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<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>
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<TR><TD colspan="9"><A HREF="#000">TABLE OF CONTENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">INFORMATION ABOUT COMPLETE BUSINESS SOLUTIONS, INC.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">INFORMATION ABOUT THE ANNUAL MEETING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">PROPOSAL 1. THE INVESTMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">PROPOSAL 2. INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE 1996 STOCK OPTION PLAN</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">PROPOSAL 3. ELECTION OF DIRECTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">PROPOSAL 4. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">MEETINGS AND COMMITTEES OF THE BOARD</A></TD></TR>
<TR><TD colspan="9"><A HREF="#008">DIRECTOR COMPENSATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">DIRECTOR AND EXECUTIVE OFFICER OWNERSHIP OF CBSI COMMON STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">PERSONS OWNING MORE THAN FIVE PERCENT OF OUTSTANDING CBSI COMMON STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#011">EXECUTIVE COMPENSATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#012">TRANSACTIONS WITH MANAGEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#013">OTHER INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#014">STOCK PURCHASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">Table of Contents</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">STOCK PURCHASE AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#018">ARTICLE IV CORPORATE GOVERNANCE</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">ARTICLE V</A></TD></TR>
<TR><TD colspan="9"><A HREF="#020">ARTICLE VI</A></TD></TR>
<TR><TD colspan="9"><A HREF="#021">ARTICLE XII MISCELLANEOUS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">CERTIFICATE OF DESIGNATION of Series A Voting Convertible Preferred Stock of Complete Business Solutions, Inc.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">[SIGNATURE PAGE OF CERTIFICATE OF DESIGNATION]</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">Table of Contents</A></TD></TR>
<TR><TD colspan="9"><A HREF="#025">REGISTRATION RIGHTS AGREEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#026">COMPLETE BUSINESS SOLUTIONS, INC.</A></TD></TR>
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<P align="center"><B>SCHEDULE 14A<BR>
(Rule 14A-101)</B>
<P align="center"><B>INFORMATION REQUIRED IN PROXY STATEMENT<BR>
SCHEDULE 14A INFORMATION</B>
<P align="center"><B>Proxy Statement Pursuant to Section 14(a) of the Securities<BR>
Exchange Act of 1934 (Amendment No. )</B>
<P>
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<TD> Filed by the
registrant [X]</TD>
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<TD> Filed by a party other than the registrant [ ]</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> Check the appropriate box:</TD>
</TR>
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<TD width="49%"> </TD>
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<TR valign="bottom">
<TD valign="top"><FONT size="2">[X] Preliminary proxy statement</FONT></TD>
<TD></TD>
<TD align="left" valign="top"><FONT size="2">
[ ] Confidential, for use of the</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
<TD valign="top"></TD>
<TD></TD>
<TD align="left" valign="top"><FONT size="2">
Commission only (as permitted by</FONT></TD>
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<TR><TD><TR><TD><TR><TD><TR><TD>
<TR valign="bottom">
<TD valign="top"></TD>
<TD></TD>
<TD align="left" valign="top"><FONT size="2">
Rule 14a-6(e)(2).</FONT></TD>
</TR>
</TABLE>
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<TD width="3%"></TD>
<TD width="97%"></TD>
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<TD> </TD>
<TD> [ ] Definitive proxy statement.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> [ ] Definitive additional materials.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> [ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.</TD>
</TR>
</TABLE>
<P align="center">Complete Business Solutions, Inc.
<HR size="1">
<P align="center">(Name of Registrant as Specified in Its Charter)
<P align="center">Complete Business Solutions, Inc.
<HR size="1">
<P align="center">(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
<P> Payment of filing fee (check the appropriate box):
<P>
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<TD> [X] No fee required.</TD>
</TR>
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<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.</TD>
</TR>
</TABLE>
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<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
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<TR valign="top">
<TD> </TD>
<TD> (1) Title of each class of securities to which transaction applies:</TD>
</TR>
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<TD width="3%"></TD>
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<TD> (2) Aggregate number of securities to which transaction applies:</TD>
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<TD> (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):</TD>
</TR>
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<TD> (4) Proposed maximum aggregate value of transaction:</TD>
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<TD> </TD>
<TD> (5) Total fee paid:</TD>
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<TD> [ ] Fee paid previously with preliminary materials.</TD>
</TR>
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<TD> </TD>
<TD> [ ] 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.</TD>
</TR>
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<TD> </TD>
<TD> (1) Amount Previously Paid:</TD>
</TR>
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<TD width="97%"></TD>
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<TR valign="top">
<TD> </TD>
<TD> (2) Form, Schedule or Registration Statement No.:</TD>
</TR>
</TABLE>
<HR size="1">
<P>
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<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> (3) Filing Party:</TD>
</TR>
</TABLE>
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<TD width="3%"></TD>
<TD width="97%"></TD>
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<TD> </TD>
<TD> (4) Date Filed:</TD>
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<P><HR noshade><P>
<P align="center"><B>COMPLETE BUSINESS SOLUTIONS, INC.</B>
<P align="left">
<B>
________________________________________________________________________________
</B>
<P align="center">
<B>NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS</B>
<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>
<P align="left">
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:
<P>
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<TD width="6%"></TD>
<TD width="3%"></TD>
<TD width="91%"></TD>
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<TR valign="top">
<TD> </TD>
<TD>1. </TD>
<TD align="left">
to consider and vote upon the second step of a transaction
described in the attached Proxy Statement (the
“Investment”) in which we will issue and sell to
various entities controlled by Clayton Dubilier & Rice,
Inc. (“CDR”) for an aggregate purchase price of
$100,000,000,</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="4%"></TD>
<TD width="90%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> • </TD>
<TD align="left">
100,000 shares of our Series A Voting Convertible Preferred
Stock (the “Series A Preferred Stock”),</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> • </TD>
<TD align="left">
seven-year warrants to purchase a total of 500,000 shares of our
Common Stock at $25.00 per share, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD> • </TD>
<TD align="left">
ten-year warrants to purchase 1,800,000 shares of our Common
Stock at $31.00 per share;</TD>
</TR>
</TABLE>
<P>
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<TR>
<TD width="6%"></TD>
<TD width="3%"></TD>
<TD width="91%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>2. </TD>
<TD align="left">
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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>3. </TD>
<TD align="left">
to elect four directors to the Board of Directors;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>4. </TD>
<TD align="left">
to ratify the appointment of Arthur Andersen LLP as our
independent auditors for the 2000 fiscal year; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>5. </TD>
<TD align="left">
to transact any other business that may properly come before the
meeting.</TD>
</TR>
</TABLE>
<P align="left">
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.
<P align="left">
Whether or not you plan to attend the meeting, please sign, date
and return the enclosed voting card in the envelope provided.
<P>
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<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
By Order of the Board of Directors</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Thomas E. Sizemore</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Secretary and General Counsel</TD>
</TR>
</TABLE>
<DIV align="left">
May 26, 2000
</DIV>
<DIV align="left">
<HR size="1" width="100%" align="left">
</DIV>
<P align="center">
<B>YOUR VOTE IS IMPORTANT</B>
<P align="center">
<B>PLEASE MARK, SIGN, AND DATE THE ENCLOSED VOTING CARD AND
RETURN</B>
<DIV align="center">
<B>IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE.
</B>
</DIV>
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<P><HR noshade><P>
<DIV align="center">
<B>[COMPLETE BUSINESS SOLUTIONS, INC. LOGO]</B>
</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
_____________________________________________, 2000</TD>
</TR>
</TABLE>
<P align="left">
Dear Complete Business Solutions Shareholder:
<P align="left">
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.
<P align="left">
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.
<P align="left">
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.
<P align="left">
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 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.
<P align="left">
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.
<P align="left">
The Board of Directors and Management look forward to seeing you
at the meeting.
<P>
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<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Sincerely,</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
/s/ RAJENDRA B. VATTIKUTI</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Rajendra B. Vattikuti</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
President and Chief Executive Officer</TD>
</TR>
</TABLE>
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<P><HR noshade><P>
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<P align="left">
<!-- link1 "TABLE OF CONTENTS" -->
<DIV align="left"><A NAME="000"></A></DIV>
<DIV align="center">
<B>TABLE OF CONTENTS</B>
</DIV>
<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="2%"> </TD>
<TD width="1%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="83%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
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<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Information About CBSI</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Information About The Annual Meeting</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Attending</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Annual Report</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Proxy Statement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Voting</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Quorum Requirement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Information About Votes Necessary For Action To Be Taken</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Soliciting Proxies</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Other Matters</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Proposal #1 — The Investment</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Introduction</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Background And Reasons For The Investment</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Certain Risks</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Use of Proceeds</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Summary of Stock Purchase Agreement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Summary of The Preferred Stock Certificate Of Designation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Board of Directors Recommendations</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Proposal #2 — Increase In The Number Of Shares Authorized To Be Issued Under The 1996 Stock Option Plan</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Introduction</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Provisions of The Plan</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Purpose</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Administration</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Eligibility</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Stock Options</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Nontransferability of Options</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Amendment and Termination of The Plan</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Proposal #3 — Election Of Directors</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="5" align="left" valign="top"><FONT size="2"><B>Proposal #4 — Appointment of Independent Public Accountants</B></FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Meetings and Committees of The Board</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Director Compensation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Director And Executive Officer Ownership of CBSI Common Stock</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Persons Owning More Than 5% of Outstanding CBSI Common Stock</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Executive Compensation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Employment Agreements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Indebtedness of Management</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Performance Graph</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Transactions With Management</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Other Information</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "INFORMATION ABOUT COMPLETE BUSINESS SOLUTIONS, INC." -->
<DIV align="center">
<B>INFORMATION ABOUT COMPLETE BUSINESS SOLUTIONS, INC.</B>
</DIV>
<P align="left">
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.
<P align="left">
<!-- link1 "INFORMATION ABOUT THE ANNUAL MEETING" -->
<DIV align="center">
<B>INFORMATION ABOUT THE ANNUAL MEETING</B>
</DIV>
<P align="left"><B>Information About Attending the Annual Meeting</B>
<P align="left">
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.
<P align="left"><B>Annual Report</B>
<P align="left">
Our annual report for the fiscal year ended December 31,
1999 is enclosed with this Proxy Statement.
<P align="left"><B>Information About this Proxy Statement</B>
<P align="left">
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 , 2000, we began mailing these proxy
materials to all shareholders of record at the close of business
on May 15, 2000.
<P align="left"><B>Information About Voting</B>
<P align="left">
You can vote on the matters to be presented at the Annual Meeting
in two ways:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="1%"></TD>
<TD width="93%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
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 <I>for</I> the Investment, <I>for</I> the amendment of the
Stock Option Plan, <I>for</I> the election of all the nominees
for director and <I>for</I> the ratification of Arthur Andersen
as auditors for the 2000 fiscal year.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
In Person — You may cast your vote in person when you
attend the Annual Meeting.</TD>
</TR>
</TABLE>
<P align="left">
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.
<P align="left">
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
<P align="center">1
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV align="left">
entitled to vote on an as converted to common basis. As of
May 15, 2000, there were 100,000 shares of Class A
Voting Convertible Preferred Stock outstanding entitled to cast
4,347,826 votes.
</DIV>
<P align="left"><B>Quorum Requirement</B>
<P align="left">
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.
<P align="left"><B>Information About Votes Necessary for Action to be Taken</B>
<P align="left">
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.
<P align="left"><B>Cost and Method of Soliciting Proxies</B>
<P align="left">
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.
<P align="left"><B>Other Matters</B>
<P align="left">
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.
<P align="center">2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "PROPOSAL 1. THE INVESTMENT" -->
<DIV align="center">
<B>PROPOSAL 1.</B>
</DIV>
<P align="center">
<B>THE INVESTMENT</B>
<P align="left">
<I>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.</I>
<P align="left"><B>Introduction</B>
<P align="left">
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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="1%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
200,000 shares of our Series A Voting Convertible Preferred
Stock (the “Series A Preferred Stock”);</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
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”).</TD>
</TR>
</TABLE>
<P align="left">
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. For 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.
<P align="left">
If converted to common stock, the Series A Preferred Stock
would represent (based on the number of our common shares
outstanding as of May 15, 2000) approximately 24% of the
outstanding stock of the Company. The Series A Preferred
Stock and the seven-year Warrants acquired at the first closing,
if exercised and converted, would represent approximately 19.9%
of our outstanding common stock. After the closing of the second
step of the Investment, the Series A Preferred Stock, the
seven-year Warrants and the ten-year Warrants owned by CDR, on an
as converted and exercised basis, would represent approximately
38.4% of our outstanding common stock.
<P align="left">
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.
<P align="left">
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.”
<P align="center">3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left"><B>Background And Reasons For The Investment</B>
<P align="left">
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.
<P align="left">
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.
<P align="left">
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 & Co. 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.
<P align="left">
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.
<P align="left">
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.
<P align="left">
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.
<P align="left">
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
<P align="center">4
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<P><HR noshade><P>
<DIV align="left">
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 its operational, managerial and financial
performance.
</DIV>
<P align="left"><B>Certain Risks</B>
<P align="left">
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.
<P align="left">
<I>Composition of the Company’s Board of Directors Following
the Sale. </I>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.
<P align="left">
<I>Super Majority Voting Provisions. </I>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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(b) any non <I>de minimis </I>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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(e) any incurrence of indebtedness in excess of
$50 million; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
<I>Diminished Ability to Sell the Company. </I>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 to a buyer other than CDR.
<P align="left">
<I>Limited Standstill Agreement. </I>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.
<P align="center">5
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<P><HR noshade><P>
<P align="left">
<I>Management Entrenchment. </I>CDR’s right to acquire
ownership through the Investment of at least approximately 37%
(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.
