a member. “Tax Returns” shall mean all federal, state, local and foreign tax returns, declarations, statements, reports, schedules, forms and information returns, and any amendments to any of the foregoing, relating to Taxes.

      2.14  Environmental Matters.

      (a)  Except as would not have a Material Adverse Effect:

	(i)  each of the Company and its Subsidiaries is in compliance in all respects with all applicable Environmental Laws pertaining to any of the properties and assets of the Company or any of its Subsidiaries and, to the knowledge of the Company, no violation by the Company or any of its Subsidiaries is being alleged of any applicable Environmental Law relating to any of their respective properties and assets or the use or ownership thereof, or to their respective businesses and operations;
	(ii)  to the knowledge of the Company, neither the Company nor any of its Subsidiaries has caused or taken any action that will result in, and neither the Company nor any of its Subsidiaries is subject to, any liability or obligation on the part of the Company or any of its Subsidiaries relating to (x) the environmental conditions on, under, or about the properties or assets currently owned, leased, operated or used by the Company or any of its Subsidiaries, including without limitation, the air, soil and groundwater conditions at such properties or (y) the past or present use, management, handling, transport, treatment, generation, storage, disposal, discharge, leak, emission, or other manner of release of any Hazardous Materials; and

8

Table of Contents

(iii)  the Company has disclosed and made available to the Purchasers all information, including, without limitation, all studies, analyses and test results, in the possession, custody or control of or otherwise known to the Company or any of its Subsidiaries relating to (x) the environmental conditions on, under or about properties or assets currently or formerly owned, leased, operated or used by the Company or any of its Subsidiaries or any predecessor in interest thereto at the present time or in the past, and (y) any Hazardous Materials used, managed, handled, transported, treated, generated, stored, discharged, leaked, emitted, or otherwise released by the Company or any of its Subsidiaries or any other Person on, under, about or from any of the properties currently or formerly owned or leased, or otherwise in connection with the use or operation of any of the properties and assets of the Company or any of its Subsidiaries, or their respective businesses and operations.

      (b)  “Environmental Law” means any foreign, federal, state or local law, regulation, rule, ordinance or case law relating to pollution or protection of human health and safety or the environment, including, but not limited to, laws relating to releases or threatened releases of Hazardous Materials into the environment and including laws pertaining to the protection of the health and safety of employees. “Hazardous Materials” means any substance or material that is classified or regulated as “hazardous” or “toxic” pursuant to any Environmental Law, including without limitation, asbestos, polychlorinated biphenyls and petroleum.

      2.15  Shareholder Approval.  Except for the Shareholder Approval of the Second Tranche Transactions, no vote of or approval by the Company’s shareholders or the Board is required under the MBCA, the Articles of Incorporation or the By-Laws of the Company to approve this Agreement, the issuance to the Purchasers of the Preferred Shares, the Conversion Shares or the Warrant Shares or the consummation of any of the other transactions contemplated hereby.

      2.16  Brokers.  Except for Merrill Lynch, Pierce, Fenner and Smith Incorporated (the “Financial Advisor”) and The Chesapeake Group, a complete and accurate copy of each engagement letter, or a complete and accurate description of the understanding between the Company and each entity if an engagement letter is unavailable, of which has been provided to the Purchasers, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries, that is or will be payable by the Company or any of its Subsidiaries.

      2.17  Insurance.  Schedule 2.17 of the Company Disclosure Schedule contains a complete and correct list of all insurance policies maintained at present by or on behalf of the Company and its Subsidiaries. Such policies are in full force and effect, and all premiums due thereon have been paid. The Company and its Subsidiaries have complied in all material respects with the terms and provisions of such policies.

      2.18  Labor Matters, etc.  Neither the Company nor any of its Subsidiaries is a party to or bound by and none of their respective employees is subject to any collective bargaining agreement, memorandum of understanding or other written document relating to the terms and conditions of employment for any group of employees (any such agreement, memorandum or document, a “Collective Bargaining Agreement”), and there are no labor unions or other organizations representing or purporting or attempting to represent any employees employed by any of the Company and its Subsidiaries. Since December 31, 1998, there has not occurred or been threatened any strike, slowdown, picketing, work stoppage, concerted refusal to work overtime or other similar labor activity with respect to any employees of the Company or any of its Subsidiaries. There are no material labor disputes currently subject to any grievance procedure, arbitration or litigation with respect to any employee of the Company or any of its Subsidiaries. The Company and its Subsidiaries have complied with all applicable Laws pertaining to the employment or termination of employment of their respective employees, including, without limitation, all such Laws relating to labor relations, equal employment opportunities, fair employment practices, prohibited discrimination or distinction and other similar employment activities, except for any failures so to comply that individually or in the aggregate would not have a Material Adverse Effect.

      2.19  Disclosure.  No representation or warranty by the Company contained in this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading. To the

9

Table of Contents

      2.20  Takeover Statutes.  Prior to the date hereof, each of the Board and the Company have taken all necessary action such that no “Fair price,” “Moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation enacted under state or federal laws in the United States (each, a “Takeover Statute”) applicable to the Company or any of its Subsidiaries, including, without limitation, Chapter 7A and Chapter 7B of the MBCA, is applicable to the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby.

      2.21  Customers; Liability for Defective Services.   Since December 31, 1999, other than in the ordinary course of business, the Company (a) has not received any notice and has no reason to believe that any material customer of the Company (i) has ceased to purchase, will cease to purchase, or has terminated or will terminate any contract in respect of the purchase of, services provided by the Company, or (ii) has materially reduced or will materially reduce the purchase of services provided by the Company, or (b) has not adopted any plan or policy or agreed or otherwise made any commitment (regardless of whether such agreement or commitment would constitute an enforceable obligation or contract under applicable law) to permit or suffer any material customer of the Company to materially reduce the price it will pay for any services of the Company.

REPRESENTATIONS AND WARRANTIES OF PURCHASERS

      Except as disclosed in the Purchaser disclosure schedule (which shall set forth with reasonable specificity by reference to the Sections of this Agreement the disclosure matters therein) delivered on or prior to the date hereof (the “Purchaser Disclosure Schedule”), each Purchaser represents and warrants to the Company as of the date hereof and as of each Closing Date as follows:

      3.1  Organization, No Prior Business.  Each Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware, with all requisite power and authority to own, lease and operate its properties and to conduct its business as now being conducted. Neither Purchaser has engaged in any business or activity of any kind, or entered into any agreement or arrangement with any person or any entity or incurred, directly or indirectly, any material liabilities or obligations, other than in connection with the transactions contemplated hereby.

      3.2  Authorization; Validity of Agreement.  Each Purchaser has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the First Tranche Transactions and the Second Tranche Transactions and the transactions contemplated by the Ancillary Agreements to which it is a party. The execution, delivery and performance by each Purchaser of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite action by each Purchaser and no other proceedings on the part of the Purchasers are necessary to authorize the execution and delivery of this Agreement by either Purchaser and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by each Purchaser and is a valid and binding obligation of each of them enforceable against each in accordance with its terms. Each Ancillary Agreement to which it is a party, when executed and delivered, assuming due authorization, execution and delivery of such Ancillary Agreements by the counterparties thereto, will constitute a valid and binding obligation of each Purchaser enforceable against such Purchaser in accordance with its terms.

      3.3  Consents and Approvals; No Violations.

      (a)  Neither the execution and delivery of this Agreement by the Purchasers nor the consummation by the Purchasers of the transactions contemplated hereby will (i) conflict with, result in a violation or breach of,

10

Table of Contents

      (b)  Assuming that the representation and warranty of the Company set forth in Section 2.4(b) is true and correct, no filing or registration with, declaration or notification to, or order, authorization, consent or approval of, any Governmental Authority is required in connection with the execution and delivery of this Agreement by the Purchasers or the consummation by the Purchasers of the transactions contemplated hereby, except (i) pursuant to the applicable requirements under the HSR Act, (ii) applicable requirements under the Exchange Act, and (iii) such other consents, approvals, authorizations and notifications of or to any Person, other than a material consent, approval, authorization and notification of or to any Governmental Authority, the failure of which to be obtained or made would not have a Material Adverse Effect, or materially impair or delay the consummation of the transactions contemplated by this Agreement.

      3.4  Information in Proxy Statement.  None of the information supplied in writing by the Purchasers specifically for inclusion in the Proxy Statement (including any amendments or supplements thereto) will, at the date mailed to shareholders and at the time of the Annual Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

      3.5  Financing.  CDR-Cookie VI and CDR-Cookie VI-A have each received and delivered to the Company a letter, as in effect on the date hereof, from Fund VI, whereby Fund VI has committed, upon the terms and subject to the conditions set forth therein, to provide equity financing to the Purchasers up to an aggregate of $200 million.

      3.6  Brokers.  Except as otherwise previously disclosed by the Purchasers to the Company in writing, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Purchasers, that is or will be payable by the Company or any of its Subsidiaries.

      3.7  Litigation; Compliance with Law.

      (a)  There is no suit, claim, action, arbitration, proceeding or investigation or other Litigation pending or, to the knowledge of the Purchasers, threatened, against the Purchasers or any of their properties or assets which, individually or in the aggregate, if determined adversely to the Purchasers, would reasonably have a Material Adverse Effect. The Purchasers are not subject to any settlement or similar agreement with any Governmental Authority, or to any order, judgment, decree, injunction or award of any Governmental Authority or arbitrator, that individually or in the aggregate, would have a Material Adverse Effect.

      (b)  The Purchasers are in compliance in all material respects with all Laws applicable to them, and the Purchasers have not received any notice alleging noncompliance. The Purchasers have all Permits that are required in order to permit each to carry on its business as it is presently conducted except where failure to hold such Permits in the aggregate would not have a Material Adverse Effect. All such Permits are in full force and effect and the Purchasers are in compliance in all material respects with the terms of such Permits, including requirements for notifications, filing, reporting, posting and maintenance of logs and records.

      (c)  There is no Litigation pending or, to the knowledge of the Purchasers, threatened, that would result in the termination, modification or nonrenewal of any Permit, and, to the knowledge of the Purchasers, they have not received notice that any Permit will be terminated or modified or cannot be renewed in the ordinary course of business, and there is no reasonable basis for any such termination, modification or nonrenewal, except for such terminations, modifications or nonrenewals as in the aggregate would not have or result in a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not violate any Permit, or result in any termination,

11

Table of Contents

      (d)  The Purchasers are purchasing the Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares solely for investment, with no intention to resell such securities in contravention of the Securities Act. The Purchasers hereby acknowledge that the Preferred Shares and Warrants have not been, and the Conversion Shares and the Warrant Shares will not be, registered pursuant to the Securities Act and may not be transferred in the absence of such registration or an exemption therefrom under the Securities Act.

      3.8  Knowledge.  Neither the Purchasers nor, to the knowledge of the Purchasers, any party acting on their behalf has any information or knowledge that makes them believe that the Company’s representations and warranties set forth in Article II of this Agreement are not true and correct in all material respects as of the date hereof.

CORPORATE GOVERNANCE

      4.1  Composition of the Board of Directors, etc.

      (a)  At and after the Initial Closing, the Board shall have nine directors (subject to the right to increase the size of the Board pursuant to Section 4.1(c)), divided into three classes. Three members of the Board shall initially be designated by the Purchasers (the “Purchaser Directors”), one of which shall be a Class I director, another of which shall be a Class II director and the last of which shall be a Class III director. Six members of the Board (the “Non-Purchaser Directors”) shall initially be designated by the Company, one of whom shall be Rajendra Vattikuti. Initially, the three Purchaser Directors shall be Ned Lautenbach, Kevin Conway and David Wasserman. At the Initial Closing, each of Rajendra Vattikuti and Ned Lautenbach shall be Co-Chairmen of the Board. From the Initial Closing, until the occurrence of a Director Termination Date, the Purchasers shall be entitled to designate Ned Lautenbach (or another Purchaser Director reasonably satisfactory to the Board) as either (i) the Co-Chairman of the Board, or, (ii) if Rajendra Vattikuti is no longer a Co-Chairman, the Chairman of the Board.

      (b)  The Purchasers shall be entitled to designate for election to the Board three persons until such date as they no longer own, in the aggregate, any combination of Preferred Shares and shares of Common Stock which, taken together on an as-converted and as-exercised basis, represent at least 25% of the number of shares of Acquired Common Stock (such date, the Director Termination Date”). The Company shall use its best efforts to cause the Purchaser Directors to be reelected at each shareholder meeting at which directors are elected (and if such Purchaser Directors are not elected, the Board shall take all action permitted by law to appoint such Purchaser Directors to the Board). If a vacancy shall exist in the office of a Purchaser Director, the Purchasers shall be entitled to designate a successor and, in connection with the meeting of the shareholders of the Company next following such election, designate such successor for election as director by the shareholders and the Company shall use its best efforts to cause the successor to be so elected. Upon the occurrence of the Director Termination Date, the Purchasers’ right to designate the Purchaser Directors shall cease and, upon notice of termination from the Company to the Purchasers, the Purchasers shall cause the Purchaser Directors to immediately resign. A Purchaser Director may be removed only for cause.

      (c)  The size of the Board may be increased without the consent of the Purchasers only as provided in this Section 4.1(c). The size of the Board may be increased by one director to include as a director a newly appointed CEO of the Company. If the size of the Board is otherwise increased, the Purchasers shall have the right to at least proportionate representation on the Board following such increase based on the composition of the Board as between Purchaser Directors and Non-Purchaser Directors immediately prior to such increase.

      (d)  Subject to any law or stock exchange rule prohibiting committee membership by Affiliates of the Company, (i) the Purchasers shall be entitled to at least proportionate representation by Purchaser Directors on any committee of the Board of Directors, based on the composition of the board of Directors as between Purchaser Directors and Non-Purchaser Directors, (ii) the Chair of the Executive Committee shall be

12

Table of Contents

      4.2  Non-Voting Observer.  Until the occurrence of a Director Termination Date, the Purchasers shall also be entitled to designate one observer to the Board (the “Purchaser Observer”), who shall be an employee of CD&R. The Purchaser Observer shall have the same access to information concerning the business and operations of the Company and its Subsidiaries, and at the same time, as directors of the Company, and shall be entitled to participate in discussions and consult with the Board without voting.

      4.3  Directors’ and Observer’s Expenses; Fees.   The Company shall promptly reimburse the Purchaser Directors and the Purchaser Observer for all reasonable expenses incurred by them in connection with their attendance at meetings and any other activities undertaken in their capacity as directors or an observer. The Purchaser Directors shall receive standard board fees, perquisites and option grants, in accordance with the Company’s policy of paying directors, as such policy may be in effect from time to time. Notwithstanding anything herein to the contrary, no Purchaser Director shall be entitled to additional compensation or to reimbursement of expenses in connection with activities undertaken pursuant to the Consulting Agreement other than as required to be paid to CD&R thereunder.

      4.4  Information, VCOC.

      (a)  The Company shall furnish the Purchasers with such financial and operating data and other information with respect to the business and properties of the Company as the Company prepares and compiles for its directors in the ordinary course and as the Purchasers may from time to time request. The Company shall permit each of the Purchasers to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, the principal officers of the Company.

      (b)  The rights set forth in this Article IV are intended to satisfy the requirement of contractual management rights for purposes of qualifying the Purchaser’s ownership interests in the Company as venture capital investments for purposes of the Department of Labor’s “plan assets” regulations.

      4.5  Supermajority Voting Provisions.

      (a)  From the Initial Closing, until the occurrence of a Director Termination Date, neither the Company nor the Board shall cause or permit to occur any of the following events without the affirmative vote of more than seventy percent of the members of the Board (except as permitted by Section 4.5(b):

	(i)  any issuance of Equity Securities other than (i) pursuant to Company Stock Plans (up to a limit of 5% of the fully diluted common stock outstanding immediately following the Subsequent Closing), (ii) issuances pursuant to acquisitions or public offerings not exceeding 5% in a single instance or 20% in the aggregate of the fully diluted common stock outstanding immediately following the Subsequent Closing, or (iii) pursuant to currently outstanding stock options previously disclosed to CD&R. No such issuance will be permitted in any case if as a result thereof any Person would own 10% of the fully diluted common stock outstanding after such issuance;
	(ii)  any non de minimis purchase or sale of stock, any purchase or sale of assets, any merger, consolidation or other business combination transaction, involving the Company or any of its Subsidiaries, on the one hand, and Rajendra Vattikuti, or Affiliates of Mr. Vattikuti (other than the Company and its Subsidiaries), on the other hand;
	(iii)  any purchases or other acquisitions of the stock or assets of another Person (whether through merger, consolidation, other business combination, lease or otherwise, and whether in one or a series of related transactions) if the fair market value of the consideration received by the parties other than the Company in all such transactions in any fiscal year of the Company would exceed $35 million;

13

Table of Contents

	(iv)  any sale, lease, transfer or other disposition in one transaction or a series of related transactions, of subsidiaries, divisions or assets of the Company, if the fair market value of the consideration received in all such transactions in any fiscal year of the Company would exceed $25 million;
	(v)  incurrence of Indebtedness in excess of $50 million;
	(vi)  any amendment or modification of the Articles of Incorporation or the By-Laws of the Company that modifies, amends or is inconsistent with the terms of this Agreement or the Certificate of Designation; and
	(vii)  prior to the EC Date, any change to the composition, powers or identity of the members of the Executive Committee of the Board (provided, that the provisions of Section 4.1(d) shall continue in effect until the Director Termination Date).

      (b)  Notwithstanding anything herein to the contrary, the following matters are subject to approval by a simple majority of the Board:

	(i)  a sale by the company of Synova, Inc. (“Synova”);
	(ii)  an initial public offering of Bridge Strategies Group LLC (“Bridge”);
	(iii)  an initial public offering of CBSI Complete Business Solutions (Mauritius) Limited or its Subsidiaries;
	(iv)  the implementation of a “holding company” structure;
	(v)  the creation of a venture fund, in an amount not to exceed $200 million, for the purpose of making investments in startup companies (such investments are herein referred to as “New Business Opportunities”); and
	(vi)  to the extent necessary to effectuate a Change of Control Transaction that has been approved by a simple majority of the Board, the actions enumerated in section 4.5(a).

      4.6  Responsibilities of Co-Chairmen, CEO.

      (a)  Co-Chairmen.  While serving as Co-Chairman of the Company, Rajendra Vattikuti shall have such duties and responsibilities consistent with such title and position as the Board specifies from time to time, including, without limitation, the primary responsibility (in consultation with the Company’s CEO and the Company’s other Co-Chairman) for (i) the operations of Synova, Bridge and New Business Opportunities and (ii) corporate transformation issues relating to the Company’s Asia operations; provided, however, that the Company shall engage in any New Business Opportunity only in accordance with guidelines approved by a simple majority of the Board. For so long as the Purchasers are entitled to designate the Co-Chairman pursuant to Section 4.1, Ned Lautenbach (or another Purchaser Director reasonably satisfactory to the Board) shall also serve as Co-Chairman of the Company, and shall have such duties and responsibilities consistent with the such title and position as the Board specifies from time to time, including, without limitation, the primary responsibility for (i) recruiting and selecting a new CEO for the Company (in consultation with Rajendra Vattikuti), (ii) the Company’s operations other than Synova, Bridge and New Business Opportunities, and (iii) the integration of the Company’s Asia operations with its U.S. and European operations.

      (b)  CEO.  Rajendra Vattikuti shall serve as the Company’s Chief Executive Officer until the earlier of (i) such time as the Company hires a new Chief Executive Officer and (ii) December 31, 2000, at which point Rajendra Vattikuti shall resign as Chief Executive Officer of the Company, but remain a Co-Chairman of the Company. If a new Chief Executive Officer has not been hired by the Company prior to December 31, 2000, Ned Lautenbach (or another Purchaser Director reasonably acceptable to the Board) shall become the acting Chief Executive Officer until such time as a new Chief Executive Officer is so hired. The Company’s newly hired Chief Executive Officer shall be responsible for the Company’s worldwide operations (other than those of Synova, Bridge and New Business Opportunities).