<P align="left">
<I>Conversion of Convertible Preferred Stock. </I>Each
share of Series A Preferred Stock converts, at the option of
the holder, into Common Stock based upon the following formula:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
the liquidation preference per share ($1,000) <I>divided by</I> a
conversion price equal to $23.00 per share of Common Stock.</TD>
<TD> </TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The conversion of all of the Series A Preferred Stock could
depress the market price of the common stock.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Registration Rights. </I>CDR can require the Company on
up to three occasions to register shares of Common Stock issued
upon the conversion of the Series A Preferred Stock and the
exercise of the Warrants, 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”.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Conditions and Termination. </I>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.”</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.”</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Fees and Expenses. </I>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.”</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="left"><B>Use of Proceeds</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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 and other general corporate purposes. Until
so utilized, the net proceeds will be invested in
income-producing securities.</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="left"><B>Summary Of Stock Purchase Agreement</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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 1 through Appendix III,
respectively, to this Proxy Statement. Capitalized terms have the
meanings set forth in the Stock Purchase Agreement or the
exhibits thereto.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Representations and Warranties. </I>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 the Ancillary Agreements, absence of conflicts
between the Stock Purchase Agreement and the organizational</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="center">6
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
documents or obligations of the Company, the accuracy of its SEC
reporting and financial statements, the absence of certain
changes that could reasonably be expected to have a Material
Adverse Impact, absence of undisclosed liabilities, employee
benefit plans, litigation and compliance with laws, intellectual
property, material contracts, tax returns and payments,
environmental matters, insurance, labor matters, disclosure of
material facts, and customer relations.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Covenants of the Company and CDR. </I>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 4,000,000 shares the number of
shares of Common Stock available for grant as Company Stock
Options under the 1996 Stock Option Plan.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Closing Conditions. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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, (g) payment by the
Company to CDR of the $6,000,000 transaction fee.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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
officer of CDR that CDR has complied with all of its obligations
and covenants as required by the Stock</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="center">7
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Purchase Agreement, (c) the receipt of an opinion of counsel
from CDR’s counsel, and (d) the receipt of the
Purchase Price.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Termination. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Indemnification. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Registration Rights. </I>Pursuant to the Registration
Rights Agreement, CDR may demand, no more than three times, 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 three Registrations undertaken at
CDR’s request will be at the Company’s expense.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="left"><B>Summary of The Preferred Stock Certificate Of Designation</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="center">8
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Rank. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Voting Rights. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Special Voting Rights. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Liquidation. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Dividends. </I>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.</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Conversion. </I>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).</TD>
<TD> </TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Redemption. </I>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.</TD>
<TD> </TD>
</TR>
</TABLE>
<P align="center">9
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
<TD width="6%"></TD>
<TD width="88%"></TD>
<TD width="6%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<I>Change of Control; Put Price. </I>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:</TD>
<TD> </TD>
</TR>
</TABLE>
<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="80%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Internal Rate</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Date of Put Purchase Date</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>of Return</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Prior to the first anniversary of purchase</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From first anniversary but prior to second</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From second anniversary but prior to third</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From third anniversary but prior to fourth</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From the fourth anniversary</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><B>Board Of Directors’ Recommendations</B>
<P align="left">
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.
<P align="left">
The Board of Directors, in recommending shareholder approval of
the Investment, considered a number of factors, including
(a) the financial presentation of Merrill Lynch & Co.,
(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.
<P align="left">
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.”
<P align="left">
<B>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.</B>
<P align="center">10
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<P><HR noshade><P>
<P align="left">
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.
<P align="left">
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.
<P align="left">
<!-- link1 "PROPOSAL 2. INCREASE IN THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE 1996 STOCK OPTION PLAN" -->
<DIV align="center">
<B>PROPOSAL 2.</B>
</DIV>
<P align="center">
<B>INCREASE IN THE NUMBER OF SHARES AUTHORIZED</B>
<DIV align="center">
<B>TO BE ISSUED UNDER THE 1996 STOCK OPTION PLAN</B>
</DIV>
<P align="left"><B>Introduction</B>
<P align="left">
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.
<P align="left">
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.
<P align="left">
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.
<P align="left"><B>Provisions of the Plan</B>
<P align="left">
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.
<P align="left"><B>Purpose</B>
<P align="left">
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.
<P align="left"><B>Administration</B>
<P align="left">
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 independent directors. Subject to the
express provisions of the 1996 Stock Option Plan, the Committee
has the authority in its discretion to determine the employees to
receive Incentive Stock Options and employees or other persons
to receive Nonqualified
<P align="center">11
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV align="left">
Options, the times when they shall receive them, the option price
and term of each option, the period during which each option may
be exercised, and the number of shares to be subject to each
option.
</DIV>
<P align="left"><B>Eligibility</B>
<P align="left">
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.
<P align="left"><B>Stock Options</B>
<P align="left">
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.
<P align="left"><B>Nontransferability of Options</B>
<P align="left">
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.
<P align="left"><B>Amendment and Termination of the Plan</B>
<P align="left">
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.
<P align="left">
<B>THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE AMENDMENT TO THE 1996 STOCK OPTION PLAN.</B>
<P align="left">
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.
<P align="left">
<!-- link1 "PROPOSAL 3. ELECTION OF DIRECTORS" -->
<DIV align="center">
<B>PROPOSAL 3.</B>
</DIV>
<P align="center">
<B>ELECTION OF DIRECTORS</B>
<P align="left">
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.
<P align="left">
The following information is furnished with respect to all of our
directors. The ages of the directors are as of December 31,
1999.
<P align="left">
<I>Rajendra B. Vattikuti,</I> 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.
<P align="center">12
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV align="left">
Mr. Vattikuti holds a Bachelor of Science degree in
Electrical Engineering from the College of Engineering, Guindy
(India) and a Master of Science degree in Electrical and Computer
Engineering from Wayne State University. Age 49. <B>Nominee
for Re-election</B>.
</DIV>
<P align="left">
<I>William Brooks, </I>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.
<P align="left">
<I>Kevin J. Conway,</I> 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, Columbia University School of
Business and Columbia Law School. Age 41. <B>Nominee for
Re-election.</B>
<P align="left">
<I>Douglas S. Land, </I>has served as a director since
November 1993 and as an advisor since 1988. Mr. Land is
the founder and President of Economic Analysis Group, Ltd., a
Washington DC-based consulting firm that has been providing
financial and economic consulting services since 1983.
Mr. Land is also the President and founder of The Chesapeake
Group, a financial advisory firm that has been providing
consulting to start-up and middle-market firms since 1985.
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.
<P align="left">
<I>Ned C. Lautenbach,</I> 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, Eaton Corporation and Choicepoint.
Mr. Lautenbach received his MBA from Harvard University
after having completed his undergraduate studies in economics at
the University of Cincinnati. Age 56. <B>Nominee for Re-election.
</B>
<P align="left">
<I>Ronald K. Machtley, </I>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.
<P align="left">
<I>Frank D. Stella, </I>has served as a director since
November 1993. Mr. Stella has served as President of
F.D. Stella Products Company, a food service and dining equipment
company, since 1946. Mr. Stella was appointed to the
Commission for White House Fellows by President Ronald W. Reagan
in 1983 and has served as Chairman of the Income Tax Board of
Review, City of Detroit, since 1965. Mr. Stella is also a
board member of VFS, Inc., an insurance holding company, and a
former board member of the Federal Home Loan Bank of
Indianapolis. He is also on the boards of several medical and
charitable organizations. Mr. Stella holds a degree from the
College of Commerce and Finance at the University of Detroit.
Age 80. Term expires 2001.
<P align="center">13
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<P><HR noshade><P>
<P align="left">
<I>John A. Stanley, </I>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.
<P align="left">
<I>David H. Wasserman,</I> 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 Harvard
Business School. Age 33. <B>Nominee for Re-election.</B>
<P align="left">
<B>THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE<I>
FOR</I> EACH OF THE NOMINEES.</B>
<P align="left">
<!-- link1 "PROPOSAL 4. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS" -->
<DIV align="center">
<B>PROPOSAL 4.</B>
</DIV>
<P align="center">
<B>APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS</B>
<P align="left">
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.
<P align="left">
<B>THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE<I> FOR
</I> THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2000.</B>
<P align="left">
<!-- link1 "MEETINGS AND COMMITTEES OF THE BOARD" -->
<DIV align="center">
<B>MEETINGS AND COMMITTEES OF THE BOARD</B>
</DIV>
<P align="left">
The Board of Directors met 5 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.
<P align="left">
<B>Audit Committee. </B>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.
<P align="left">
<B>Compensation Committee.</B> 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.
<P align="left">
<B>Executive Committee.</B> 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
<P align="center">14
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV align="left">
Board of Directors. The Executive Committee met twelve times
during the year. The current members of the Executive Committee
are Messrs. Lautenbach, Stanley and Vattikuti.
</DIV>
<P align="left">
<B>Nominating Committee. </B>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.
<P align="left">
<!-- link1 "DIRECTOR COMPENSATION" -->
<DIV align="center">
<B>DIRECTOR COMPENSATION</B>
</DIV>
<P align="left">
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.
<P align="left">
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.
<P align="left">
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:
<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="69%"> </TD>
<TD width="3%"> </TD>
<TD width="14%"> </TD>
<TD width="1%"> </TD>
<TD width="13%"> </TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Director</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of Options Granted</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
William Brooks</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Douglas S. Land</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Ronald Machtley</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
John Stanley</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Frank Stella</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<P align="left">
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.
<P align="center">15
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "DIRECTOR AND EXECUTIVE OFFICER OWNERSHIP OF CBSI COMMON STOCK" -->
<DIV align="center">
<B>DIRECTOR AND EXECUTIVE OFFICER OWNERSHIP</B>
</DIV>
<DIV align="center">
<B>OF CBSI COMMON STOCK</B>
</DIV>
<P align="left">
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.
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="47%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="1%"> </TD>
<TD width="5%"> </TD>
<TD width="3%"> </TD>
<TD width="9%"> </TD>
<TD width="1%"> </TD>
<TD width="8%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
<TD width="1%"> </TD>
<TD width="7%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares of</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Common Stock</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Beneficially</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options Exercisable</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent of</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Owned</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Within 60 Days</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Outstanding Shares</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Ned Lautenbach</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Rajendra B. Vattikuti</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9,361,759</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8,750</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">25.7</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Timothy S. Manney</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">299,004</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6,250</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Joseph Benaroya</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Karen Fast</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">75,309</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">25,218</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">72,422</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
William Brooks</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Kevin Conway</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Douglas S. Land</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">235,382</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,750</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Ronald Machtley</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">0</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
John Stanley</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11,297</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">22,750</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Frank Stella</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">67,915</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">22,750</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
David Wasserman</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Directors and Executive Officers as a group (13 persons)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10,128,088</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">123,090</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">27.8</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<DIV align="left">
* Less than 1% of CBSI’s outstanding shares of common
stock
</DIV>
<P align="left">
<!-- link1 "PERSONS OWNING MORE THAN FIVE PERCENT OF OUTSTANDING CBSI COMMON STOCK" -->
<DIV align="center">
<B>PERSONS OWNING MORE THAN FIVE PERCENT</B>
</DIV>
<DIV align="center">
<B>OF OUTSTANDING CBSI COMMON STOCK</B>
</DIV>
<P align="left">
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.
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="59%"> </TD>
<TD width="3%"> </TD>
<TD width="9%"> </TD>
<TD width="1%"> </TD>
<TD width="8%"> </TD>
<TD width="3%"> </TD>
<TD width="8%"> </TD>
<TD width="1%"> </TD>
<TD width="8%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of Shares</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Percent of</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Name and Address</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Beneficially Owned</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Outstanding Shares</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
GEO Capital LLC</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">2,387,724 shares</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6.4%</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
767 Fifth Avenue</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">of common stock</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
45 Floor, New York, NY 10153</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Massachusetts Financial Services Company (“MFS”)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">2,306,210 shares</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6.2%</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
500 Boylston Street</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">of common stock</FONT></TD>
<TD align="left" valign="top" nowrap><FONT size="2">(1)</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Boston, MA 02116</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Franklin Resources, Inc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">2,714,336 shares</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">7.3%</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
777 Mariners Island Boulevard</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="top" nowrap><FONT size="2">of common stock</FONT></TD>
<TD align="left" valign="top" nowrap><FONT size="2">(2)</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
San Mateo, CA 94404</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="4%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD>(1) </TD>
<TD align="left">
As of December 31, 1999, MFS had sole voting power over
1,879,510 shares of common stock and sole dispositive power over
2,306,210 shares of common stock.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(2) </TD>
<TD align="left">
As of December 31, 1999, Franklin Resources, Inc. reported
no voting or dispositive power over these shares. Franklin
Resources, Inc. reported that the shares of common stock were
owned by one or more</TD>
</TR>
</TABLE>
<P align="center">16
<!-- PAGEBREAK -->
<P><HR noshade><P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="4%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD></TD>
<TD align="left">
open or closed-end investment companies or other managed accounts
which are advised by direct or indirect investment advisory
subsidiaries of Franklin Resources, Inc.</TD>
</TR>
</TABLE>
<P align="left">
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.
<P align="left">
<!-- link1 "EXECUTIVE COMPENSATION" -->
<DIV align="center">
<B>EXECUTIVE COMPENSATION</B>
</DIV>
<P align="left"><B>Report of the Compensation Committee on 1999 Executive
Compensation</B>
<P align="left">
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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="1%"></TD>
<TD width="93%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
provide competitive compensation packages in order to attract and
retain superior executive talent;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
link a significant portion of an executive’s overall
compensation to financial results as reflected in the value
returned to shareholders; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>• </TD>
<TD align="left">
provide long-term equity compensation to align the interests of
executive officers with those of shareholders and reward
successful performance.</TD>
</TR>
</TABLE>
<P align="left"><B>Cash Compensation</B>
<P align="left">
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.
<P align="left">
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.
<P align="left"><B>Equity Compensation</B>
<P align="left">
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.
<P align="left">
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.
<P align="left"><B>Chief Executive Officer’s Compensation</B>
<P align="left">
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
<P align="center">17
<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV align="left">
that renews automatically for an additional year which provides
that Mr. Vattikuti will receive a salary in 2000 of $500,000
with the potential to receive a cash bonus of 100% of his base
compensation if certain performance objectives are attained.