14

Table of Contents

      4.7  By-Laws.  The Company and the Purchasers shall take or cause to be taken all lawful action necessary to ensure at all times as of and following the Initial Closing Date that the Company By-Laws are not inconsistent with the provisions of this Agreement and the transactions contemplated hereby.

CERTAIN EQUITY MATTERS

      5.1  Subscription Rights.  Until the occurrence of a Director Termination Date, if the Board shall authorize the issuance of New Securities for cash (other than any New Securities issued (i) to officers, employees or directors of the Company or any of its Subsidiaries pursuant to any Company Stock Plan, (ii) in connection with any acquisition transaction, (iii) in connection with a public offering of securities, and (iv) to the Purchasers or their Affiliates (other than the Company and its Subsidiaries), then, prior to each such issuance of New Securities, the Company shall offer to the Purchasers a Pro Rata Share of such New Securities. Any offer of New Securities made to the Purchasers under this Section 5.1 shall be made by notice in writing (the “Subscription Notice”) at least 20 Business Days prior to the issuance of such New Securities. The Subscription Notice shall set forth (i) the number of New Securities proposed to be issued and the terms of such New Securities, (ii) the consideration (or manner of determining the consideration), if any, for which such New Securities are proposed to be issued and the terms of payment, (iii) the number of New Securities offered to the Purchasers in compliance with the provisions of this Section 5.1 and (iv) the proposed date of issuance of such New Securities. Not later than 10 Business Days after its receipt of a Subscription Notice, the Purchasers shall notify the Company in writing whether it elects to purchase all or any portion of the New Securities offered to the Purchasers pursuant to the Subscription Notice. If the Purchasers shall elect to purchase any such New Securities, the New Securities which it shall have elected to purchase shall be issued and sold to the Purchasers by the Company at the same time and on the same terms and conditions as the New Securities are issued and sold to other Persons. If, for any reason, the issuance of New Securities is not consummated, the Purchasers’ right to its Pro Rata Share of such issuance shall lapse, subject to the Purchasers’ ongoing subscription right with respect to issuances of New Securities at later dates or times. The Purchasers agree that the Company may grant rights to Rajendra Vattikuti equivalent to (but not better than) those set forth in this Section 5.1.

      5.2  Issuance and Delivery of New Securities.  The Company represents and covenants to the Purchasers that (i) upon issuance, all the shares of New Securities sold to the Purchasers pursuant to this Article V shall be duly authorized, validly issued, fully paid and nonassessable and will be approved (if outstanding securities of the Company of the same type are at the time already approved) for listing on the Nasdaq National Market or for quotation or listing on the principal trading market for the securities of the Company at the time of issuance, (ii) upon delivery of such shares, they shall be free and clear of all Liens and shall not be subject to any preemptive right of any stockholder of the Company, (iii) in connection with any such issuance, the Company shall have taken all necessary actions such that no Takeover Statute shall be applicable to any such issuance and (iv) upon issuance all the shares of New Securities shall have the voting and other rights attributable to the Common Stock or the Preferred Shares under the Certificate of Designation, as the case may be. Each share certificate representing New Securities issued or delivered by the Company hereunder shall bear the legend set forth in Section 12.10.

      5.3  Limitation on Purchases of Equity Securities.  (a) Except as permitted by a majority of the Non-Purchaser Directors, during the period commencing on the date hereof and ending on the earlier of (x) the fifth anniversary of the Initial Closing and (y) the occurrence of a Director Termination Date, the Purchasers and their Affiliates shall not, directly or indirectly:

	(i)  acquire, or offer or agree to acquire, beneficial ownership (as defined in Rule 13d-3 and 13d-5 under the Exchange Act) of any Voting Securities;
	(ii)  contrary to the recommendation of the Board, participate in any “solicitation” of “proxies” (as such terms are used in the proxy rules of the SEC), vote any shares of capital stock of the Company, initiate, propose or otherwise solicit stockholders of the Company for the approval of one or more

15

Table of Contents

	stockholder proposals or induce or attempt to induce any other individual, firm, corporation, partnership or other entity to initiate any stockholder proposal;
	(iii)  join in or in any way participate in a pooling agreement, syndicate, voting trust or other arrangement with respect to the Company’s Voting Securities, or otherwise act in concert with, any other Person (other than Affiliates of the Purchasers, or Rajendra Vattikuti or Affiliates of Mr. Vattikuti), for the purpose of acquiring, holding, voting or disposing of the Company’s securities;

      (b)  Notwithstanding anything to the contrary in this Agreement, however, nothing contained in this Section 5.3 shall be deemed to (i) restrict the manner in which the Purchaser Directors or the Purchaser Observer participate in deliberations or discussion of the Board in compliance with their fiduciary duties, (ii) prevent the Purchasers from acquiring any of the Preferred Shares, the Conversion Shares or the Warrant Shares pursuant to the terms of this Agreement, the Certificate of Designation and the Warrants (and the Purchasers shall not be deemed to have breached any covenant in this Agreement solely as a result of such acquisition) or (iii) restrict the Purchasers from acquiring beneficial ownership over Voting Securities, whether by purchase of such Voting Securities, by proxy or otherwise, up to an aggregate amount of 49.9% of the Voting Securities from time to time outstanding. Nothing herein shall be construed as permitting the Purchasers and their Affiliates from acquiring beneficial ownership of Voting Securities in excess of 49.9% of the Voting Securities from time to time outstanding during the time period contemplated in Section 5.3(a) unless otherwise permitted by a majority of the Non-Purchaser Directors. This Article V expressly supercedes Section 8 of the Confidentiality Agreement, dated February 1, 2000, by and between CD&R and the Company, which Section 8 is hereby terminated and of no further force and effect.

COVENANTS OF THE COMPANY

      6.1  Covenants of the Company.  During the period from the date of this Agreement and continuing until the Subsequent Closing, the Company agrees as to itself and its Subsidiaries that, except as (i) set forth in Schedule 6.1, (ii) to the extent that the Purchasers otherwise consent in writing, (iii) required by Law, (iv) mandatorily required by any Plan, or (v) specifically required by this Agreement:

      (a)  Reasonable Efforts.  The Company will, and will cause its Subsidiaries to, use commercially reasonable efforts to preserve the relationships with customers, suppliers and others having business dealings with the Company and its Subsidiaries.

      (b)  Other Transactions.  The Company will not, nor will it permit any of its Subsidiaries to, do any of the following (except as otherwise expressly provided herein):

	(i)  amend its Articles of Incorporation (except to the extent necessary to adopt the Certificate of Designation), By-Laws or other organizational documents (except to comply with the terms of this Agreement and consummate the transactions contemplated herein and for immaterial amendments to the certificate of incorporation or bylaws of any of the Company’s Subsidiaries, provided such amendments in no way adversely affect the Purchasers or the rights granted to the Purchaser hereunder);
	(ii)  declare or pay any dividend or make any distribution with respect to the assets of the Company and its Subsidiaries;
	(iii)  redeem or otherwise acquire any shares of its capital stock or issue any capital stock (except upon exercise of options issued prior to the date hereof under a Company Stock Option Plan), or any option or warrant or right relating thereto;
	(iv)  split, combine or reclassify any shares of its capital stock;
	(v)  incur any liabilities, obligations or indebtedness for borrowed money or guarantee any such liabilities, obligations or indebtedness, other than in the ordinary course of business consistent with past practice (except as incurred in connection with acquisitions to the extent permitted hereby) and in an aggregate amount that would not be material to the Company and its Subsidiaries, taken as a whole;

16

Table of Contents

	(vi)  take any action or omit to take any action, which action or omission would result in a breach of any of the representations and warranties set forth in Article II;
	(vii)  cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value;
	(viii)  enter into any agreement or take any action in violation of the terms of this Agreement or any Contract that would be required to be set forth on Schedule 2.12 if in effect on the date hereof;
	(ix)  agree, whether in writing or otherwise, to do any of the foregoing.

      (c)  Certificate of Designation.  Prior to the Initial Closing, the Board will cause the Certificate of Designation to be filed with the Department of Consumer and Industry Services of the State of Michigan or any successor agency or administrator.

      6.2  Access and Information.  So long as this Agreement remains in effect, prior to the Subsequent Closing, the Company will (and will cause each of its Subsidiaries and each of their respective accountants, counsel, consultants, officers, directors, employees, agents and representatives to) give the Purchasers and their representatives, reasonable access during reasonable business hours to all of their respective properties, assets, books, contracts, commitments, reports and records relating to the Company and its Subsidiaries, and furnish to them all such documents, records and information with respect to the properties, assets and business of the Company and its Subsidiaries and copies of any work papers relating thereto as the Purchasers shall from time to time reasonably request. The Company will use reasonable efforts to keep the Purchasers generally informed as to the affairs of the business of the Company and its Subsidiaries and shall consult with the representatives of the Purchasers on material matters pertaining to the Business.

      6.3  Shareholders’ Meeting; Proxy Statement.

      (a)  As promptly as practicable after the date hereof, the Company shall prepare the Proxy Statement, and the Company shall prepare and file with the SEC, and the Purchasers shall cooperate with the Company in such preparation and filing, the Schedule 14A in which the Proxy Statement shall be included. The Company will use its reasonable best efforts, after consultation with the Purchasers, to respond promptly to any comments made by the SEC with respect to the Schedule 14A or the Proxy Statement and use its reasonable best efforts to cause the Proxy Statement to be cleared by the SEC, as promptly as practicable following such filing. The Company will use its reasonable best efforts to cause a definitive proxy statement (the “Proxy Statement”) to be mailed to its shareholders as promptly as practicable after the Proxy Statement is cleared by the SEC. The Company shall include in the Proxy Statement the recommendation of the Board and the Special Committee that shareholders of the Company approve the Second Tranche Transactions, unless such recommendation has been withdrawn or modified as permitted by Section 6.13.