</DIV>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Compensation Committee</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
John Stanley</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Ronald Machtley</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Frank Stella</TD>
</TR>
</TABLE>
<P align="left"><B>Employment Agreements</B>
<P align="left">
In December 1996, the Company entered into agreements with
Rajendra B. Vattikuti and Timothy S. Manney.
<P align="left">
The agreement with Mr. Vattikuti provides 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 provides 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 bonus of up to 100% of his base
salary. The base salary and bonus may be adjusted by the
Compensation Committee.
<P align="left">
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.
<P align="center">18
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left"><B>Indebtedness of Management</B>
<P align="left">
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:
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="51%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
<TD width="1%"> </TD>
<TD width="6%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="4%"> </TD>
<TD width="1%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="4%"> </TD>
<TD width="1%"> </TD>
<TD width="3%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Interest</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Maturity</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Person</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Title</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Amount</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Rate</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Date</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Douglas S. Land</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">558,325</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8.25%</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4/25/06</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Frank D. Stella</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">Director</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">310,815</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6%</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9/13/01</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD colspan="3" align="center" valign="bottom"><FONT size="2">Vice-President Human Resources</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">349,967</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6%</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>
</TABLE>
</CENTER>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<DIV align="left">
(1) Maturity date of 4 notes range from October 1, 2000
until November 4, 2001.
</DIV>
<P align="left"><B>Compensation Committee Interlocks and Insider Participation
</B>
<P align="left">
During 1999, the Company had no compensation committee
interlocks.
<P align="left"><B>Performance Graph</B>
<P align="left">
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.
<P align="center"><B>Comparison of Cumulative Total Return</B>
<DIV align="center">
<B>Since March 5, 1997, Initial Public Offering</B>
</DIV>
<P align="center">
<B>[PERFORMANCE GRAPH]</B>
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="33%"> </TD>
<TD width="3%"> </TD>
<TD width="12%"> </TD>
<TD width="3%"> </TD>
<TD width="12%"> </TD>
<TD width="3%"> </TD>
<TD width="12%"> </TD>
<TD width="3%"> </TD>
<TD width="14%"> </TD>
</TR>
<TR>
<TD colspan="11"></TD>
</TR>
<TR>
<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap><FONT size="2">5-Mar-97</FONT></TD>
<TD></TD>
<TD align="center" nowrap><FONT size="2">Dec-97</FONT></TD>
<TD></TD>
<TD align="center" nowrap><FONT size="2">Dec-98</FONT></TD>
<TD></TD>
<TD align="center" nowrap><FONT size="2">Dec-99</FONT></TD>
</TR>
<TR>
<TD colspan="11"></TD>
</TR>
<TR>
<TD align="center" nowrap colspan="11"><HR size="1"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Complete Business Solutions</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$100.00</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$355.102</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$553.061</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$410.204</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
S&P 500</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$100.00</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$122.838</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$158.506</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$191.908</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Russell 2000 Technology</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$100.00</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$ 126.05</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$ 141.18</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
$ 289.59</FONT></TD>
</TR>
<TR>
<TD colspan="11" align="left"><HR size="1"></TD>
</TR>
</TABLE>
</CENTER>
<P align="center">19
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left"><B>Executive Compensation Table</B>
<P align="left">
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.
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="27%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="1%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="1%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
<TD width="1%"> </TD>
<TD width="7%"> </TD>
<TD width="3%"> </TD>
<TD width="6%"> </TD>
<TD width="1%"> </TD>
<TD width="5%"> </TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Long-Term</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation Awards</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Securities</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Fiscal</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Underlying</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>All Other</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Name and Principal Position</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Year</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Salary</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Bonus</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Other</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Options (#)</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Compensation(3)</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD colspan="3" align="left" valign="top"><FONT size="2">
Rajendra B. Vattikuti</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9,509</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">(1)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
President and Chief</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,136</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">(1)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Executive Officer</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1997</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">350,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">350,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16,788</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">(2)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,800</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="3" align="left" valign="top"><FONT size="2">
Timothy S. Manney</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Executive Vice President</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,845</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
of Finance and Administration,</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1997</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">180,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">108,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,800</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Treasurer</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="3" align="left" valign="top"><FONT size="2">
Karen Fast</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">350,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1,333</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Executive Vice President,</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
U.S. Consulting West</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1997</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD colspan="3" align="left" valign="top"><FONT size="2">
Joseph Benaroya(4)</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Executive Vice President</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2,848</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
U.S. Consulting East</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1997</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="3" align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1999</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD colspan="2" align="left" valign="top"><FONT size="2">
Vice President of Human</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1998</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">160,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">50,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1,302</FONT></TD>
<TD></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="top"><FONT size="2">
Resources</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1997</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">692</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="4%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD>(1) </TD>
<TD align="left">
Represents the personal use of corporate cars.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(2) </TD>
<TD align="left">
Represents the use of corporate cars and health benefits.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(3) </TD>
<TD align="left">
Represents the amount of contribution by the Company on behalf of
such individual to the Company’s 401(k) Plan.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(4) </TD>
<TD align="left">
Joseph Benaroya was employed by the Company from
December 14, 1998 until March 31, 2000.</TD>
</TR>
</TABLE>
<P align="left"><B>Options Granted During 1999</B>
<TABLE width="100%" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="30%"> </TD>
<TD width="3%"> </TD>
<TD width="10%"> </TD>
<TD width="1%"> </TD>
<TD width="9%"> </TD>
<TD width="3%"> </TD>
<TD width="8%"> </TD>
<TD width="3%"> </TD>
<TD width="7%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>% of Total Options</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Number of Securities</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Granted to</B></FONT></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Underlying Option</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Employees in</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercise</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Expiration</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Granted</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Fiscal Year</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Price(2)(3)</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Date</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Rajendra B. Vattikuti</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">.63</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17 3/4</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4/1/09</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Timothy S. Manney</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">.42</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17 3/4</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4/1/09</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Karen Fast</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">.50</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17 3/4</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4/1/09</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">.50</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17 3/4</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4/1/09</FONT></TD>
<TD></TD>
</TR>
</TABLE>
<P align="right">[Additional columns below]
<P>[Continued from above table, first column(s) repeated]
<TABLE width="50%" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="48%"> </TD>
<TD width="3%"> </TD>
<TD width="14%"> </TD>
<TD width="1%"> </TD>
<TD width="14%"> </TD>
<TD width="3%"> </TD>
<TD width="8%"> </TD>
<TD width="1%"> </TD>
<TD width="8%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="7"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Potential Realizable Value at</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Assumed Annual Rates of Stock</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Appreciation For</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Option Term(1)</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>5%</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>10%</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Rajendra B. Vattikuti</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">167,443</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">424,000</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Timothy S. Manney</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">111,629</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">282,667</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Karen Fast</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">133,954</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">339,200</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">133,954</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">339,200</FONT></TD>
<TD></TD>
</TR>
</TABLE>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="4%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD>(1) </TD>
<TD align="left">
The dollar amounts indicated in these columns are the result of
calculations required by the rules of the Securities and Exchange
Commission which assume specified stock value appreciation.
These growth rates are not intended by CBSI to forecast future
stock price appreciation of CBSI common stock.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(2) </TD>
<TD align="left">
The exercise price equals the fair market value of CBSI common
stock as of the date the options are granted as determined by the
Compensation Committee.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD>(3) </TD>
<TD align="left">
Options are exercisable in 4 equal annual installments commencing
on the date the option was granted.</TD>
</TR>
</TABLE>
<P align="center">20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left"><B>Option Exercises and 1999 Year-End Values</B>
<P align="left">
The following table shows the number and value of stock options
(exercised and unexercised) for the listed Executive Officers who
exercised options during 1999.
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="24%"> </TD>
<TD width="3%"> </TD>
<TD width="6%"> </TD>
<TD width="1%"> </TD>
<TD width="5%"> </TD>
<TD width="3%"> </TD>
<TD width="4%"> </TD>
<TD width="1%"> </TD>
<TD width="3%"> </TD>
<TD width="3%"> </TD>
<TD width="4%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
<TD width="3%"> </TD>
<TD width="4%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="1%"> </TD>
<TD width="4%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="7"></TD>
<TD></TD>
<TD colspan="7"></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Number of Securities</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Value of Unexercised</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Underlying Unexercised</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>In-the-Money Options</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD colspan="3"></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>Options at Year-End(#)</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><FONT size="2"><B>at Year End($)(1)</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Shares Acquired</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Value</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="7"><HR size="1"></TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Name</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>upon Exercise(#)</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Realized($)</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Exercisable</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Unexercisable</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Rajendra B. Vattikuti</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11,875</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">146,250</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Timothy S. Manney</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3,750</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">21,250</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8,906</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">100,468</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Karen Fast</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">27,056</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">41,533</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">170,647</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">109,599</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
Venu Vaishya</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19,809</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">257,071</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">—</FONT></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">116,500</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<DIV align="left">
<HR size="1" width="31%" align="left">
</DIV>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="4%"></TD>
<TD width="96%"></TD>
</TR>
<TR valign="top">
<TD>(1) </TD>
<TD align="left">
Calculated based upon the share price of CBSI common stock on
December 31, 1999 of $25.125 less the option exercise price.
An option is in-the-money when the market value of CBSI common
stock exceeds the exercise price of the option.</TD>
</TR>
</TABLE>
<P align="left">
<!-- link1 "TRANSACTIONS WITH MANAGEMENT" -->
<DIV align="center">
<B>TRANSACTIONS WITH MANAGEMENT</B>
</DIV>
<P align="left">
During 1999, CBSI paid $425,000 for consulting services provided
by the Chesapeake Group, an entity affiliated with
Douglas S. Land.
<P align="left">
<!-- link1 "OTHER INFORMATION" -->
<DIV align="center">
<B>OTHER INFORMATION</B>
</DIV>
<P align="left"><B>Compliance with Section 16(a) of the Securities Exchange
Act of 1934</B>
<P align="left">
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
.
<P align="left"><B>Shareholder Proposals</B>
<P align="left">
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.
<P align="center">21
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="right"><B>APPENDIX 1</B>
<P align="left">
<!-- link1 "STOCK PURCHASE AGREEMENT" -->
<DIV align="center">
<B>STOCK PURCHASE AGREEMENT</B>
</DIV>
<P align="center"><B>by and among</B>
<P align="center"><B>COMPLETE BUSINESS SOLUTIONS, INC.</B>
<P align="center"><B>and</B>
<P align="center"><B>CDR-COOKIE ACQUISITION L.L.C.</B>
<P align="center"><B>and</B>
<P align="center"><B>CDR-COOKIE ACQUISITION VI-A L.L.C.</B>
<P align="center"><B>as Purchasers</B>
<P align="center"><B>Dated as of March 17, 2000</B>
<DIV> </DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "Table of Contents" -->
<DIV align="center">
<B>Table of Contents</B>
</DIV>
<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="9%"> </TD>
<TD width="3%"> </TD>
<TD width="79%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE I<BR><BR>STOCK PURCHASE</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
1.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Sale and Purchase of the Preferred Shares</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
1.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Initial Closing</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
1.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Subsequent Closing</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
1.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Allocation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE II<BR><BR>REPRESENTATIONS AND WARRANTIES OF THE COMPANY</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Organization</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Capitalization</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Authorization; Validity of Agreement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Violations; Consents and Approvals</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
SEC Reports and Financial Statements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Absence of Certain Changes</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.7</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Absence of Undisclosed Liabilities</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.8</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Information in Proxy Statement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.9</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Employee Benefit Plans; ERISA</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.10</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Litigation; Compliance with Law</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.11</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Intellectual Property</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.12</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Material Contracts; Registration Rights Agreements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.13</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Taxes</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.14</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Environmental Matters</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.15</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Shareholder Approval</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.16</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Brokers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.17</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Insurance</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.18</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Labor Matters, etc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.19</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Disclosure</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.20</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Takeover Statutes</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
2.21</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Customers; Liability for Defective Services</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE III<BR><BR>REPRESENTATIONS AND WARRANTIES OF PURCHASERS</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Organization, No Prior Business</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Authorization; Validity of Agreement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Consents and Approvals; No Violations</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Information in Proxy Statement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Financing</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Brokers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.7</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Litigation; Compliance with Law</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
3.8</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Knowledge</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE IV<BR><BR>CORPORATE GOVERNANCE</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Composition of the Board of Directors, etc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Non-Voting Observer</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Directors’ and Observer’s Expenses; Fees</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Information, VCOC</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<P align="center">i
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<P><HR noshade><P>
<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="9%"> </TD>
<TD width="3%"> </TD>
<TD width="79%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Supermajority Voting Provisions</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Responsibilities of Co-Chairmen, CEO</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
4.7</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
By-Laws</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE V<BR><BR>CERTAIN EQUITY MATTERS</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
5.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Subscription Rights</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
5.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Issuance and Delivery of New Securities</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
5.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Limitation on Purchases of Equity Securities</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE VI<BR>COVENANTS OF THE COMPANY</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Covenants of the Company</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Access and Information</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Shareholders’ Meeting; Proxy Statement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">17</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Notification of Certain Matters</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Press Releases; Interim Public Filings</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Reservation of Common Stock for Conversion and Exercise</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.7</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Listing</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.8</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Periodic Information</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.9</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Preferred Share Rights</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.10</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
New Shareholders</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.11</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Executive Committee</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.12</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Shareholder Rights</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
6.13</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Solicitation by the Company</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE VII<BR><BR>COVENANTS OF THE COMPANY AND THE PURCHASERS</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
7.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Public Announcements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
7.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Further Actions</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
7.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Further Assurances</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
7.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Certain Tax Matters</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE VIII<BR><BR>CONDITIONS PRECEDENT</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
8.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Condition to Obligations of Each Party</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
8.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Conditions to Obligations of the Purchasers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
8.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Conditions to Obligations of the Company Conditions to
Obligations to Consummate the Second Tranche</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
8.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Transactions</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE IX<BR><BR>TERMINATION</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
9.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Termination</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
9.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Effect of Termination</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<P align="center">ii
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<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="9%"> </TD>
<TD width="3%"> </TD>
<TD width="79%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE X<BR><BR>INDEMNIFICATION</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Indemnification by the Company</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Indemnification by the Purchasers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Indemnification Procedures</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Remedies</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Tax Treatment of Adjustments</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
10.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Survival</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE XI<BR><BR>INTERPRETATION; DEFINITIONS</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
11.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Definitions</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD colspan="7" align="center" valign="top"><FONT size="2"><B>ARTICLE XII<BR><BR>MISCELLANEOUS</B></FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.1</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Fees and Expenses</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.2</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Severability</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.3</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Specific Enforcement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.4</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Entire Agreement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.5</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Counterparts</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.6</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Notices</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.7</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Amendments; Waivers, etc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.8</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Cooperation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.9</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Successors and Assigns</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.10</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Transfer of Preferred Shares, etc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.11</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Governing Law, etc.</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.12</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Necessary Adjustments</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.13</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Inconsistent Agreements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.14</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Third Party Beneficiaries</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
12.15</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Replacement of Share Certificates</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="11%"> </TD>
<TD width="3%"> </TD>
<TD width="23%"> </TD>
<TD width="3%"> </TD>
<TD width="60%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Exhibit A</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Form of Certificate of Designation</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Exhibit B</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Form of 25 Warrant</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Exhibit C</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Form of 31 Warrant</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Exhibit D</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Form of Registration Rights Agreement</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Exhibit E</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Form of Indemnification Agreement</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center">iii
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<P align="left">
<!-- link1 "STOCK PURCHASE AGREEMENT" -->
<DIV align="center">
<B>STOCK PURCHASE AGREEMENT</B>
</DIV>
<P align="left">
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”).