      (b)  The Company shall, as soon as practicable, in accordance with applicable law and the Articles of Incorporation and the By-Laws of the Company, duly call, set a record date for, give notice of, convene and hold the Annual Meeting for the purpose of considering and taking action upon this Agreement and such other matters as may be appropriate at the Annual Meeting. The Company shall, through its Board of Directors, recommend that its shareholders approve the Second Tranche Transactions and shall use all reasonable efforts to solicit from shareholders of the Company proxies in favor of the approval thereof, unless such recommendation has been withdrawn or modified as permitted by Section 6.13.

      (c)  If at any time prior to the Subsequent Closing Date any event relating to the Company or any of its affiliates, or its, or its affiliates’, respective officers, directors or shareholders, should be discovered which should be set forth in an amendment of, or a supplement to such Schedule 14A or the Proxy Statement, the Company shall promptly so inform the Purchasers and will furnish all necessary information to the Purchasers relating to such event and an appropriate amendment or supplement to such Schedule 14A or Proxy Statement will thereafter be filed with the SEC by the Company. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated by this Agreement shall comply in all material respects, both as to form and otherwise, with the Exchange Act and the rules and regulations thereunder.

17

Table of Contents

      (d)  The Company will immediately notify the Purchasers of the receipt of any comments from the SEC concerning any of the filings described in this Section 6.3. All filings with the SEC and all mailings to the Company’s stockholders in connection with the Purchasers, including the Proxy Statement, shall be subject to the prior review and comment and with respect to matters pertaining to the Purchasers, the approval of the Purchasers. No such filing or mailing shall be made without the prior consent of the Purchasers.

      (e)  If at any time prior to the Subsequent Closing Date any event relating to the Purchasers or any of their Affiliates, or their Affiliates’ respective officers, directors or shareholders should be discovered which should be set forth in an amendment of, or a supplement to, such Schedule 14A or the Proxy Statement, the Purchasers shall promptly so inform the Company and will furnish all necessary information to the Company relating to such event and an appropriate amendment or supplement to such Schedule 14A or Proxy Statement will thereafter be filed with the SEC by the Company. All documents that the Purchasers are responsible for filing with the SEC in connection with the transactions contemplated by this Agreement shall comply in all material respects, both as to form and otherwise, with the Exchange Act and the rules and regulations thereunder.

      6.4  Notification of Certain Matters.  The Company shall give prompt notice to the Purchasers, and the Purchasers shall give prompt notice to the Company, of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any representation or warranty of the Company, or of the Purchasers, as the case may be, contained in this Agreement to be untrue or inaccurate in any material respect at any Closing, (ii) any material failure of the Company, or the Purchasers, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder and (iii) any event, occurrence, fact, condition, change, development or effect that, individually or in the aggregate, would have a Material Adverse Effect or a breach of Section 6.1; provided, however, that any failure to provide such notice pursuant to this Section 6.4 shall not constitute a separate breach of the terms of this Agreement.

      6.5  Press Releases; Interim Public Filings.  The Company shall deliver to the Purchasers complete and correct copies of all press releases and public filings made between the date hereof and the Subsequent Closing Date, and, to the extent any such press release and public filings refer in any way to the Purchasers or their Affiliates, they shall be subject to the prior review and comment of the Purchasers.

      6.6  Reservation of Common Stock for Conversion and Exercise.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Preferred Shares and exercise of the Warrants, such number of shares of Common Stock as may be issued upon conversion of all outstanding Preferred Shares not previously converted and exercise of all outstanding Warrants not previously exercised.

      6.7  Listing.  The Company shall use its reasonable best efforts to cause the shares of Common Stock issuable upon conversion of the Preferred Shares or exercise of the Warrants to be listed or otherwise eligible for trading on the NASDAQ National Market System or another national securities exchange.

      6.8  Periodic Information.  For so long as the Preferred Shares or any Conversion Shares or Warrant Shares are outstanding, the Company shall file all reports required to be filed by the Company under Section 13 or 15(d) of the Exchange Act and shall provide the holders of the Preferred Shares, Conversion Shares and Warrant Shares with the information specified in Rule 144A(d) under the Securities Act.

      6.9  Preferred Share Rights.

      (a)  Change of Control.  After the date hereof, the Company shall not, nor shall it agree to, engage in a Change of Control (as such term is defined in the Certificate of Designation), unless (i) if the Initial Closing has occurred, it offers to repurchase the Preferred Shares issued to the Purchasers as provided in Section 9 of the Certificate of Designation, and (ii) if either the Initial or the Subsequent Closing has not occurred, it pays the Purchasers an amount equal to the difference between (A) the amount the Purchasers would have been entitled to receive pursuant to Section 9 of the Certificate of Designation had such closing or closings occurred immediately prior to such Change of Control, and (B) the initial liquidation preference that would have been

18

Table of Contents

      (b)  Special Voting Rights.  Following the Closing, the Company shall not take any of the actions described in Section 3(b) of the Certificate of Designation unless the holders of the Preferred Shares shall have first been allowed to vote on such action as a single class, as described in Section 3(b) of the Certificate of Designation.

      (c)  Redemption, Repurchase.  Following the tenth anniversary of the Closing Date, upon the request of the Purchasers (or any Affiliates thereof), the Company shall redeem the Preferred Shares as provided in Section 8 of the Certificate of Designation. Following the Shareholder Approval Deadline (as defined in the Certificate of Designation), the Company shall offer to repurchase the Preferred Shares, as provided in Section 9 of the Certificate of Designation.

      6.10  New Shareholders.  The Company agrees to use commercially reasonable efforts to cause any Person or “group” (as defined in the Exchange Act) that acquires ten percent or more of the Company’s Voting Securities from the Company or an Affiliate in a merger, stock purchase (other than in an underwritten public offering) or other business combination to, enter into an agreement to vote their shares of capital stock so as to effectuate the Purchasers’ rights under Section 4.1.

      6.11  Executive Committee.  Until the occurrence of the Subsequent Closing, no change shall be made to the composition, powers or identity of the members of the Executive Committee of the Board, as extant on the Initial Closing Date, without the consent of the Purchasers.

      6.12  Shareholder Rights.  The Board shall take all necessary action such that, effective immediately after the Subsequent Closing, the Company shall have adopted a shareholder rights plan (or “poison pill”), in form and substance reasonably satisfactory to the Purchasers.

      6.13  No Solicitation by the Company.

      (a)  The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any of its directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its Subsidiaries to, directly or indirectly through another person, (i) solicit, initiate or knowingly encourage (including by way of furnishing non-public information), or take any other action designed to facilitate, any inquiries or the making of any proposal which constitutes either a Company Takeover Proposal or an Alternative Proposal or (ii) participate in any discussions or negotiations regarding any Company Takeover Proposal or Alternative Proposal; provided, however, that if the Special Committee or the Board determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to act in a manner consistent with its fiduciary duties to the Company’s shareholders under applicable Law, the Company may, in response to any Company Takeover Proposal or Alternative Proposal that was not solicited by it and that does not otherwise result from a breach of this Section 6.13 and, subject to providing prior notice of any such proposal or any such request for non-public information and of its decision to take such action to the Purchasers, (x) furnish information with respect to the Company and it Subsidiaries to any person inquiring about or making a Company Takeover Proposal or Alternative Proposal pursuant to a customary confidentiality agreement (as determined by the Company based on the advice of its outside counsel) and (y) participate in discussions or negotiations regarding such Company Takeover Proposal or Alternative Proposal, as the case may be.

      (b)  Except as expressly permitted by this Section 6.13, neither the Board, the Special Committee nor any other committee shall (i) withdraw or modify, in a manner adverse to the Purchasers the approval or recommendation by such Board or such committee of the Second Tranche Transactions or this Agreement, (ii) approve or recommend, or propose publicly to approve or recommend, any Company Takeover Proposal or Alternative Proposal, or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Company Takeover Proposal or Alternative Proposal, unless the Special Committee or the Board, determines in good faith, after consultation with outside counsel, that it is necessary to do so in order to act in a manner consistent with its fiduciary duties to the Company’s shareholders under applicable Law. Notwithstanding the foregoing provisions of this

19

Table of Contents

      (c)  In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 6.13, the Company shall advise the Purchasers of any request for information or of any Company Takeover Proposal or Alternative Proposal, within one Business Day of the Company’s receipt of such request or such Company Takeover Proposal or Alternative Proposal, as the case may be, and the material terms and conditions of such request or such Company Takeover Proposal or Alternative Proposal.

      (d)  Nothing contained in this Section 6.13 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) and 14d-9 promulgated under the Exchange Act or from making any disclosure to the Company’s shareholders if, in the good faith judgment of the Special Committee or the Board, after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law.

      (e)  The parties agree that, following the Initial Closing Date until the Subsequent Closing Date, any determination with respect to a Company Takeover Proposal at a meeting of the Board convened to consider such Company Takeover Proposal shall be made by Non-Purchaser Directors who are also not officers or employees of the Company; provided that nothing in this Section 6.13(e) shall prevent any director from participating in such meeting and consulting with the Board on such Company Takeover Proposal in compliance with their fiduciary duties.

ARTICLE VII

COVENANTS OF THE COMPANY AND THE PURCHASERS

      7.1  Public Announcements.

      (a)  On the date hereof, the Company and the Purchasers shall jointly prepare a press release by the Company, satisfactory in form and substance to each of them, announcing (i) the general terms of the transactions contemplated hereby (ii) that Mr. Lautenbach and Mr. Vattikuti will be Co-Chairmen of the Board and (iii) the general reasons for the transactions contemplated hereby.

      (b)  Prior to the Initial Closing, except as required by applicable Law, no party shall, nor shall permit its Affiliates to, make any public announcement in respect of this Agreement or the transactions contemplated hereby without the prior consent of the other parties.

      7.2  Further Actions.

      (a)  From the date hereof to the Subsequent Closing, each party agrees to use its reasonable best efforts to take all actions and to do all things necessary or appropriate to consummate the transactions contemplated hereby and by the Ancillary Agreements as promptly as possible, including, without limitation: (i) filing or supplying all applications, notifications and information required to be filed or supplied by it pursuant to applicable Law, (ii) obtaining all Consents and Governmental Approvals necessary or appropriate to be obtained by it in order to consummate transactions contemplated hereby and thereby, (iii) obtaining Shareholder Approval of the Second Tranche Transactions and (iv) coordinating and cooperating with the other parties in exchanging such information and supplying such reasonable assistance as may be reasonably requested by the other parties.