<P align="center"><B>W I T N E S S E T H:</B>
<P align="left">
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”);
<P align="left">
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;
<P align="left">
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
<P align="left">
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.
<P align="left">
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties agree as follows:
<P align="center"><B>ARTICLE I</B>
<P align="center">
<B>STOCK PURCHASE</B>
<P align="left">
1.1 <I>Sale and Purchase of the Preferred Shares.
</I>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.
<P align="center">
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<P align="left">
1.2 <I>Initial Closing.</I>
<P align="left">
(a) <I>Time and Place of Initial Closing. </I>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.
<P align="left">
(b) <I>Transactions at the Initial Closing. </I>At
the Initial Closing, subject to the terms and conditions of this
Agreement:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
1.3 <I>Subsequent Closing.</I>
<P align="left">
(a) <I>Time and Place of Subsequent Closing. </I>
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.
<P align="left">
(b) <I>Transactions at the Subsequent Closing. </I>At
the Subsequent Closing, subject to the terms and conditions of
this Agreement:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
1.4 <I>Allocation. </I>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.
<P align="center"><B>ARTICLE II</B>
<P align="center">
<B>REPRESENTATIONS AND WARRANTIES OF THE COMPANY</B>
<P align="left">
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
<P align="center">2
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<P><HR noshade><P>
<DIV align="left">
Documents, the Company represents and warrants to the Purchasers
as of the date hereof and as of each Closing Date that:
</DIV>
<P align="left">
2.1 <I>Organization. </I>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.
<P align="left">
2.2 <I>Capitalization.</I>
<P align="left">
(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.
<P align="left">
(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
<P align="center">3
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<DIV align="left">
been duly authorized by all necessary corporation action on the
part of the Company, and the Company has validly reserved for
issuance a number of shares of Common Stock that will be
sufficient to permit the exercise in full of the Warrants.
Assuming payment therefor has been made, upon issuance and
exercise of the Warrants, the Warrant Shares will be validly
issued and outstanding, fully paid and nonassessable. Upon the
adoption of the Certificate of Designation, the Preferred Shares
shall have the voting and other rights specified therein and upon
their issuance, the Conversion Shares and the Warrant Shares
shall have the voting and other rights attributable to Common
Stock.
</DIV>
<P align="left">
(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.
<P align="left">
2.3 <I>Authorization Validity of Agreement. </I>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.
<P align="left">
2.4 <I>No Violations; Consents and Approvals.</I>
<P align="left">
(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.
<P align="left">
(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,
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<DIV align="left">
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 in the aggregate would not have
a Material Adverse Effect or materially impair or delay the
consummation of the transactions contemplated hereby.
</DIV>
<P align="left">
2.5 <I>SEC Reports and Financial Statements.</I>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
2.6 <I>Absence of Certain Changes. </I>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.
<P align="left">
2.7 <I>Absence of Undisclosed Liabilities. </I>
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.
<P align="center">5
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<P align="left">
2.8 <I>Information in Proxy Statement. </I>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.
<P align="left">
2.9 <I>Employee Benefit Plans; ERISA.</I>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
2.10 <I>Litigation; Compliance with Law.</I>
<P align="left">
(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.
<P align="left">
(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
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Company and each of its Subsidiaries is 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.
</DIV>
<P align="left">
(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.
<P align="left">
2.11 <I>Intellectual Property.</I>
<P align="left">
(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”).
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(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.
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
2.12 <I>Material Contracts; Registration Rights Agreements.
</I>
<P align="left">
(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”).
<P align="left">
(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,
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<DIV align="left">
breaches or defaults as in the aggregate would not have a
Material Adverse Effect or materially delay the consummation of
the transactions contemplated hereby.
</DIV>
<P align="left">
(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.
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2.13 <I>Taxes.</I>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(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).
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(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.
<P align="left">
2.14 <I>Environmental Matters.</I>
<P align="left">
(a) Except as would not have a Material Adverse Effect:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
</TABLE>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
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(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.
<P align="left">
2.15<I> Shareholder Approval.</I> 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.
<P align="left">
2.16<I> Brokers.</I> 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.
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2.17<I> Insurance.</I> 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.
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2.18<I> Labor Matters, etc.</I> 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.
<P align="left">
2.19<I> Disclosure.</I> 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
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knowledge of the Company, there is no information relating to the
Company or any of its Subsidiaries that could reasonably be
expected to be material to the Company and its Subsidiaries,
taken as a whole, that has not been disclosed to the Purchaser
prior to or after the date hereof (as to any fact arising or that
becomes known after the date hereof) in accordance with the
terms of Section 12.6.
</DIV>
<P align="left">
2.20<I> Takeover Statutes.</I> 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.
<P align="left">
2.21<I> Customers; Liability for Defective Services.</I>
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.
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<B>ARTICLE III</B>
</DIV>
<P align="center">
<B>REPRESENTATIONS AND WARRANTIES OF PURCHASERS</B>
<P align="left">
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:
<P align="left">
3.1<I> Organization, No Prior Business.</I> 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.
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3.2<I> Authorization; Validity of Agreement.</I> 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.
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3.3<I> Consents and Approvals; No Violations.</I>
<P align="left">
(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,
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<DIV align="left">
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) under, any of the terms,
conditions or provisions of any Contract to which either
Purchaser is a party or by which or any of such Purchaser’s
assets may be bound or (ii) conflict with or violate any
Laws applicable to either Purchaser or any of such
Purchaser’s properties or assets; except in the case of
clause (i) 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 by this Agreement.
</DIV>
<P align="left">
(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.
<P align="left">
3.4<I> Information in Proxy Statement.</I> 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.
<P align="left">
3.5<I> Financing.</I> 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.
<P align="left">
3.6<I> Brokers.</I> 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.
<P align="left">
3.7<I> Litigation; Compliance with Law.</I>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(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,
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<DIV align="left">
modification or nonrenewal thereof, except for such violations,
terminations, modifications or nonrenewals thereof as in the
aggregate would not have a Material Adverse Effect.
</DIV>
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(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.
<P align="left">
3.8<I> Knowledge.</I> 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.
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<B>ARTICLE IV</B>
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<B>CORPORATE GOVERNANCE</B>
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4.1<I> Composition of the Board of Directors, etc.</I>
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(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.
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(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.
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(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.
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(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
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Ned Lautenbach or such other Purchaser Director as shall be
reasonably acceptable to the Board, and (iii) the Chair of
the Compensation Committee shall be a Purchaser Director. At and
after the Initial Closing, (i) the Executive Committee of
the Board shall consist of Ned Lautenbach as Chair, Rajendra
Vattikuti and John Stanley and (ii) the initial Nominating
Committee of the Board shall consist of Ned Lautenbach, Kevin
Conway, Rajendra Vattikuti, Doug Land and Frank Stella. Until the
occurrence of a Director Termination Date, any reconstituted
Nominating Committee shall consist of the same proportion of
Purchaser Directors and Non-Purchaser Directors as the initial
Nominating Committee.
</DIV>
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4.2<I> Non-Voting Observer.</I> 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.
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4.3<I> Directors’ and Observer’s Expenses; Fees.
</I> 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.
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4.4<I> Information, VCOC.</I>
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(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.
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(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.
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4.5<I> Supermajority Voting Provisions.</I>
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(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):
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(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;</TD>
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(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;</TD>
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(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;</TD>
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(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;</TD>
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(v) incurrence of Indebtedness in excess of
$50 million;</TD>
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(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</TD>
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(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).</TD>
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(b) Notwithstanding anything herein to the contrary, the
following matters are subject to approval by a simple majority of
the Board:
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(i) a sale by the company of Synova, Inc.
(“Synova”);</TD>
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(ii) an initial public offering of Bridge Strategies Group
LLC (“Bridge”);</TD>
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(iii) an initial public offering of CBSI Complete Business
Solutions (Mauritius) Limited or its Subsidiaries;</TD>
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(iv) the implementation of a “holding company”
structure;</TD>
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(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</TD>
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(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).</TD>
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4.6<I> Responsibilities of Co-Chairmen, CEO.</I>
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(a)<I> Co-Chairmen.</I> 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.
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(b)<I> CEO.</I> 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).
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4.7 <I>By-Laws. </I>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.
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<B>ARTICLE V</B>
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<B>CERTAIN EQUITY MATTERS</B>
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5.1 <I>Subscription Rights. </I>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.
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5.2 <I>Issuance and Delivery of New Securities. </I>
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.
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5.3 <I>Limitation on Purchases of Equity Securities.
</I>(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:
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(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;</TD>
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(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</TD>
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stockholder proposals or induce or attempt to induce any other
individual, firm, corporation, partnership or other entity to
initiate any stockholder proposal;</TD>
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(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;</TD>
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(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.
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<B>ARTICLE VI</B>
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<B>COVENANTS OF THE COMPANY</B>
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6.1 <I>Covenants of the Company. </I>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:
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(a) <I>Reasonable Efforts. </I>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.
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(b) <I>Other Transactions. </I>The Company will not,
nor will it permit any of its Subsidiaries to, do any of the
following (except as otherwise expressly provided herein):
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(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);</TD>
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(ii) declare or pay any dividend or make any distribution
with respect to the assets of the Company and its Subsidiaries;</TD>
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(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;</TD>
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(iv) split, combine or reclassify any shares of its capital
stock;</TD>
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(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;</TD>
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(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;</TD>
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(vii) cancel any material indebtedness (individually or in
the aggregate) or waive any claims or rights of substantial
value;</TD>
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(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;</TD>
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(ix) agree, whether in writing or otherwise, to do any of
the foregoing.</TD>
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(c) <I>Certificate of Designation. </I>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.
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6.2 <I>Access and Information. </I>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.
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6.3 <I>Shareholders’ Meeting; Proxy Statement.</I>
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(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.
<P align="left">
(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.
<P align="left">
(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.
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<P align="left">
(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.
<P align="left">
(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.
<P align="left">
6.4 <I>Notification of Certain Matters. </I>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.
<P align="left">
6.5 <I>Press Releases; Interim Public Filings. </I>
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.
<P align="left">
6.6 <I>Reservation of Common Stock for Conversion and
Exercise. </I>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.
<P align="left">
6.7 <I>Listing. </I>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.
<P align="left">
6.8 <I>Periodic Information. </I>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.
<P align="left">
6.9 <I>Preferred Share Rights.</I>
<P align="left">
(a) <I>Change of Control. </I>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
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<DIV align="left">
attributable to the Preferred Shares had such closing or closings
occurred immediately prior to the Change of Control.
</DIV>
<P align="left">
(b) <I>Special Voting Rights. </I>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.
<P align="left">
(c) <I>Redemption, Repurchase. </I>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.
<P align="left">
6.10 <I>New Shareholders. </I>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.
<P align="left">
6.11 <I>Executive Committee. </I>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.
<P align="left">
6.12 <I>Shareholder Rights. </I>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.
<P align="left">
6.13 <I>No Solicitation by the Company.</I>
<P align="left">
(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.
<P align="left">
(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
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<P><HR noshade><P>
<DIV align="left">
Section 6.13(b), prior to the adoption of this Agreement by
the Company’s shareholders at the Annual Meeting, the Board,
to the extent that it determines in good faith, following the
recommendation of the Special Committee and after consultation
with outside counsel, that in light of a Company Superior
Proposal 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, may terminate this Agreement
solely in order to concurrently enter into a definitive agreement
with respect to any Company Superior Proposal, but only at a
time that is after the third business day following the
Purchasers’ receipt of written notice advising them that the
Board is prepared to accept a Company Superior Proposal,
specifying the material terms and conditions of such Company
Superior Proposal, all of which information will be kept
confidential by the Purchasers in accordance with the terms of
the Confidentiality Agreement.
</DIV>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(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.
<P align="center"><B>ARTICLE VII</B>
<P align="center">
<B>COVENANTS OF THE COMPANY AND THE PURCHASERS</B>
<P align="left">
7.1 <I>Public Announcements.</I>
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
7.2 <I>Further Actions.</I>
<P align="left">
(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.
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<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
7.3 <I>Further Assurances. </I>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.
<P align="left">
7.4 <I>Certain Tax Matters.</I>
<P align="left">
(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.
<P align="left">
(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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
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
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<DIV align="left">
reasonable estimate as to whether the Company will have current
earnings and profits as of the close of the taxable year in which
the distribution is made.
</DIV>
<P align="left">
(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.
<P align="left">
(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.
<P align="center"><B>ARTICLE VIII</B>
<P align="center">
<B>CONDITIONS PRECEDENT</B>
<P align="left">
8.1 <I>Condition to Obligations of Each Party. </I>
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):
<P align="left">
(a) <I>No Injunction, etc. </I>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.
<P align="left">
(b) <I>Consents. </I>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.
<P align="left">
8.2 <I>Conditions to Obligations of the Purchasers.
</I>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:
<P align="left">
(a) <I>Representations, Performance, etc. </I>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.
<P align="left">
(b) <I>Performance of Obligations of the Company.
</I>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
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<DIV align="left">
Closing by the Company under this Agreement and the Purchasers
shall have received a certificate signed by an officer of the
Company to such effect.
</DIV>
<P align="left">
(c) <I>Ancillary Agreements. </I>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.
<P align="left">
(d) <I>Board of Directors. </I>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.
<P align="left">
(e) <I>Opinions of Counsel. </I>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.
<P align="left">
(f) <I>Corporate Proceedings. </I>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.
<P align="left">
(g) <I>Other Parties. </I>(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.
<P align="left">
(h) <I>Transaction Fee; Transaction Expenses. </I>The
Purchasers’ transaction Expenses shall have been paid to
the Purchasers and the Transaction Fee shall have been paid to
CD&R.
<P align="left">
8.3 <I>Conditions to Obligations of the Company. </I>
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:
<P align="left">
(a) <I>Representations, Performance, etc. </I>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
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<P><HR noshade><P>
<DIV align="left">
and on and as of each Closing Date with the same effect as though
made at 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
Company shall have received a certificate of the Purchasers to
such effect.
</DIV>
<P align="left">
(b) <I>Performance of Obligations of the Purchasers.
</I>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.
<P align="left">
(c) <I>Opinions of Counsel. </I>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.
<P align="left">
(d) <I>Funding of Purchase Price. </I>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.
<P align="left">
8.4 <I>Conditions to Obligations to Consummate the Second
Tranche Transactions. </I>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.
<P align="center"><B>ARTICLE IX</B>
<P align="center">
<B>TERMINATION</B>
<P align="left">
9.1 <I>Termination. </I>This Agreement may be
terminated with respect to any Closing Date that shall not have
occurred at any time prior to such Closing Date:
<P align="left">
(a) by the written agreement of the parties hereto;
<P align="left">
(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;
<P align="left">
(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.
<P align="left">
9.2 <I>Effect of Termination. </I>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
<P align="center">24
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<P><HR noshade><P>
<DIV align="left">
have no effect, without any liability to any Person in respect
hereof or of the transactions contemplated hereby on the part of
any party hereto, or any of its directors, officers, employees,
agents, consultants, representatives, advisers, stockholders or
Affiliates, except as specified in Section 12.1 and except
for any liability resulting from such party’s breach of this
Agreement.
</DIV>
<P align="center"><B>ARTICLE X</B>
<P align="center">
<B>INDEMNIFICATION</B>
<P align="left">
10.1 <I>Indemnification by the Company.</I>
<P align="left">
(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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
(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.
<P align="left">
10.2 <I>Indemnification by the Purchasers.</I>
<P align="left">
(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:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(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.</TD>
</TR>
</TABLE>
<P align="left">
(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.
<P align="left">
10.3 <I>Indemnification Procedures. </I>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,
<P align="center">25
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<P><HR noshade><P>
<DIV align="left">
in the defense of any such claim or litigation, shall consent to
entry of any judgment or enter into any settlement that provides
for injunctive or other nonmonetary relief affecting the
Indemnified Party or that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to
such claim or litigation. In the event that the Indemnified
Party shall in good faith determine that the conduct of the
defense of any claim subject to indemnification hereunder or any
proposed settlement of any such claim by the Indemnifying Party
might be expected to affect adversely the Indemnified
Party’s Tax liability or its ability to conduct its
businesses, or that the Indemnified Party may have available to
it one or more defenses or counterclaims that are inconsistent
with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at
all times to take over and assume control over the defense,
settlement, negotiations or litigation relating to any such claim
at the sole cost of the Indemnifying Party, provided, that, if
the Indemnified Party does so take over and assume control, the
Indemnified Party shall not settle such claim or litigation
without the written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. In the event that the
Indemnifying Party does not accept the defense of any matter as
above provided, the Indemnified Party shall have the full right
to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand, at the
sole expense of the Indemnifying Party. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in
the defense of any claim or litigation subject to this
Article X and the records of each shall be available to the
other with respect to such defense.
</DIV>
<P align="left">
10.4 <I>Remedies. </I>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.
<P align="left">
10.5 <I>Tax Treatment of Adjustments. </I>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.
<P align="left">
10.6 <I>Survival. </I>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:
<P align="left">
(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).
<P align="left">
(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;
<P align="left">
(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.
<P align="center"><B>ARTICLE XI</B>
<P align="center">
<B>INTERPRETATION; DEFINITIONS</B>
<P align="left">
11.1 <I>Definitions. </I>For purposes of this
Agreement, the following terms shall have the following meanings:
<P align="left">
25 <I>Warrants: </I>is defined in the recitals to
this Agreement.
<P align="left">
31 <I>Warrants: </I>is defined in the recitals to
this Agreement.
<P align="left">
<I>Acquired Common Stock: </I>(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.
<P align="center">26
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<P><HR noshade><P>
<P align="left">
<I>Affiliate: </I>shall have the meaning set forth in
Rule 12b-2 under the Exchange Act (as in effect on the date
of this Agreement).
<P align="left">
<I>Agreement: </I>is defined in the introductory paragraph to
this Agreement.
<P align="left">
<I>Alternative Proposal: </I>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.
<P align="left">
<I>Ancillary Agreement: </I>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.
<P align="left">
<I>Annual Meeting: </I>is defined in the recitals to this
Agreement.
<P align="left">
<I>Articles of Incorporation: </I>is defined in Section 2.1.
<P align="left">
<I>Balance Sheet: </I>is defined in Section 2.5(c).
<P align="left">
<I>Board: </I>is defined in the recitals to this Agreement.
<P align="left">
<I>Bridge: </I>is defined in Section 4.5.
<P align="left">
<I>Business: </I>means the business of the Company and its
Subsidiaries.
<P align="left">
<I>Business Day: </I>means any day on which banking institutions
are open in the City of New York.
<P align="left">
<I>CD&R:</I> Clayton, Dubilier & Rice, Inc., a
Delaware corporation.
<P align="left">
<I>CDR-Cookie VI: </I>is defined in the introductory paragraph of
this Agreement.
<P align="left">
<I>CDR-Cookie VI-A: </I>is defined in the introductory paragraph
of this Agreement.
<P align="left">
<I>CDR-Registration Rights Agreement: </I>is defined in
Section 8.2(c).
<P align="left">
<I>Certificate of Designation: </I>is defined in the recitals to
this Agreement.
<P align="left">
<I>Change of Control Transaction: </I>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.
<P align="left">
<I>Closing: </I>means any of the Initial Closing or the
Subsequent Closing.
<P align="left">
<I>Closing Date: </I>means any of the Initial Closing Date or the
Subsequent Closing Date.
<P align="left">
<I>Code: </I>means the Internal Revenue Code of 1986, as amended.
<P align="left">
<I>Collective Bargaining Agreement: </I>is defined in
Section 2.18.
<P align="left">
<I>Common Stock: </I>is defined in the recitals to this
Agreement.
<P align="left">
<I>Company: </I>is defined in the introductory paragraph to this
Agreement.
<P align="center">27
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<P><HR noshade><P>
<P align="left">
<I>Company Disclosure Schedule: </I>is defined in the
introductory paragraph to Article II.
<P align="left">
<I>Company Intellectual Property: </I>is defined in
Section 2.11(a).
<P align="left">
<I>Company SEC Documents: </I>is defined in Section 2.5(a).
<P align="left">
<I>Company Stock Options: </I>is defined in Section 2.2(a).
<P align="left">
<I>Company Superior Proposal: </I>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.
<P align="left">
<I>Company Takeover Proposal: </I>means a Change of Control
Transaction.
<P align="left">
<I>Consent: </I>any consent, approval, waiver, agreement,
license, or report or notice to, any Person.
<P align="left">
<I>Consolidated Group: </I>is defined in Section 2.13(e).
<P align="left">
<I>Consulting Agreement: </I>is defined in the recitals to this
Agreement.
<P align="left">
<I>Contract: </I>any note, bond, mortgage, indenture, contract,
agreement, obligation, instrument, offer, commitment,
understanding or other arrangement.
<P align="left">
<I>Conversion Shares: </I>is defined in Section 2.2(b).
<P align="left">
<I>Director Termination Date: </I>is defined in
Section 4.1(b).
<P align="left">
<I>EC Date: </I>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.
<P align="left">
<I>Environmental Law: </I>is defined in Section 2.14(b).
<P align="left">
<I>Equity Security: </I>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.
<P align="left">
<I>ERISA: </I>means the Employee Retirement Income Security Act,
as amended.
<P align="left">
<I>Exchange Act: </I>means the Securities Exchange Act of 1934,
as amended.
<P align="left">
<I>Expenses: </I>is defined in Section 12.1(b).
<P align="left">
<I>Filed Company SEC Documents: </I>is defined in
Section 2.7.
<P align="left">
<I>Financial Advisor: </I>is defined in Section 2.16.
<P align="left">
<I>Financial Statements: </I>is defined in Section 2.5(c).
<P align="left">
<I>First Tranche Transactions: </I>is defined in
Section 2.3.
<P align="left">
<I>Fund VI: </I>is defined in the introductory paragraph of this
Agreement.
<P align="left">
<I>Fund VI-A: </I>is defined in the introductory paragraph of
this Agreement.
<P align="left">
<I>GAAP: </I>means United States generally accepted accounting
principles.
<P align="center">28
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<P align="left">
<I>Governmental Approval: </I>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.
<P align="left">
<I>Governmental Authority: </I>is defined in Section 2.4(b).
<P align="left">
<I>Hazardous Materials: </I>is defined in Section 2.14(b).
<P align="left">
<I>HSR Act: </I>the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
<P align="left">
<I>Indebtedness: </I>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.
<P align="left">
<I>Indemnification Agreement: </I>is defined in
Section 8.2(c).
<P align="left">
<I>Indemnified Party: </I>is defined in Section 10.3.
<P align="left">
<I>Indemnifying Party: </I>is defined in Section 10.3.
<P align="left">
<I>Initial Closing: </I>is defined in Section 1.2(a).
<P align="left">
<I>Initial Closing Date: </I>is defined in Section 1.2(a).
<P align="left">
<I>Intellectual Property: </I>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).
<P align="left">
<I>knowledge:</I> 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.
<P align="left">
<I>Law: </I>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.
<P align="left">
Litigation is defined in Section 2.10(a).
<P align="left">
<I>Losses: </I>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.
<P align="left">
<I>Material Adverse Effect: </I>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.
<P align="center">29
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<P align="left">
<I>Material Adverse Impact: </I>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.
<P align="left">
<I>Material Contracts: </I>is defined in Section 2.12(a).
<P align="left">
<I>MBCA: </I>means the Michigan Business Corporation Act, as
amended.
<P align="left">
<I>New Business Opportunities: </I>is defined in
Section 4.5.
<P align="left">
<I>New Security: </I>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.
<P align="left">
<I>Non-Purchaser Director: </I>means any director of the Company
not designated by the Purchasers.
<P align="left">
<I>Owned Software: </I>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.
<P align="left">
<I>Permit: </I>is defined in Section 2.10(b).
<P align="left">
<I>Person: </I>means any individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
<P align="left">
<I>Plans: </I>is defined in Section 2.9(b).
<P align="left">
<I>Preferred Shares: </I>is defined in the recitals to this
agreement.
<P align="left">
<I>Pro Rata Share: </I>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.
<P align="left">
<I>Proxy Statement: </I>is defined in Section 6.3(a).
<P align="left">
<I>Purchase Price: </I>is defined in Section 1.1.
<P align="left">
<I>Purchasers: </I>is defined in the introductory paragraph to
this Agreement.
<P align="left">
<I>Purchaser Directors: </I>is defined in Section 4.1.
<P align="left">
<I>Purchaser Disclosure Schedule: </I>is defined in the
introductory paragraph to Article III.
<P align="left">
<I>Purchaser Indemnitees: </I>is defined in Section 10.1(a).
<P align="left">
<I>Purchaser Observer: </I>is defined in Section 4.2.
<P align="left">
<I>Registration Rights Agreement: </I>is defined in
Section 2.12(c).
<P align="left">
<I>R Agreements:</I> is defined in Section 8.2(c).
<P align="left">
<I>R Employment Agreement:</I> is defined in
Section 8.2(c).
<P align="left">
<I>R Subscription Agreement:</I> is defined in
Section 8.2(c).
<P align="center">30
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<P><HR noshade><P>
<P align="left">
<I>R Indemnification Agreement: </I>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.
<P align="left">
<I>SEC:</I> means the Securities and Exchange Commission.
<P align="left">
<I>Second Tranche Transactions: </I>is defined in
Section 2.3.
<P align="left">
<I>Securities Act: </I>means the Securities Act of 1933, as
amended.
<P align="left">
<I>Security: </I>means at any time Equity Securities and any
shares of any class of capital stock of the Company.
<P align="left">
<I>Shareholder Approval: </I>is defined in the recitals to this
Agreement.
<P align="left">
<I>Special Committee: </I>is defined in the recitals to this
Agreement.
<P align="left">
<I>Subscription Notice: </I>is defined in Section 5.1.
<P align="left">
<I>Subsequent Closing: </I>is defined in Section 1.3(a).
<P align="left">
<I>Subsequent Closing Date: </I>is defined in
Section 1.3(a).
<P align="left">
<I>Subsidiary: </I>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.
<P align="left">
<I>Synova: </I>is defined in Section 4.5(b).
<P align="left">
<I>Takeover Statute: </I>is defined in Section 2.20.
<P align="left">
<I>Tax: </I>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.
<P align="left">
<I>Tax Returns: </I>is defined in Section 2.13(e).
<P align="left">
<I>Termination Fee: </I>an amount equal to $6,000,000.
<P align="left">
<I>Transaction Fee: </I>an amount equal to $6,000,000.
<P align="left">
<I>Voting Agreement: </I>is defined in Section 8.2(c).