20

Table of Contents

      (b)  The Company shall use its best efforts to take all necessary steps under the Articles of Incorporation and the Company’s By-Laws to increase by 4 million the number of shares of Common Stock available for grant as Company Stock Options under existing Plans or pursuant to new Plans.

      (c)  The Purchasers shall not exercise their special voting rights under Section 3(b) of the Certificate of Designation so as to prevent a Change of Control Transaction that has been approved as contemplated by this Agreement.

      (d)  The Company agrees that at no time shall it exercise its rights under Section 11 of the Certificate of Designation with respect to Preferred Shares beneficially owned by the Purchasers or their Affiliates.

      7.3  Further Assurances.  Following the Initial Closing, each party shall execute and deliver such additional instruments, documents, conveyances or assurances and take such other actions as shall be necessary, or otherwise reasonably requested by another party hereto, to confirm and assure the rights and obligations provided for in this Agreement and the Ancillary Agreements, and render effective the consummation of the transactions contemplated hereby and thereby.

      7.4  Certain Tax Matters.

      (a)  The Company shall consult in good faith with the Purchasers concerning (i) the tax treatment of the Preferred Shares and any actual or constructive distributions made or deemed made to the Purchasers and (ii) any available alternatives for minimizing any withholding tax in respect of such actual or constructive distributions. The Company does not presently intend to withhold tax on account of any “constructive distribution.” In the event that the Company determines that such withholding is required, the Company shall comply with the terms of Section 7.4(b) below.

      (b)  At least 30 days prior to making any withholding tax payment on account of any actual or constructive distributions made or deemed made to the Purchasers, the Company shall (x) provide a written notice to the Purchasers (which notice shall set forth an estimate of the amount of the anticipated withholding tax payment), (y) consult in good faith with the Purchasers concerning whether all or a portion of such anticipated withholding tax payment is required under applicable Law and concerning any available alternatives that could reduce or eliminate the amount of withholding tax required to be made and (z) afford the Purchasers the opportunity to fund any withholding tax that the Company determines (after consulting with the Purchasers as provided herein) required to be made, provided that:

	(A)  the Company shall not withhold or deduct any tax on any constructive distribution deemed made to the Purchasers without the prior written consent of the Purchasers;
	(B)  provided that the Company shall have given the Purchasers written notice and otherwise complied with the terms of this Section 7.4(b), the Purchasers shall defend, indemnify and hold the Company harmless against any withholding tax (together with interest, penalties and additions thereto) on any constructive distribution deemed made to the Purchasers if the Company has not timely received from the Purchasers the amount necessary to pay such withholding tax;
	(C)  the Purchasers shall have full participation rights in any audit, examination, investigation and proceeding relating to any withholding tax described in clause (B) above; and
	(D)  control of decisions with respect to any such audit, examination, investigation or proceeding shall be made solely by the Company and the Company shall reasonably cooperate with, and provide reasonable assistance, to the Purchasers (including, without limitation, access to the records, making personnel available and executing the applicable power of attorney) concerning any matter described in this proviso.

With respect to any withholding tax payable in respect of dividends under the Code, the Company shall not treat any actual or constructive distribution made or deemed made to the Purchasers as giving rise to any withholding tax unless such distribution is described in Section 316 of the Code. For such purposes, in determining whether any distribution is described in section 316 of the Code, the Company shall make a

21

Table of Contents

      (c)  Notwithstanding any provisions in this Agreement to the contrary, if the Company receives any written notice of assessment or demand from the Internal Revenue Service that the Company is required to pay any withholding tax on account of any actual or constructive distribution made or deemed made to the Purchasers, the Company shall have the right to require, by written request to the Purchasers together with a copy of such written notice of assessment or demand, that the Purchasers pay, by wire transfer of immediately available funds, the amount necessary to pay any such assessment or demand (other than interest, penalties and additions thereto); provided that the Purchasers shall not be required to pay any amounts hereunder that the Purchasers shall have previously paid, whether through withholding or deduction, setoff or any direct payment in respect of such withholding tax, to the Company or to any applicable withholding agent or to any applicable taxing authority; and provided further that, the Purchasers shall have full participation rights in any proceeding relating to such assessment or demand.

      (d)  The Company shall pay, by wire transfer of immediately available funds, to the Purchasers any refund received by the Company of withholding tax in respect of any actual or constructive distribution made or deemed made to the Purchasers.

ARTICLE VIII

CONDITIONS PRECEDENT

      8.1  Condition to Obligations of Each Party.  The obligation of the parties to consummate the transactions contemplated hereby and by the Ancillary Agreements to which each is a party shall be subject to the fulfillment of the following conditions on or prior to each Closing Date (any or all of which may be waived, in whole or in part, in writing to the extent permitted by applicable Law):

      (a)  No Injunction, etc.  Consummation of the transactions contemplated hereby or by the Ancillary Agreements shall not have been restrained, enjoined or otherwise prohibited or made illegal by any applicable Law. No Governmental Authority shall have enacted any applicable Law to make illegal the consummation of the transactions contemplated hereby or by the Ancillary Agreements, and no proceeding with respect to the application of any such applicable Law to such effect shall be pending.

      (b)  Consents.  Any applicable waiting period under the HSR Act with respect to the purchase of the Preferred Shares and the Warrants shall have expired or been terminated, and all Governmental Approvals and all Consents required to be obtained for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements shall have been obtained and remain in full force and effect.

      8.2  Conditions to Obligations of the Purchasers.  The obligation of the Purchasers to consummate the transactions contemplated hereby and by the Ancillary Agreements shall be subject to the fulfillment on or prior to each Closing Date (or waiver by the Purchasers) of the following additional conditions, which the Company agrees to use its reasonable best efforts to cause to be fulfilled:

      (a)  Representations, Performance, etc.  The representations and warranties of the Company contained herein and in the Ancillary Agreements to which the Company is a party shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the date hereof and at and as of each Closing Date with the same effect as though made on and as of such Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties that are qualified as to materiality shall be true and correct, and those that are not so qualified shall be true and correct in all material respects, on and as of such earlier date), and the Purchasers shall have received a certificate signed by an officer of the Company to such effect.

      (b)  Performance of Obligations of the Company.  The Company shall have performed or complied in all material respects with all obligations and covenants required to be performed or complied with prior to each

22

Table of Contents

      (c)  Ancillary Agreements.  On or prior to any Closing Date, (i) the Company and the Purchasers shall have entered into a registration rights agreement in the form of Exhibit D hereto (the “CDR Registration Rights Agreement”) and such agreement shall remain in full force and effect; (ii) the Company and the Purchasers shall have entered into an indemnification agreement substantially in the form of Exhibit E hereto (the “Indemnification Agreement”) and on and prior to each Closing Date such agreement shall remain in full force and effect; (iii) Rajendra Vattikuti and each Purchasers shall have entered into an agreement simultaneously with the execution of this Agreement with respect to certain voting, standstill and other matters (the “Voting Agreement”) and the Company and Rajendra Vattikuti shall have entered into an agreement simultaneously with the execution of this Agreement with respect to matters set forth in Article 5 (the “R Subscription Agreement” and, together with the Voting Agreement, the “R Agreements”) and such agreements shall remain in full force and effect; and (iv) the Company and Rajendra Vattikuti shall have entered into an employment agreement simultaneously with the execution hereof (the “R Employment Agreement”) and such agreement shall remain in full force and effect.

      (d)  Board of Directors.  On or prior to the Initial Closing Date the Board shall consist of nine persons and include the Purchaser Directors and the Non-Purchaser Directors.

      (e)  Opinions of Counsel.  On or prior to each Closing Date, the Purchasers shall have received such opinions of counsel, dated the Closing Date, from Butzel Long, counsel to the Company, and from Dewey Ballantine LLP, special counsel to the Company, each in the respective form attached hereto as Schedule 8.2 and an opinion reasonably satisfactory to the Purchasers with respect to the due authorization, execution and delivery of the Voting Agreement under New York and Michigan law.

      (f)  Corporate Proceedings.  The Purchasers shall have received a certificate, dated the Closing Date, executed by the Secretary of the Company certifying as of the Closing Date (i) that attached thereto is (x) a true and correct copy of the Articles of Incorporation, (y) a true and correct copy of the Bylaws of the Company, (z) a true and correct copy of resolutions of the Board or a duly authorized committee thereof authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party by the Company and the consummation of the transactions contemplated hereby and thereby, and resolutions adopted prior to the execution hereof, making the determinations contemplated by Section 2.20 hereof and attributing to the Executive Committee of the Board the powers and authority described in Section 2.1 hereof, (ii) that the documents described in clauses (x), (y) and (z) are in full force and effect and have not been amended, modified or supplemented, and (iii) as to the incumbency of the officers of the Company executing this Agreement, any Ancillary Agreement or any documents or instruments executed in connection herewith.

      (g)  Other Parties.  (A) No Person or “group” (as defined in the Exchange Act) other than the Purchasers shall have acquired beneficial ownership of more than 15% of the outstanding Voting Securities, and (B) no Person other than the Purchasers shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any shares of Common Stock or a merger, consolidation or other business combination involving the Company.

      (h)  Transaction Fee; Transaction Expenses.  The Purchasers’ transaction Expenses shall have been paid to the Purchasers and the Transaction Fee shall have been paid to CD&R.