<P align="left">
<I>Voting Securities: </I>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.
<P align="left">
<I>Warrants: </I>is defined in the recitals to this Agreement.
<P align="left">
<I>Warrant Shares: </I>is defined in Section 2.2(b) of this
Agreement.
<P align="center">31
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<P align="left">
<!-- link1 "ARTICLE XII MISCELLANEOUS" -->
<DIV align="center">
<B>ARTICLE XII</B>
</DIV>
<P align="center">
<B>MISCELLANEOUS</B>
<P align="left">
12.1<I> Fees and Expenses.</I>
<P align="left">
(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).
<P align="left">
(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.
<P align="left">
(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.
<P align="left">
(d) This Section 12.1 shall survive any termination of
this Agreement.
<P align="left">
12.2<I> Severability.</I> 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.
<P align="left">
12.3<I> Specific Enforcement.</I> 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.
<P align="center">32
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<P><HR noshade><P>
<P align="left">
12.4<I> Entire Agreement.</I> 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.
<P align="left">
12.5<I> Counterparts.</I> 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.
<P align="left">
12.6<I> Notices.</I> 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:
<P align="left">
the Company:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Complete Business Solutions, Inc. <BR>
32605 West Twelve Mile Road <BR>
Farmington Hills, Michigan 48334-3339</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="10%"></TD>
<TD width="84%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>Attention of: </TD>
<TD align="left">
Timothy S. Manney <BR>
Thomas E. Sizemore, Esq.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Facsimile: 248-848-0109 <BR>
Telephone: 248-848-8660</TD>
</TR>
</TABLE>
<P align="left">
with a copy to:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Butzel Long <BR>
150 West Jefferson <BR>
Suite 900 <BR>
Detroit, Michigan 48226</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Attention of: Arthur Dudley, Esq. <BR>
Facsimile: (313) 225-7080 <BR>
Telephone: (313) 225-7000</TD>
</TR>
</TABLE>
<P align="left">
with a copy to:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Dewey Ballantine, LLP <BR>
1301 Avenue of the Americas <BR>
New York, New York 10019</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Attention of: Morton A. Pierce, Esq. <BR>
Facsimile: (212) 259-6333 <BR>
Telephone: (212) 259-8000 <BR>
Attention: Morton A. Pierce, Esq.</TD>
</TR>
</TABLE>
<P align="left">
the Purchasers:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
CDR-Cookie Acquisition L.L.C. <BR>
c/o CD&R Associates VI Limited Partnership <BR>
CRD-Cookie Acquisition VI-A L.L.C. <BR>
c/o CD&R Associates VI-A Limited Partnership <BR>
1043 Foulk Road, Suite 106 <BR>
Wilmington, Delaware 19803</TD>
</TR>
</TABLE>
<P align="left">
with a copy to:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Clayton, Dubilier & Rice, Inc. <BR>
375 Park Avenue, 18th Floor <BR>
New York, New York 10152</TD>
</TR>
</TABLE>
<P align="center">33
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<P><HR noshade><P>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Attention of: Kevin J. Conway <BR>
Facsimile: (212) 407-5252 <BR>
Telephone: (212) 407-5200</TD>
</TR>
</TABLE>
<P align="left">
with a copy to:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="6%"></TD>
<TD width="94%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Debevoise & Plimpton <BR>
875 Third Avenue <BR>
New York, New York 10022</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Attention of: Franci J. Blassberg, Esq. <BR>
Facsimile: (212) 909-6836 <BR>
Telephone: (212) 909-6000</TD>
</TR>
</TABLE>
<P align="left">
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.
<P align="left">
12.7<I> Amendments; Waivers, etc.</I> 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.
<P align="left">
12.8 <I>Cooperation. </I>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.
<P align="left">
12.9 <I>Successors and Assigns. </I>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.
<P align="left">
12.10 <I>Transfer of Preferred Shares, etc. </I>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
<P align="center">34
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<P><HR noshade><P>
<DIV align="left">
from the registration requirements of the Securities Act pursuant
to Rule 144 thereunder or any similar rule or regulation)
shall bear the following legend:
</DIV>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
“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.”</TD>
</TR>
</TABLE>
<P align="left">
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.
<P align="left">
12.11 <I>Governing Law, etc.</I>
<P align="left">
(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.
<P align="left">
(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
<P align="center">35
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<P><HR noshade><P>
<DIV align="left">
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 12.11(b).
</DIV>
<P align="left">
12.12 <I>Necessary Adjustments. </I>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.
<P align="left">
12.13 <I>No Inconsistent Agreements. </I>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.
<P align="left">
12.14 <I>No Third Party Beneficiaries. </I>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.
<P align="left">
12.15 <I>Replacement of Share Certificates. </I>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.
<P align="left">
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.
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
COMPLETE BUSINESS SOLUTIONS, INC.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="2%"></TD>
<TD width="60%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ TIMOTHY S. MANNEY</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name: Timothy S. Manney</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title: Executive Vice President</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
CDR-COOKIE ACQUISITION, L.L.C.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="2%"></TD>
<TD width="60%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ KEVIN J. CONWAY</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name: Kevin J. Conway</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title: President</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
CDR-COOKIE ACQUISITION VI-A, L.L.C.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="2%"></TD>
<TD width="60%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ KEVIN J. CONWAY</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name: Kevin J. Conway</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title: President</TD>
</TR>
</TABLE>
<P align="center">36
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<P><HR noshade><P>
<P align="right"><B>Appendix II</B>
<P align="left">
<!-- link1 "CERTIFICATE OF DESIGNATION of Series A Voting Convertible Preferred Stock of Complete Business Solutions, Inc." -->
<DIV align="center">
<B>CERTIFICATE OF DESIGNATION</B>
</DIV>
<P align="center">
<B>of</B>
<P align="center">
<B>Series A Voting Convertible Preferred Stock</B>
<P align="center">
<B>of</B>
<P align="center">
<B>Complete Business Solutions, Inc.</B>
<P align="left">
Complete Business Solutions, Inc., a Michigan corporation (the
“<I>Corporation</I>”), certifies that pursuant to the
authority contained in its Amended and Restated Articles of
Incorporation (the “<I>Articles of Incorporation</I>”),
the board of directors of the Corporation (the “<I>Board of
Directors</I>”) has duly adopted the following recitals and
resolution:
<P align="left">
WHEREAS, Article III of the Articles of Incorporation
provides that the Corporation may issue preferred stock, without
par value (“<I>Preferred Stock</I>”), from time to time
in one or more series or classes, having such voting powers and
such designations, preferences and relative, participating,
optional and other special rights and qualifications, limitations
or restrictions, as the Board of Directors determines;
<P align="left">
WHEREAS, pursuant to Article III of the Articles of
Incorporation and in accordance with the provisions of
Section 302 of the Michigan Business Corporation Act, the
Board of Directors has adopted the following resolution creating
a series of its Preferred Stock, designated as Series A
Voting Convertible Preferred Stock;
<P align="left">
RESOLVED, that a series of the class of authorized Preferred
Stock, no par value, of the Corporation be hereby created, and
that the voting powers and designation, preferences and relative,
participating, optional and other special rights of the shares
of such series, and the qualifications, limitations and
restrictions thereof are as follows:
<P align="left">
<I>Series A Voting Convertible Preferred Stock</I>
<P align="left">
Section 1. <I>Designation and Amount.</I> The
shares of such series of preferred stock shall be designated as
the Series A Voting Convertible Preferred Stock (the “
<I>Series A Preferred Stock</I>”) and the number of
shares initially constituting such series shall be 200,000, which
number may be increased or decreased by the Board of Directors
without a vote of stockholders; <I>provided, however,</I> that no
decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares of
Series A Preferred Stock then outstanding plus the number of
shares of Series A Preferred Stock reserved for issuance
upon the exercise of outstanding options, rights or warrants for,
or upon the conversion of any outstanding securities issued by
the Corporation convertible into, Series A Preferred Stock.
<P align="left">
Section 2. <I>Rank. </I>The Series A
Preferred Stock shall, with respect to rights upon the
liquidation, winding-up and dissolution of the Corporation, rank
(i) senior to all classes of Common Stock of the Corporation
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 as to rights upon
the liquidation, winding-up and dissolution of the Corporation
(collectively with the Common Stock, the “<I>Junior Stock
</I>”), (ii) on a parity with additional shares of
Series A Preferred Stock and each other class or series of
capital stock the terms of which expressly provide that such
class or series will rank on a parity with the Series A
Preferred Stock as to rights upon the liquidation, winding-up and
dissolution of the Corporation (collectively, the “<I>
Parity Stock</I>”), and (iii) junior to each series of
Preferred Stock created by the Corporation after the Original
Issuance Date in accordance with the special voting rights set
forth in Section 3(b) hereof, the terms of which expressly
provide that such series will rank senior to the Series A
Preferred Stock as to rights upon the liquidation, winding-up and
dissolution of the Corporation (collectively, the “<I>
Senior Stock</I>”). The Corporation may at any time
authorize shares of capital stock with any rights, including
without limitation the right to receive dividends, senior to,
junior to, or on parity with the rights of the Series A
Preferred Stock without the vote or consent of the Series A
Preferred Stock.
<P align="center">
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<P><HR noshade><P>
<P align="left">
Section 3. <I>Voting Rights of Series A Preferred
Stock.</I> (a) <I>Ordinary Voting Rights.</I> Except
as provided in Section 3(b) or by law, the Series A
Preferred Stock shall vote with the Common Stock as a single
class, at each meeting of stockholders of the Corporation (and in
connection with all written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the
stockholders of the Corporation for their action or
consideration. Each share of Series A Preferred Stock shall
have a number of votes equal to the number of votes to 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. Each
holder of the Series A Preferred Stock shall be entitled to
an aggregate number of votes with respect to its Series A
Preferred Stock determined in accordance with the previous
sentence and rounded down to the nearest whole number. Each
holder of the Series A Preferred Stock shall be entitled to
notice of any stockholders’ meeting in accordance with the
Articles of Incorporation and bylaws of the Corporation (the
“By-laws”) in the same manner as holders of the
Corporation’s Common Stock.
<P align="left">
(b) <I>Special Voting Rights. </I>The Corporation
shall not, without having obtained the affirmative vote or
written consent of the holders of a majority of the outstanding
shares of Series A Preferred Stock, (i) amend, alter or
repeal (by merger, consolidation or otherwise) any provision of,
or add any provision to, the Articles of Incorporation, the
Bylaws or this Certificate of Designation, if such action would
adversely affect the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the
Series A Preferred Stock, (ii) 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 and 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 into or exchangeable for, or having
rights to purchase, any shares of stock of the Corporation having
any preference or priority as to liquidation preference or
assets superior to the preferences and priorities of the
Series A Preferred Stock, or (iii) undertake or agree
to undertake any reorganization, dissolution, winding-up,
liquidation or similar transaction involving the Corporation, or
the initiation of any proceeding therefor.
<P align="left">
Section 4. <I>Liquidation.</I> In the event of
any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, after payment or provision for payment of
the Corporation’s debt obligations and liquidating payment
obligations on 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 in cash in full an amount equal to one thousand dollars
($1,000) per share of Series A Preferred Stock plus the
amount of any accrued but unpaid dividends (the “<I>
Liquidation Preference</I>”), 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. If, upon any liquidation, dissolution or winding
up, the net assets of the Corporation distributable among the
holders of all outstanding Series A Preferred Stock and
Parity Stock shall be insufficient to permit the payment in full
of the then Liquidation Preference of the Series A Preferred
Stock and of all liquidating payments on all Parity Stock, then
the entire net assets of the Corporation remaining after the
provision for the payment of the Corporation’s debt
obligations and liquidating payment obligations on Senior Stock
shall be distributed among the holders of the Series A
Preferred Stock and any Parity Stock ratably in proportion to the
full preferential amounts that would otherwise be payable on
such shares of Series A Preferred Stock and such Parity
Stock. For the purposes of this Section 4, the voluntary
sale, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of
the Corporation’s property or assets to, or a consolidation
or merger of the Corporation with, any other Person shall not be
deemed to be a liquidation, dissolution or winding up of the
affairs of the Corporation.
<P align="left">
Section 5. <I>Dividends.</I> (a) <I>
Participating Dividends.</I> In the event the Board of
Directors shall declare a dividend or a distribution (whether of
evidences of indebtedness of the Corporation, cash, assets or
securities) payable upon the then outstanding shares of Common
Stock, other than in a manner described in Section 7(a)(i)
through 7(a)(iii), 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
<P align="center">2
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<P><HR noshade><P>
<DIV align="left">
Preferred Stock had been converted to Common Stock pursuant to
the provisions of Section 6 hereof as of the record date for
the determination of holders of Common Stock entitled to receive
such dividends.
</DIV>
<P align="left">
(b) All dividends payable on the Series A Preferred
Stock shall be payable to the holders of record of such shares of
Series A Preferred Stock at the close of business on the
corresponding Dividend Record Date. The holder of record of a
share of Series A Preferred Stock on a Dividend Record Date
shall be entitled to receive such dividends with respect to such
share of Series A Preferred Stock, notwithstanding the
conversion or redemption of such share after such Dividend Record
Date and prior to the time such dividends are paid.
<P align="left">
Section 6. <I>Conversion. </I>(a) <I>Optional
Conversion of the Series A Preferred Stock.</I> The
Series A Preferred Stock shall be convertible at the option
of the holder thereof, at any time and from time to time, in
whole or in part, into fully paid and non-assessable shares of
Common Stock. Each holder of Series A Preferred Stock who
desires to convert the same into shares of Common Stock shall
surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred Stock or Common Stock, and
shall give written notice to the Corporation at such office that
such holder elects to convert the same and shall state therein
the number of shares of Series A Preferred Stock being
converted. Thereupon the Corporation shall promptly issue and
deliver to such holder (i) a certificate or certificates for
the number of shares of Common Stock to which such holder is
entitled and (ii) a new certificate representing the shares
of Series A Preferred Stock which were not converted, if
any.
<P align="left">
(b) <I>Conversion Ratio.</I> Each share of
Series A Preferred Stock shall be convertible into a number
of shares of Common Stock equal to the then Liquidation
Preference divided by the Conversion Price in effect at the time
of conversion.
<P align="left">
(c) <I>Date of Conversion.</I> Any conversion
pursuant to this Section 6 shall be deemed to have been made
immediately prior to the close of business on the date of the
surrender of the certificate or certificates representing the
shares of Series A Preferred Stock to be converted, and the
Person entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
holder of such shares of Common Stock on such date.
<P align="left">
(d) <I>Reservation of Shares.</I> The Corporation
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 Series A
Preferred Stock, such number of shares of Common Stock as may be
issued upon conversion of all outstanding shares of Series A
Preferred Stock not previously converted.
<P align="left">
(e) <I>Cancellation of Shares.</I> All shares of
Series A Preferred Stock which shall have been converted
pursuant to this Section 6 shall no longer be deemed to be
outstanding and shall be canceled and shall not be reissued as
shares of Series A Preferred Stock.
<P align="left">
(f) <I>No Charge.</I> The issuance of certificates
for shares of Common Stock upon conversion of shares of the
Series A Preferred Stock shall be made without charge to the
holders of such shares for any issuance tax in respect thereof
or other cost incurred by the Corporation in connection with such
conversion and/or the issuance of shares of Common Stock; <I>
provided, however,</I> that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Series A Preferred
Stock converted.
<P align="left">
(g) <I>No Fractional Shares.</I> No fractional shares
or scrip representing fractions of Common Stock shall be issued
upon conversion of the Series A Preferred Stock. Instead of
any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of Series A
Preferred Stock, the Corporation shall pay an amount in cash
based upon the then Market Price of the Common Stock.
<P align="left">
Section 7. <I>Adjustments.</I> (a) <I>Stock
Dividends, Subdivisions and Combinations.</I> If at any
time the Corporation shall:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) issue or deliver any shares of 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,</TD>
</TR>
</TABLE>
<P align="center">3
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<P><HR noshade><P>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock, or</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,</TD>
</TR>
</TABLE>
<P align="left">
then the Conversion Price then in effect shall be adjusted to
equal (1) the Conversion Price in effect immediately prior
to such event multiplied by the number of shares of Common Stock
for which the Series A Preferred Stock is convertible
immediately prior to the adjustment, divided by (2) the
number of shares of Common Stock which a record holder of the
same number of shares of Common Stock for which the Series A
Preferred Stock is convertible immediately prior to the
happening of such event would own or be entitled to receive after
the happening of such event.
<P align="left">
(b) <I>Extraordinary Dividends and Distributions.</I>
If at any time the Corporation shall distribute to all holders
of its outstanding Common Stock evidences of indebtedness of the
Corporation, cash or assets or securities other than the Common
Stock (any such evidences of indebtedness, cash, assets or
securities, the “<I>Assets</I>”), and despite the
provisions of Section 5(b) hereof, the holders of
Series A Preferred Stock do not participate in such
distribution, then, in each case, the Conversion Price then in
effect shall be reduced to a price determined by multiplying such
Conversion Price by a fraction,
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) the numerator of which shall be the Market Price in
effect immediately prior to the distribution less the value of
such Assets applicable to one share of Common Stock at the time
of the distribution, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) the denominator of which shall be such Market Price
immediately prior to the distribution.</TD>
</TR>
</TABLE>
<P align="left">
Any adjustment required by this Section 7(b) shall be made
whenever any such distribution is made, and shall become
effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive
such distribution.
<P align="left">
(c) <I>Issuance of Additional Shares of Common Stock.</I>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) If at any time after the date hereof the Corporation
shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock without consideration or in
exchange for consideration in an amount per Additional Share of
Common Stock less than the Market Price of such securities at the
time the Additional Shares of Common Stock are issued, then the
Conversion Price then in effect shall be reduced to a price
determined by multiplying such Conversion Price by a fraction,</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(1) the numerator of which shall be (x) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale plus (y) the number of shares of Common Stock
which the aggregate consideration received by the Corporation for
the total number of such Additional Shares of Common Stock so
issued or sold would purchase at the Market Price, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(2) the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such issue or sale;
and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) The provisions of paragraph (i) of this
Section 7(c) shall not apply to any issuance of Additional
Shares of Common Stock for which an adjustment is provided under
Section 7(a).</TD>
</TR>
</TABLE>
<P align="left">
(d) <I>Issuance of Warrants or Other Rights.</I> If
at any time after the date hereof the Corporation shall take a
record of holders of Common Stock for the purpose of entitling
them to receive a distribution of (and the holders of
Series A Preferred Stock do not participate in such
distribution, despite the provisions of Section 5(b)
hereof), or shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell, any warrants or other rights to
subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Securities, whether or not such rights
thereunder are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Market Price in
effect immediately prior to the time of such issue or sale then
the Conversion Price shall be adjusted as provided in
Section 7(c) on the basis that the maximum number of shares
of Common Stock issuable pursuant to all such warrants or other
rights or necessary to effect the conversion or exchange of all
<P align="center">4
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<P><HR noshade><P>
<DIV align="left">
such Convertible Securities shall be deemed to have been issued
and outstanding and the Corporation shall have received all of
the consideration payable therefor, if any, as of the date of the
actual issuance of such warrants or other rights. No further
adjustments of the Conversion Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities
upon exercise of such warrants or other rights or upon the actual
issuance of such Common Stock upon such conversion or exchange
of such Convertible Securities.
</DIV>
<P align="left">
(e) <I>Issuance of Convertible Securities.</I> If at
any time the Corporation shall take a record of the holders of
Common Stock for the purpose of entitling them to receive a
distribution of (and the holders of Series A Preferred Stock
do not participate in such distribution, despite the provisions
of Section 5(b) hereof), or shall in any manner (whether
directly or by assumption in a merger in which the Corporation is
the surviving corporation) issue or sell, any Convertible
Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or
exchange shall be less than the Market Price in effect
immediately prior to the time of such issue or sale, then the
Conversion Price shall be adjusted as provided in
Section 7(c) on the basis that the maximum number of shares
of Common Stock necessary to effect the conversion or exchange of
all such Convertible Securities shall be deemed to have been
issued and outstanding and the Corporation shall have received
all of the consideration payable therefor, if any, as of the date
of actual issuance of such Convertible Securities. No adjustment
of the Conversion Price shall be made under this
Section 7(e) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any warrants or
other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of
such warrants or other rights pursuant to Section 7(d). No
further adjustments of the Conversion Price shall be made upon
the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities, and, if any issuance or
sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of
this Section 2, no further adjustments of the Conversion
Price shall be made by reason of such issuance or sale.
<P align="left">
(f) <I>Superseding Adjustment.</I> If, at any time
after any adjustment of the Conversion Price shall have been made
pursuant to Section 7(d) or 7(e) as the result of any
issuance of warrants, rights or Convertible Securities,
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and
all or a portion of such warrants or rights, or the right of
conversion or exchange with respect to all or a portion of such
other Convertible Securities, as the case may be, shall not have
been exercised, or</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased
solely by virtue of provisions therein contained for an increase
in such consideration per share upon the occurrence of a
specified date or event,</TD>
</TR>
</TABLE>
<P align="left">
then such previous adjustment shall be rescinded and annulled and
the shares of Common Stock which were deemed to have been issued
by virtue of the computation made in connection with the
adjustment so rescinded and annulled shall no longer be deemed to
have been issued by virtue of such computation. Thereupon, a
recomputation shall be made of the effect of such warrants or
rights or other Convertible Securities effective as of the date
of such previous adjustment on the basis of
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(A) treating the number of shares of Common Stock or other
property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights
or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(B) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having
been granted or issued immediately after the time of such
increase of the</TD>
</TR>
</TABLE>
<P align="center">5
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
consideration per share for which shares of Common Stock or other
property are issuable under such warrants or rights or other
Convertible Securities,</TD>
</TR>
</TABLE>
<P align="left">
whereupon a new adjustment of the Conversion Price shall be made
effective as of the date of such previous adjustment, which new
adjustment shall supersede the previous adjustment so rescinded
and annulled. Any reduction in the number of shares of Common
Stock into which the Series A Preferred Stock is convertible
as a result of this Section 7(f) shall be applied in its
entirety to the number of shares of Common Stock into which the
Series A Preferred Stock is convertible as of the date such
new adjustment is made.
<P align="left">
(g) <I>Consolidation, Merger, Sale of Assets,
Reorganization, etc.</I> (a) In case at any time the
Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or
substantially all of the Corporation’s assets or
recapitalization of the Common Stock) in which the previously
outstanding Common Stock shall be changed into or exchanged for
different securities of the Corporation or changed into or
exchanged for common stock or other securities of another
corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the
foregoing (each such transaction being hereinafter referred to as
the “<I>Transaction</I>”) then, as a condition to the
consummation of the Transaction, lawful and adequate provisions
shall be made so that (i) the holders of the Series A
Preferred Stock shall thereafter be entitled to receive, upon
conversion of the Series A Preferred Stock, the stock and
other securities, cash and property to which such holders would
have been entitled upon the consummation of the Transaction if
they had converted the Series A Preferred Stock immediately
prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible (as determined in
good faith by the Board of Directors) to the adjustments provided
for in Section 7, and (ii) the other rights and
preferences of the Series A Preferred Stock continue in
effect for so long as neither such conversion right nor the
rights contemplated by Sections 8, 9 or 11 hereof are
exercised.
<P align="left">
(h) <I>Other Dilutive Events.</I> If any event occurs
as to which Section 7 is not strictly applicable or, if
strictly applicable, would not fairly and adequately protect the
conversion rights of the Series A Preferred Stock in
accordance with the essential intent and principles of such
provisions, then there shall be made such adjustments in the
application of such provisions, in accordance with such essential
intent and principles, as shall be reasonably necessary to
protect such conversion rights as aforesaid.
<P align="left">
(i) <I>Other Provisions Applicable to Adjustments under
this Section 7.</I> The following provisions shall be
applicable to the making of adjustments to the Conversion Price
provided for in this Section 7:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) <I>Computation of Consideration.</I> To the
extent that any shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or
purchase any shares of Common Stock or any Convertible Securities
shall be issued for cash consideration, the cash consideration
received by the Corporation therefor shall be the amount of the
cash received by the Corporation therefor, or, if such shares of
Common Stock or Convertible Securities are offered by the
Corporation for subscription, the subscription price, or, if such
shares of Common Stock or Convertible Securities are sold to
underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any
such case subtracting any amounts paid or receivable for accrued
interest or accrued dividends and including any compensation,
discounts or expenses paid or incurred by the Corporation for and
in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for
a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such non-cash consideration
shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board
of Directors. In case any shares of Common Stock or any
Convertible Securities or any warrants or other rights to
subscribe for or purchase such shares of Common Stock or
Convertible Securities shall be issued in connection with any
merger in which the Corporation issues any such securities, the
amount of consideration therefor shall be deemed to be the fair
value, as determined in good faith by an independent investment
banking firm retained by the Corporation which may be an
independent investment banking firm regularly retained by the
Corporation, of such portion of the assets and business of the
nonsurviving corporation as such firm shall determine to be
attributable to such shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any shares of Common Stock issuable pursuant to
any</TD>
</TR>
</TABLE>
<P align="center">6
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<P><HR noshade><P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Corporation for
issuing such warrants or other rights plus the additional
consideration payable to the Corporation upon exercise of such
warrants or other rights. The consideration for any shares of
Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration, if any, received by the
Corporation for issuing warrants or other rights to subscribe for
or purchase such Convertible Securities, plus the consideration
paid or payable to the Corporation in respect of the subscription
for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Corporation upon
the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any shares of Common Stock or Convertible Securities in payment
or satisfaction of any dividends upon any class or series of
stock other than Common Stock, the Corporation shall be deemed to
have received for such shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend
so paid or satisfied.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) <I>Computation of Asset Value. </I>To the extent
that any Assets shall be distributed to all holders of the
Corporation’s outstanding Common Stock in cash, the value of
such Assets shall be the amount of cash so distributed, or, if
such Assets are securities offered by the Corporation for
subscription, the subscription price, or if such Assets are
securities sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering
price (in any such case adding any accrued interest or dividends
and any compensation, discounts or expenses paid or incurred by
the Corporation in connection therewith). To the extent that the
Corporation shall so distribute Assets other than cash, except as
herein otherwise expressly provided, then the value of such
Assets shall be deemed to be fair value of such Assets at the
time of such distribution as determined in good faith by the
Board of Directors.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(iii) <I>When Adjustment to Be Made. </I>The
adjustments required by this Section 7 shall be made
whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the
Conversion Price that would otherwise be required may be
postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 7(a))
up to but in no event beyond the date of conversion if such
adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the shares of
Common Stock into which the Series A Preferred Stock is
convertible immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by this Section 7 and not previously
made, would result in an adjustment at least equal to such
minimum amount, or on the date of exercise. For the purpose of
any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(iv) <I>Fractional Interest; Rounding. </I>In
computing adjustments under this Section 7, fractional
interests in Common Stock shall be taken into account to the
nearest 1/10th of a share, and adjustments in the Conversion
Price shall be made to the nearest $.01.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(v) <I>When Adjustment Not Required. </I>If the
Corporation shall take a record of the holders of its Common
Stock or Preferred Stock for the purpose of entitling them to
receive subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to deliver such subscription or purchase rights, then
no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.</TD>
</TR>
</TABLE>
<P align="left">
(j) <I>Notice of Adjustment. </I>Whenever the
Conversion Price shall be adjusted pursuant to Section 7,
the Corporation shall forthwith prepare a certificate to be
executed by the chief financial officer of the Corporation
setting forth, in reasonable detail, the event requiring the
adjustment, the method by which the adjustment was calculated,
the number of shares of Series A Common Stock for which the
Series A Preferred Stock is convertible and the Conversion
Price after giving effect to such adjustment or change. The
Corporation shall promptly cause a signed copy of such
certificate to be delivered to the holders of the Series A
Preferred Stock.
<P align="center">7
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<P><HR noshade><P>
<DIV align="left">
The Corporation shall keep at the office of the Corporation
copies of all such certificates and cause the same to be
available for inspection during normal business hours by the
holders of the Series A Preferred Stock.