      8.3  Conditions to Obligations of the Company.  The obligation of the Company to consummate the transactions contemplated hereby and by the Ancillary Agreements shall be subject to the fulfillment (or waiver by the Company), on or prior to each Closing Date, of the following additional conditions, which the Purchasers agree to use their reasonable best efforts to cause to be fulfilled:

      (a)  Representations, Performance, etc.  The representations and warranties of the Purchasers contained herein and in the Ancillary Agreements to which it is a party shall be true and correct in all respects (in the case of any representation or warranty containing any materiality qualification) or in all material respects (in the case of any representation or warranty without any materiality qualification) at and as of the date hereof

23

Table of Contents

      (b)  Performance of Obligations of the Purchasers.  The Purchasers shall have performed or complied with all obligations and covenants required to be performed or complied with prior to each Closing by the Purchasers under this Agreement and the Company shall have received a certificate of the Purchasers to such effect.

      (c)  Opinions of Counsel.  The Company shall have received such opinions of counsel, dated the Closing Date, from Debevoise & Plimpton, counsel to the Purchasers, in the form attached hereto as Schedule 8.3.

      (d)  Funding of Purchase Price.  The Purchasers shall have received the amount of the Purchase Price to be paid at such Closing from Fund-VI, all of such funds to be used exclusively as payment of such amount of the Purchase Price.

      8.4  Conditions to Obligations to Consummate the Second Tranche Transactions.  In addition to each of the foregoing conditions, the obligations of the Purchasers and the Company to consummate the Second Tranche Transactions shall be conditioned upon the receipt of Shareholder Approval of the Second Tranche Transactions prior to August 30, 2000.

ARTICLE IX

TERMINATION

      9.1  Termination.  This Agreement may be terminated with respect to any Closing Date that shall not have occurred at any time prior to such Closing Date:

      (a)  by the written agreement of the parties hereto;

      (b)  by the Purchasers by written notice to the Company if (i) any of the conditions set forth in Section 8.1, 8.2 or 8.4 (including with respect to any representations and warranties) shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by 5:00 p.m. New York time on June 30, 2000 (with respect to Sections 8.1 and 8.2) or August 30, 2000 (with respect to Sections 8.1, 8.2 and 8.4), unless such failure shall be due to the failure of the Purchasers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by them on or prior to the Closing or (ii) the Board or the Special Committee, at any time prior to the consummation of the Subsequent Closing, withdraws, modifies or changes its recommendation of the Second Tranche Transaction or this Agreement and the transactions contemplated hereby in a manner adverse to the Purchasers or otherwise exercises the rights provided in Section 6.13, or shall have resolved to do any of the foregoing;

      (c)  by the Company by written notice to the Purchasers if (i) any of the conditions set forth in Section 8.1, 8.3 or 8.4 (including with respect to any representations and warranties) shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by 5:00 p.m. New York time on June 30, 2000 (with respect to Sections 8.1 and 8.3) or August 30, 2000 (with respect to Sections 8.1, 8.3 and 8.4), unless such failure shall be due to the failure of the Purchasers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by them on or prior to the Closing or (ii) the Board or the Special Committee, at any time prior to the consummation of the Subsequent Closing, withdraws, modifies or changes its recommendation of the Second Tranche Transaction or this Agreement and the transactions contemplated hereby in a manner adverse to the Purchasers or otherwise exercises the rights provided in Section 6.13, or shall have resolved to do any of the foregoing.

      9.2  Effect of Termination.  In the event of the termination of this Agreement pursuant to the provisions of Section 9.1, written notice thereof shall forthwith be given by the terminating party or parties, specifying the provisions hereof pursuant to which such termination is effected, and this Agreement shall become void and

24

Table of Contents

ARTICLE X

INDEMNIFICATION

      10.1  Indemnification by the Company.

      (a)  The Company covenants and agrees to defend, indemnify and hold the Purchasers and their Affiliates (the “Purchaser Indemnitees”) harmless from and against, and pay or reimburse Purchaser Indemnitees for, any and all Losses (whether attributable in whole or in part to the acts or omissions of the Purchaser Indemnitees) resulting from or arising out of either:

	(i)  any breach of any representation or warranty made by the Company in any provision of this Agreement or under any Ancillary Agreement or in connection herewith or therewith; or
	(ii)  any failure of the Company to perform any covenant or agreement hereunder or under any Ancillary Agreement or to fulfill any other obligation in respect hereof or thereof.

      (b)  (i) Except with respect to Losses described by Section 10.1(a)(ii), the Company shall not be required to indemnify Purchaser Indemnitees unless the aggregate amount of all claims against the Company under this Section 10.1 exceeds $3,400,000, in which event the Purchasers shall be entitled to make a claim against the Company for the full amount of any Losses, and (ii) the liability of the Company under this Section 10.1 shall not exceed the Purchase Price.

      10.2  Indemnification by the Purchasers.

      (a)  The Purchasers covenant and agree to defend, indemnify and hold the Company harmless from and against, and pay or reimburse the Company for, any and all Losses (whether attributable in whole or in part to the acts or omissions of the Company) resulting from or arising out of:

	(i)  any breach in any representation or warranty made by the Purchasers herein or under any Ancillary Agreement, or in connection herewith or therewith; or
	(ii)  any failure of the Purchasers to perform any covenant or agreement hereunder or under any Ancillary Agreement, or fulfill any other obligation in respect hereof or thereof.

      (b)  (i) Except with respect to Losses described by Section 10.2(a)(ii), the Purchasers shall not be required to indemnify the Company unless the aggregate amount of all claims against the Purchasers under this Section 10.2 exceeds $3,400,000, in which event the Company shall be entitled to make a claim against the Purchasers for the full amount of any Losses, and (ii) the liability of the Purchasers under this Section 10.2 shall not exceed the Purchase Price.

      10.3  Indemnification Procedures.  In the case of any claim asserted by a third party against a party entitled to indemnification under this Agreement (the “Indemnified Party”), notice shall be given by the Indemnified Party to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and the Indemnified Party shall (at the expense of such Indemnifying Party) assume the defense of any claim or any litigation resulting therefrom, provided, that, (i) the counsel for the Indemnifying Party who shall conduct the defense of such claim or litigation shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and (iii) the omission by any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except to the extent that such omission results in a failure of actual notice to the Indemnifying Party and such Indemnifying Party is materially damaged as a result of such failure to give notice. Except with the prior written consent of the Indemnified Party, no Indemnifying Party,

25

Table of Contents

      10.4  Remedies.  Except in the case of fraud, the rights and remedies provided for in this Agreement and the Ancillary Agreements are the exclusive rights and remedies that any party may have at law or in equity.

      10.5  Tax Treatment of Adjustments.  The Purchasers and the Company agree to treat any indemnity payment made pursuant to Section 10.1 or 10.2 as an adjustment to the Purchase Price for all Tax purposes.

      10.6  Survival.  The representations and warranties and all indemnification obligations contained in this Agreement shall survive the execution and delivery of this Agreement, any examination by or on behalf of the parties hereto and the completion of the transactions contemplated herein, but only to the extent specified below:

      (a)  except as set forth in clauses (b) and (c) below, the representations and warranties contained in Articles II and III, (and the indemnification obligations in respect thereof under clauses (i) of Section 10.1(a) and 10.2(a)), shall survive for twelve months following the Subsequent Closing Date (except with respect to claims for Losses incurred within such period that have been filed within 30 days of the termination of such period).

      (b)  the representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.20, 3.1, 3.2, and 3.6 shall survive without limitation;

      (c)  the indemnification obligations under clauses (ii) of Section 10.1(a) and 10.2(a) shall survive with respect to any covenant covered thereby for the period such covenant is in force and effect.

ARTICLE XI

INTERPRETATION; DEFINITIONS

      11.1  Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:

      25  Warrants:  is defined in the recitals to this Agreement.

      31  Warrants:  is defined in the recitals to this Agreement.

      Acquired Common Stock:  (i) prior to the occurrence of the Subsequent Closing, the Common Stock issuable upon conversion of the Preferred Shares acquired by the Purchasers at the Initial Closing and upon exercise of the 25 Warrant, and (ii) thereafter, the Common Stock issuable upon conversion of the Preferred Shares acquired by the Purchasers at both the Initial Closing and the Subsequent Closing and upon conversion of both the Warrants.

26

Table of Contents

      Affiliate: shall have the meaning set forth in Rule 12b-2 under the Exchange Act (as in effect on the date of this Agreement).

      Agreement: is defined in the introductory paragraph to this Agreement.

      Alternative Proposal: means any bona fide third party proposal with respect to a direct or indirect acquisition or purchase of a business that constitutes a portion of net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole, or a portion of any class of equity securities of the Company, any tender offer or exchange offer that if consummated would result in any person beneficially owning a portion of any class of any equity securities of the Company, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company (or any Subsidiary whose business constitutes a portion of the net revenues, net income or assets of the Company and its Subsidiaries taken as a whole), other than the transactions contemplated by this Agreement.

      Ancillary Agreement: means any of the CDR Registration Rights Agreement, the Indemnification Agreement, the Certificate of Designation, the Warrants, the Consulting Agreement, the Voting Agreement, the R Subscription Agreement and the R Employment Agreement.

      Annual Meeting: is defined in the recitals to this Agreement.

      Articles of Incorporation: is defined in Section 2.1.

      Balance Sheet: is defined in Section 2.5(c).

      Board: is defined in the recitals to this Agreement.

      Bridge: is defined in Section 4.5.

      Business: means the business of the Company and its Subsidiaries.

      Business Day: means any day on which banking institutions are open in the City of New York.

      CD&R:  Clayton, Dubilier & Rice, Inc., a Delaware corporation.

      CDR-Cookie VI: is defined in the introductory paragraph of this Agreement.

      CDR-Cookie VI-A: is defined in the introductory paragraph of this Agreement.

      CDR-Registration Rights Agreement: is defined in Section 8.2(c).

      Certificate of Designation: is defined in the recitals to this Agreement.

      Change of Control Transaction: means any bona fide third party proposal with respect to a direct or indirect acquisition or purchase of a business that constitutes 50% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole, or 50% or more of any class of equity securities of the Company, any tender offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of any class of any equity securities of the Company, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company (or any Subsidiary whose business constitutes 50% or more of the net revenues, net income or assets of the Company and its Subsidiaries taken as a whole), other than the transactions contemplated by this Agreement.

      Closing: means any of the Initial Closing or the Subsequent Closing.

      Closing Date: means any of the Initial Closing Date or the Subsequent Closing Date.

      Code: means the Internal Revenue Code of 1986, as amended.

      Collective Bargaining Agreement: is defined in Section 2.18.

      Common Stock: is defined in the recitals to this Agreement.

      Company: is defined in the introductory paragraph to this Agreement.

27

Table of Contents

      Company Disclosure Schedule: is defined in the introductory paragraph to Article II.

      Company Intellectual Property: is defined in Section 2.11(a).

      Company SEC Documents: is defined in Section 2.5(a).

      Company Stock Options: is defined in Section 2.2(a).

      Company Superior Proposal: means any Alternative Proposal or Company Takeover Proposal otherwise on terms that the Board determines in its good faith judgment based on consultation with an investment banking firm of national reputation and outside counsel, is more favorable to the Company’s stockholders than the transactions contemplated by this Agreement, considering all factors including, without limitation, (i) the overall significance and amount of the Alternative Proposal or Company Takeover Proposal in absolute terms to the Company, (ii) the services that otherwise would be rendered to the Company pursuant to the Consulting Agreement and by the Purchaser Directors, and (iii) the financing, to the extent required, for the Alternative Proposal or the Company Takeover Proposal is then committed or which, in the good faith judgment of the Board, is reasonably capable of being obtained by such third party.

      Company Takeover Proposal: means a Change of Control Transaction.

      Consent: any consent, approval, waiver, agreement, license, or report or notice to, any Person.

      Consolidated Group: is defined in Section 2.13(e).

      Consulting Agreement: is defined in the recitals to this Agreement.

      Contract: any note, bond, mortgage, indenture, contract, agreement, obligation, instrument, offer, commitment, understanding or other arrangement.

      Conversion Shares: is defined in Section 2.2(b).

      Director Termination Date: is defined in Section 4.1(b).

      EC Date: the later to occur of (i) the third anniversary of the Subsequent Closing Date and (ii) the election to the Board of three individuals who are not Purchaser Directors, are not officers or directors of the Company and who are not members of the Board immediately following the Initial Closing.

      Environmental Law: is defined in Section 2.14(b).

      Equity Security: means (i) any Common Stock or other capital stock of the Company, (ii) any securities of the Company convertible into or exchangeable for Common Stock or other capital stock of the Company, or (iii) any options, rights or warrants (or any similar securities) issued by the Company to acquire Common Stock or other capital stock of the Company.

      ERISA: means the Employee Retirement Income Security Act, as amended.

      Exchange Act: means the Securities Exchange Act of 1934, as amended.

      Expenses: is defined in Section 12.1(b).

      Filed Company SEC Documents: is defined in Section 2.7.

      Financial Advisor: is defined in Section 2.16.

      Financial Statements: is defined in Section 2.5(c).

      First Tranche Transactions: is defined in Section 2.3.

      Fund VI: is defined in the introductory paragraph of this Agreement.

      Fund VI-A: is defined in the introductory paragraph of this Agreement.

      GAAP: means United States generally accepted accounting principles.

28

Table of Contents

      Governmental Approval: any consent, approval, authorization, waiver, permit, concession, franchise, agreement, license, exemption or order of, declaration or filing with, or report or notice to, any Governmental Authority.

      Governmental Authority: is defined in Section 2.4(b).

      Hazardous Materials: is defined in Section 2.14(b).

      HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

      Indebtedness: of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all leases the obligations of such Person in respect of which are required in accordance with GAAP to be capitalized, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person, and (e) all indebtedness or obligations of the types referred to in the preceding clauses (a) through (d) secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

      Indemnification Agreement: is defined in Section 8.2(c).

      Indemnified Party: is defined in Section 10.3.

      Indemnifying Party: is defined in Section 10.3.

      Initial Closing: is defined in Section 1.2(a).

      Initial Closing Date: is defined in Section 1.2(a).

      Intellectual Property: means any and all mask works, software, data and documentation, trademarks, trade names, copyrights and service marks, including applications to register and registrations for any of the foregoing, United States and foreign patents, patent applications and patent disclosures, inventions, processes, designs, formulae, trade secrets, know-how and other proprietary rights and information, and all similar intellectual property rights (including moral rights).

      knowledge:  qualifications as to the knowledge of any Person with respect to any matter shall mean the actual knowledge of such Person or senior management of such Person.

      Law: all applicable provisions of all (a) constitutions, treaties, statutes, laws (including the common law), codes, rules, regulations, ordinances or orders of any Governmental Authority, (b) Governmental Approvals and (c) orders, decisions, injunctions, judgments, awards and decrees of or agreements with any Governmental Authority.

      Litigation is defined in Section 2.10(a).

      Losses: any and all liabilities, obligations, commitments, losses, fines, penalties, sanctions, costs (including court costs), expenses, interest, royalties, deficiencies or damages (whether absolute, accrued, conditional or otherwise and whether or not resulting from third-party claims), including out-of-pocket expenses and reasonable fees and expenses of attorneys, accountants, consultants and expert witnesses incurred in the investigation or defense of any of the same or in asserting any of the respective rights of the Purchasers or the Company under Article X or under any Ancillary Agreement.

      Material Adverse Effect: on or with respect to an entity (or group of entities taken as a whole) means any state of facts, event, change or effect that has had, or would reasonably be expected to have, a material adverse effect on the business, properties, results of operations or condition (whether financial or other) of such entity (or, if with respect thereto, of such group of entities taken as a whole), or on the ability of such entity (or group of entities) to consummate the transactions contemplated hereby or to perform its obligations hereunder.

29

Table of Contents

      Material Adverse Impact: on or with respect to an entity (or group of entities taken as a whole) means any state of facts, event, change or effect that has had or would have a material adverse effect on the business, properties, results of operations or condition (whether financial or other) of such entity (or, if with respect thereto, of such group of entities taken as a whole), or on the ability of such entity (or group of entities) to consummate the transactions contemplated hereby or to perform its obligations hereunder.

      Material Contracts: is defined in Section 2.12(a).

      MBCA: means the Michigan Business Corporation Act, as amended.

      New Business Opportunities: is defined in Section 4.5.

      New Security: means any Equity Security issued by the Company after the Initial Closing; provided that “New Security” shall not include (i) any securities issuable upon conversion of any convertible Equity Security, (ii) any securities issuable upon exercise of any option, warrant or other similar Equity Security or (iii) any securities issuable in connection with any stock split, stock dividend or recapitalization of the Company where such securities are issued to all stockholders of the Company on a pro rata basis.

      Non-Purchaser Director: means any director of the Company not designated by the Purchasers.

      Owned Software: all computer software developed by or for the Company or any of its Subsidiaries or in connection with the business of the foregoing by any employee of the Company or any of its Subsidiaries or by an independent contractor.

      Permit: is defined in Section 2.10(b).

      Person: means any individual, partnership, joint venture, corporation, limited liability company, trust, unincorporated organization, government or department or agency of a government.

      Plans: is defined in Section 2.9(b).

      Preferred Shares: is defined in the recitals to this agreement.

      Pro Rata Share: means the fraction of an entire issuance of New Securities, the numerator of which shall be the number of shares of Common Stock owned or receivable upon conversion of the Preferred Shares and exercise of the Warrants by Purchasers and their Affiliates (other than the Company and its Subsidiaries) immediately prior to such issuance of such New Securities and the denominator of which shall be the aggregate number of shares of Common Stock outstanding immediately prior to such issuance of such New Securities and receivable upon conversion of the Preferred Shares and exercise of the Warrants.

      Proxy Statement: is defined in Section 6.3(a).

      Purchase Price: is defined in Section 1.1.

      Purchasers: is defined in the introductory paragraph to this Agreement.

      Purchaser Directors: is defined in Section 4.1.

      Purchaser Disclosure Schedule: is defined in the introductory paragraph to Article III.

      Purchaser Indemnitees: is defined in Section 10.1(a).

      Purchaser Observer: is defined in Section 4.2.

      Registration Rights Agreement: is defined in Section 2.12(c).

      R Agreements:  is defined in Section 8.2(c).

      R Employment Agreement:  is defined in Section 8.2(c).

      R Subscription Agreement:  is defined in Section 8.2(c).

30

Table of Contents

      R Indemnification Agreement: means an agreement dated of even date herewith between Rajendra Vattikuti and the Company pursuant to which the Company will indemnify Mr. Vattikuti in accordance with the terms therein.

      SEC:  means the Securities and Exchange Commission.

      Second Tranche Transactions: is defined in Section 2.3.

      Securities Act: means the Securities Act of 1933, as amended.

      Security: means at any time Equity Securities and any shares of any class of capital stock of the Company.

      Shareholder Approval: is defined in the recitals to this Agreement.

      Special Committee: is defined in the recitals to this Agreement.

      Subscription Notice: is defined in Section 5.1.

      Subsequent Closing: is defined in Section 1.3(a).

      Subsequent Closing Date: is defined in Section 1.3(a).

      Subsidiary: means, as to any Person, any corporation or other entity at least a majority of the shares of stock or interest of which having general voting power under ordinary circumstances to elect a majority of the Board of Directors of such corporation or others performing similar functions with respect to such entity is, at the time as of which the determination is being made, owned by such Person, or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, other than any such corporation or other entity that conducts no business and holds no more than de minimis assets.

      Synova: is defined in Section 4.5(b).

      Takeover Statute: is defined in Section 2.20.

      Tax: any federal, state, provincial, local, foreign or other income, alternative minimum, accumulated earnings, personal holding company, franchise, capital stock, net worth, capital, profits, windfall profits, gross receipts, value added, sales (including, without limitation, bulk sales), use, goods and services, excise, customs duties, transfer, conveyance, mortgage, registration, stamp, documentary, recording, premium, severance, environmental (including, without limitation, taxes under Section 59A of the Code), real property, personal property, ad valorem, intangibles, rent, occupancy, license, occupational, employment, unemployment insurance, social security, disability, workers’ compensation, payroll, health care, withholding, estimated or other similar tax, levy, impost, fee, duty or other governmental charge or assessment or deficiencies thereof (including all interest and penalties thereon and additions thereto, whether disputed or not) imposed by any Governmental Authority or other taxing authority.

      Tax Returns: is defined in Section 2.13(e).

      Termination Fee: an amount equal to $6,000,000.

      Transaction Fee: an amount equal to $6,000,000.

      Voting Agreement: is defined in Section 8.2(c).

      Voting Securities: means at any time shares of any class of capital stock of the Company which are then entitled to vote generally in the election of directors.

      Warrants: is defined in the recitals to this Agreement.

      Warrant Shares: is defined in Section 2.2(b) of this Agreement.

31

Table of Contents

MISCELLANEOUS

      12.1  Fees and Expenses.

      (a)  Except as contemplated by this Agreement, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such expenses except that the Company shall bear and pay the costs and expenses incurred in connection with (i) the preparation, filing, printing and mailing of the Proxy Statement (including SEC filing fees) and (ii) the filings of the notification and report forms under the HSR Act (including filings fees).

      (b)  The Company shall promptly pay the Purchasers an amount equal to all Expenses (as defined below) in the event that this Agreement is terminated for any reason other than a breach by the Purchasers of this Agreement or an Ancillary Agreement. The Company shall promptly pay to CD&R the Termination Fee if (i) prior to the Initial Closing, this Agreement is terminated for any reason other than a breach by the Purchasers of this Agreement or an Ancillary Agreement or the failure of the applicable waiting period under the HSR Act to expire or terminate or, (ii) following the Initial Closing, this Agreement is terminated by reason of (x) failure of Shareholder Approval to be obtained prior to August 30, 2000, (y) the termination of this Agreement pursuant to either Section 9.1(b)(ii) or Section 9.1(c)(ii), or (z) a breach by the Company of this Agreement. All such payments shall be in immediately available funds. In the event that the Company shall pay the Purchasers an amount in respect of Expenses and such amount shall subsequently prove to exceed the amount of Expenses actually incurred, the Purchasers shall refund the excess to the Company. The term “Expenses” means all out-of-pocket fees, costs and other expenses incurred or assumed by the Purchasers or incurred on their behalf in connection with this Agreement, the Ancillary Agreements or any of the transactions contemplated hereby and thereby, including the preparation, execution and delivery of this Agreement and the Ancillary Agreements, compliance herewith and therewith and any amendments to or waivers of this Agreement or the Ancillary Agreements.

      (c)  The Company acknowledges that the agreements contained in this Section 12.1 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the Purchasers would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 12.1, and, in order to obtain such payment, the Purchasers commence a suit which results in a judgment against the Company for any of the Termination Fee or Expenses set forth in this Section 12.1, the Company shall pay to the Purchasers their costs and expenses (including attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of such Termination Fee and Expenses at the rate on six-month U.S. Treasury obligations plus 300 basis points in effect on the date such payment was required to be made.

      (d)  This Section 12.1 shall survive any termination of this Agreement.

      12.2  Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable.

      12.3  Specific Enforcement.  The Purchasers, on the one hand, and the Company, on the other, acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the Certificate of Designation were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement or the Certificate of Designation and to enforce specifically the terms and provisions hereof and thereof in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which they may be entitled at law or equity.

32

Table of Contents

      12.4  Entire Agreement.  This Agreement (including the documents set forth in the Exhibits and Schedules hereto), together with the Ancillary Agreements, contains the entire understanding of the parties with respect to the transactions contemplated hereby.

      12.5  Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each party and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

      12.6  Notices.  All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be validly given, made or served, if in writing and delivered personally, by telecopy (except for legal process) or sent by registered mail, postage prepaid, if to:

      the Company:

	Complete Business Solutions, Inc. 32605 West Twelve Mile Road Farmington Hills, Michigan 48334-3339

	Attention of:	Timothy S. Manney Thomas E. Sizemore, Esq.

	Facsimile:  248-848-0109 Telephone:  248-848-8660

      with a copy to:

	Butzel Long 150 West Jefferson Suite 900 Detroit, Michigan 48226
	Attention of:  Arthur Dudley, Esq. Facsimile:  (313) 225-7080 Telephone: (313) 225-7000

      with a copy to:

	Dewey Ballantine, LLP 1301 Avenue of the Americas New York, New York 10019
	Attention of:  Morton A. Pierce, Esq. Facsimile:  (212) 259-6333 Telephone:  (212) 259-8000 Attention: Morton A. Pierce, Esq.

      the Purchasers:

	CDR-Cookie Acquisition L.L.C. c/o CD&R Associates VI Limited Partnership CRD-Cookie Acquisition VI-A L.L.C. c/o CD&R Associates VI-A Limited Partnership 1043 Foulk Road, Suite 106 Wilmington, Delaware 19803

      with a copy to:

	Clayton, Dubilier & Rice, Inc. 375 Park Avenue, 18th Floor New York, New York 10152

33

Table of Contents

	Attention of:  Kevin J. Conway Facsimile:  (212) 407-5252 Telephone:  (212) 407-5200

      with a copy to:

	Debevoise & Plimpton 875 Third Avenue New York, New York 10022
	Attention of:  Franci J. Blassberg, Esq. Facsimile:  (212) 909-6836 Telephone:  (212) 909-6000

or to such other address or telex number as any party may, from time to time, designate in a written notice given in a like manner.

      12.7  Amendments; Waivers, etc.  No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. Neither the waiver by any of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies of any party based upon, arising out of or otherwise in respect of any inaccuracy or breach of any representation, warranty, covenant or agreement or failure to fulfill any condition shall in no way be limited by the fact that the act, omission, occurrence or other state of facts upon which any claim of any such inaccuracy or breach is based may also be the subject matter of any other representation, warranty, covenant or agreement as to which there is no inaccuracy or breach. The representations and warranties of the Company shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Purchasers (including but not limited to by any of its advisors, consultants or representatives) or by reason of the fact that the Purchasers or any of their advisors, consultants or representatives knew or should have known that any such representation or warranty is or might be inaccurate.

      12.8  Cooperation.  The Purchasers and the Company agree to take, or cause to be taken, all such further or other actions as shall reasonably be necessary to make effective and consummate the transactions contemplated by this Agreement.

      12.9  Successors and Assigns.  All covenants and agreements contained herein shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything to the contrary herein, each Purchaser may assign any and all of its rights and obligations under this Agreement to the other. In no event shall the rights and obligations set forth in Articles 4 and 5 shall be binding on, or inure to the benefit of, any transferee of the Acquired Common Stock.

      12.10  Transfer of Preferred Shares, etc.  The Purchasers understand and agree that the Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares have not been registered under the Securities Act or the securities laws of any state and that they may be sold or otherwise disposed of only in one or more transactions registered under the Securities Act and, where applicable, such laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, such laws is available. The Purchasers acknowledge that except as provided in the Registration Rights Agreement, the Purchasers have no right to require the Company to register Preferred Shares, the Conversion Shares, the Warrants or the Warrant Shares. The Purchasers understand and agree that each certificate representing Preferred Shares, Conversion Shares, Warrants, or Warrant Shares (other than, Preferred Shares, Warrants, Conversion Shares or Warrant Shares which have been transferred in a transaction registered under the Securities Act or exempt

34

Table of Contents

	“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.”

and the Purchasers agree to transfer Preferred Shares, Conversion Shares, Warrants and Warrant Shares only in accordance with the provisions of such legend. At the holder’s request, the Company shall exchange any such legended securities for unlegended securities at any time after (i) such securities have been held, or deemed, by virtue of tacking holding periods as contemplated by Rule 144, to have been held for a period of two years by the holder thereof, and (ii) such holder has not been an affiliate (within the meaning of Rule 144) of the Company for three months.

      12.11  Governing Law, etc.

      (a)  EXCEPT TO THE EXTENT THAT THE LAW OF MICHIGAN MANDATORILY APPLIES, THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES THEREOF TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. EACH PARTY HEREBY WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION AND ENFORCEMENT HEREOF, OR ANY SUCH DOCUMENT OR IN RESPECT OF ANY SUCH TRANSACTION, THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SUCH COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS. EACH PARTY HEREBY CONSENTS TO AND GRANTS ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY SUCH DISPUTE AND AGREES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, THAT THE MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 12.6 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

      (b)  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OR ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS

35

Table of Contents

      12.12  Necessary Adjustments.  If, after the date hereof, the Company shall (a) issue or deliver any shares of its Common Stock as a result of the declaration or payment of a dividend of Common Stock payable in, or other distribution to holders of Common Stock of, shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, (d) issue any shares of capital stock in a reclassification of the Common Stock, or (e) undertake any similar transaction, then the threshold amounts described in Section 4.1(b) shall be proportionately adjusted.

      12.13  No Inconsistent Agreements.  The Company will not hereafter enter into any agreement which is inconsistent with the rights granted to the Purchasers by this Agreement or the Ancillary Agreements. The Company will not hereafter enter into any agreement with [R] that provides Mr. Vattikuti with subscription, indemnification, registration or other rights similar to those granted to the Purchaser under this Agreement or the Ancillary Agreements, that are superior to such rights granted to the Purchasers.

      12.14  No Third Party Beneficiaries.  Nothing contained in this Agreement is intended to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement; provided, however, that the parties hereto hereby acknowledge and agree that the Purchaser Indemnitees (other than the Purchasers) are third party beneficiaries of Article X of this Agreement.

      12.15  Replacement of Share Certificates.  Upon receipt of an affidavit of loss with respect to any certificate representing Preferred Shares, Conversion Shares, Warrants or Warrant Shares or, in the case of any mutilation of such certificate, upon surrender of such certificate, the Company at its expense shall execute and deliver, in lieu thereof, a new certificate representing such Preferred Shares.

      IN WITNESS WHEREOF, each of the Purchasers and the Company has caused this Agreement to be duly executed as of the day and year first above written.

	COMPLETE BUSINESS SOLUTIONS, INC.

	By:	/s/ TIMOTHY S. MANNEY

	Name: Timothy S. Manney
	Title: Executive Vice President
	CDR-COOKIE ACQUISITION, L.L.C.