</DIV>
<P align="left">
Section 8. <I>Redemption. </I>(a) <I>At the
Option of the Holders. </I>At any time from and after the
tenth anniversary of the Original Issuance Date, each holder of
Series A Preferred Stock shall have the right, in its sole
discretion, to require the Corporation, to the extent it shall
have 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.
<P align="left">
(b) <I>Redemption Procedures. </I>A holder of
Series A Preferred Stock may elect to exercise its
redemption right pursuant to Section 8(a) by mailing written
notice to the Corporation by certified mail, return receipt
requested, specifying (i) that such holder is exercising its
option to require the Corporation to redeem shares of
Series A Preferred Stock held by such holder, and
(ii) the number of shares of Series A Preferred Stock
to be subject to such redemption. The Corporation shall, within
thirty (30) days of receipt of such notice, deliver to such
Holder a notice (the “<I>Corporation Notice</I>”)
specifying the date set for such redemption, which date shall be
no more than thirty (30) days after the Corporation Notice (the
“<I>Redemption Date</I>”). In the case of any
redemption pursuant to this Section 8, unless the
Corporation defaults on the payment in full of the redemption
price, dividends on the shares of Series A Preferred Stock
being redeemed shall cease to accumulate on the applicable
Redemption Date (or if later the date such shares are actually
redeemed), and no Holder shall thereafter have any rights in
respect of such shares of Series A Preferred Stock, except the
right to receive the redemption price on surrender to the
Corporation of the certificates representing such shares. Any
shares of Series A Preferred Stock which shall have been
redeemed pursuant to this Section 8 shall be canceled and
shall not be reissued as shares of Series A Preferred Stock.
<P align="left">
(c) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series A
Preferred Stock pursuant to paragraph 8(a) (the “<I>
Mandatory Redemption Obligation</I>”), the Mandatory
Redemption Obligation shall be discharged as soon as the
Corporation is able to do so. If and for so long as any Mandatory
Redemption Obligation with respect to the Series A
Preferred Stock shall not be fully discharged, the Corporation
shall not (i) directly or indirectly, redeem, purchase, or
otherwise acquire any Parity Stock or discharge any mandatory or
optional redemption, sinking fund or other similar obligation in
respect of any Parity Stock (except in connection with a
redemption, sinking fund or other similar obligation to be
satisfied pro rata with the Series A Preferred Stock) or
(ii) declare any dividend or make any distribution on Junior
Stock, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in
respect of any Junior Stock.
<P align="left">
Section 9. <I>Change of Control, Shareholder Approval.</I>
(a) <I>Offer to Purchase.</I> Within ten days
following a Change of Control or a Shareholder Approval Deadline,
the Corporation shall notify holders of the Series A
Preferred Stock of the Change of Control or the Shareholder
Approval Deadline and shall be required to make an offer (the
“<I>Offer to Purchase</I>”) to each such holder to
purchase for cash such holder’s shares of Series A
Preferred Stock, or such portion thereof as may be determined by
such holder, at the Put Price.
<P align="left">
(b) The Offer to Purchase must take place on a Business Day
(the “<I>Put Purchase Date</I>”) not later than twenty
days following the occurrence of the Change of Control or the
Shareholder Approval Deadline. On the Put Purchase Date, the
Corporation shall (A) accept for payment the Series A
Preferred Stock validly tendered pursuant to the Offer to
Purchase, and (B) pay to the holders of shares so accepted
an amount in cash per share equal to the Put Price. Unless the
Corporation defaults in the payment for the Series A
Preferred Stock tendered pursuant to the Offer to Purchase,
dividends will cease to accrue with respect to the Series A
Preferred Stock so tendered and all rights of holders of such
tendered shares will terminate, except for the right to receive
payment therefor. Any shares of Series A Preferred Stock
which shall have been redeemed pursuant to this Section 9
shall be canceled and shall not be reissued as shares of
Series A Preferred Stock.
<P align="left">
Section 10. <I>Remedies.</I> (a) If the
Corporation (i) fails to meet its Mandatory Redemption
Obligation, or (ii) fails to fulfill its obligations under
Section 9 hereof, (each such event, a “<I>Voting Rights
Event</I>”) then the holders of a majority of the
Series A Preferred Stock shall have the right (in addition
to any contractual rights they may have) to elect two directors
at a meeting therefor called as promptly as practicable following
the
<P align="center">8
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<P><HR noshade><P>
<DIV align="left">
occurrence of a Voting Rights Event, and at every subsequent
meeting at which the terms of office of the directors so elected
expire; provided, that in the event more than one Voting Rights
Event occurs, the holders of Series A Preferred Stock shall
nonetheless be entitled to elect a maximum of two directors
pursuant to this Section 10.
</DIV>
<P align="left">
(b) The rights of the holders of Series A Preferred
Stock to elect members of the board of Directors described in
Section 10(a) shall continue until the failure, breach or
default giving rise to such Voting Rights Event is cured or
waived by the holders of a majority of the shares of
Series A Preferred Stock then outstanding, at which time
(i) the right of the holders of Series A Preferred
Stock to vote for the election of directors pursuant to Section
10(a), and (ii) the term of office of the directors so
elected, shall each terminate and the directors so elected shall
resign immediately.
<P align="left">
Section 11. <I>Change of Control Transaction.</I> In
connection with a Change of Control Transaction that has been
approved as contemplated by the Stock Purchase Agreement, the
Corporation may, at its option, and to the extent it shall have
funds legally available therefor, redeem the shares of
Series A Preferred Stock, at a redemption price per share
equal to the Put Price as of the date fixed for redemption. The
Corporation shall give the holders of Series A Preferred
Stock 20 days notice of its intention to redeem the
Series A Preferred Stock pursuant to this Section 11,
and such holders shall be entitled to exercise the conversion
rights set forth in Section 6 hereof at any time prior to
such redemption.
<P align="left">
Section 12. <I>Definitions.</I> As used herein, the
following terms shall have the meanings shown below:
<P align="left">
<I>Additional Shares of Common Stock: </I>all shares (including
treasury shares) of Common Stock issued or sold by the
Corporation after
[ ],
2000, whether or not subsequently reacquired or retired by the
Company, other than (i) shares of Common Stock issued upon
the exercise of the Warrants or conversion of the Series A
Preferred Shares; (ii) shares issued or sold pursuant to the
exercise or conversion of options granted pursuant to the
Company Stock Option Plans; (iii) shares issued or sold to
the Purchasers or their Affiliates; or (iv) as agreed to in
writing by the Purchasers.
<P align="left">
<I>Affiliate: </I>of a Person means a Person that directly or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person,
and with respect to a natural person shall include any child,
stepchild, grandchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, and shall include adoptive
relationships. “<I>Control</I>” (including the terms
“<I>controlled by</I>” and “<I>under common
control with</I>”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee
or executor, or otherwise.
<P align="left">
<I>Articles of Incorporation: </I>has the meaning specified in
the first paragraph of this Agreement.
<P align="left">
<I>Assets: </I>has the meaning specified in Section 7(b).
<P align="left">
<I>Board of Directors: </I>has the meaning specified in the first
paragraph of this Certificate of Designation.
<P align="left">
<I>Business Day: </I>shall mean a day which is not a Saturday,
Sunday or legal holiday on which banking institutions in New York
are authorized to close.
<P align="left">
<I>Change of Control: </I>shall mean the occurrence, on or prior
to the fifth anniversary of the Original Issuance Date, of any of
the following events: (A) any “person” or
“group” (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding the Purchasers and
their Affiliates, is or becomes the “beneficial owner”
(as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have “beneficial
ownership” of all securities that such Person has the right
to acquire, whether such rights is exercisable immediately or
only after the passage of time), directly or indirectly, of more
than 50% of the Voting Stock of the Corporation; (B) the
Corporation consolidates with, or mergers with or into, another
Person, or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or
into the Corporation, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Corporation is
converted into or exchanged for cash, securities, or other
property, other than any such
<P align="center">9
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<P><HR noshade><P>
<DIV align="left">
transaction where (i) the outstanding Voting Stock of the
Corporation is converted into or exchanged for Voting Stock of
the surviving or transferee Person or its parent corporation, and
(ii) the shareholders of the Corporation immediately prior
to such transaction own more than 50% of the Voting Stock of the
surviving person; or (C) any voluntary liquidation,
dissolution or winding up of the Corporation, other than in a
circumstance described in the preceding clause (B).
</DIV>
<P align="left">
<I>Change of Control Transaction: </I>shall mean 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 the Stock
Purchase Agreement.
<P align="left">
<I>Common Stock: </I>the Corporation’s common stock, without
par value, as constituted on the date hereof, any stock into
which the foregoing shall have been changed or any stock
resulting from any reclassification of the foregoing, and all
other stock of any class or series (however designated) of the
Corporation the holders of which have the right, without
limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference, provided that the term “Common Stock” shall
not include the Series A Preferred Stock issued to the
Purchasers on the Original Issuance Date.
<P align="left">
<I>Company Stock Option Plans: </I>the Complete Business
Solutions, Inc. Employee Stock Purchase Plan and the Complete
Business Solutions, Inc. 1996 Stock Option Plan, as such plan may
be amended from time to time, or any other stock option plans
adopted by the Board of Directors.
<P align="left">
<I>Conversion Price: </I>$23, as adjusted from time to time
pursuant to Section 7.
<P align="left">
<I>Convertible Securities: </I>any evidences of indebtedness,
shares of stock (other than Common Stock and Preferred Shares) or
other securities directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock.
<P align="left">
<I>Corporation: </I>has the meaning specified in the first
paragraph of this certificate of designation.
<P align="left">
<I>Corporation Notice: </I>has the meaning specified in
Section 8(b).
<P align="left">
<I>Dividend Record Date: </I>means such date as shall be fixed as
the record date for such dividend by the Board of Directors.
<P align="left">
<I>Junior Stock: </I>has the meaning specified in Section 2.
<P align="left">
<I>Liquidation Preference: </I>has the meaning specified in
Section 4.
<P align="left">
<I>Mandatory Redemption Obligation: </I>has the meaning specified
in Section 8(c).
<P align="left">
<I>Market Price: </I>on any date specified herein, (a) in
the case of securities that have an existing public trading
market, the amount per security equal to (i) the last sale
price of such security, regular way, on such date or, if no such
sale takes place on such date, the average of the closing bid and
asked prices thereof on such date, in each case as officially
reported on the principal national securities exchange on which
the same are then listed or admitted to trading, or (ii) if
no such security is then listed or admitted to trading on any
national securities exchange but such security is designated as a
national market system security by the NASD, the last trading
price of such security on such date, or if such security is not
so designated, the average of the reported closing bid and asked
prices thereof on such date as shown by the NASD automated
quotation system or, if no shares thereof are then quoted in such
system, as published by the National Quotation Bureau,
Incorporated or any successor organization, and in either case as
reported by any member firm of the New York Stock Exchange
selected by the Corporation, and (b) in the case of
securities that do not have an existing public trading market and
in the case of other property, the higher of (i) the book
value thereof as
<P align="center">10
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<P><HR noshade><P>
<DIV align="left">
determined by agreement between the Corporation and the Holder,
or if the Corporation and the Holder fail to agree, by any firm
of independent public accountants of recognized standing selected
by the Board of Directors of the Corporation, as of the last day
of any month ending within 60 days preceding the date as of
which the determination is to be made and (ii) the fair
value thereof (w) determined by an agreement between the
Corporation and the Holder or (x) if the Corporation and the
Holder fail to agree, determined jointly by an independent
investment banking firm retained by the Corporation and by an
independent investment banking firm retained by the Holder,
either of which firms may be an independent investment banking
firm regularly retained by the Corporation or the Holder or
(y) if the Corporation or the Holder shall fail so to retain
an independent investment banking firm within five Business Days
of the retention of such firm by the Holders or the Corporation,
as the case may be, determined solely by the firm so retained or
(z) if the firms so retained by the Corporation and by such
holders shall be unable to reach a joint determination within 15
Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm chosen
by the first two such firms and which is not a regular investment
banking firm of the Corporation or any such holder.
</DIV>
<P align="left">
<I>Offer to Purchase: </I>has the meaning specified in
Section 9(a).
<P align="left">
<I>Original Issuance Date: </I>shall mean the first date on which
any shares of Series A Preferred Stock are issued.
<P align="left">
<I>Parity Stock: </I>has the meaning specified in Section 2.
<P align="left">
<I>Person, person:</I> shall be construed broadly and shall
include an individual, a partnership, a limited liability
corporation, a corporation, a trust, a joint venture, an
unincorporated organization or other entity or a government or
any department or agency thereof.
<P align="left">
<I>Preferred Stock: </I>has the meaning specified in the second
paragraph of this Certificate of Designation.
<P align="left">
<I>Purchasers: </I>CDR-COOKIE Acquisition, L.L.C. and CDR-COOKIE
Acquisition VI-A, L.L.C., each a Delaware limited liability
company.
<P align="left">
<I>Put Price: </I>a price per share of Series A Preferred
Stock equal to (i) with respect to a Shareholder Approval
Deadline, 120% of the Liquidation Preference on the Put Purchase
Date, and (ii) with respect to a Change of Control, the
amount (not to exceed a maximum of 5% of the greater of
(i) total equity market capitalization of the Corporation on
the trading day immediately preceding the Put Purchase Date, and
(ii) the total consideration paid to the shareholders of
the Corporation in the Change of Control Transaction, determined
by the Board in its good-faith judgement) required to provide the
Purchasers with an annually compounded internal rate of return,
calculated from the date of purchase of the Series A
Preferred Stock being repurchased by the Company, determined as
follows:
<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="92%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
</TR>
<TR>
<TD align="center" nowrap><FONT size="2"><B>Date of Put Purchase Date</B></FONT></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>IRR</B></FONT></TD>
</TR>
<TR>
<TD align="center" nowrap><HR size="1"></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="left" valign="top"><FONT size="2">
Prior to the first anniversary of the purchase thereof:</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From the first anniversary, but prior to the second anniversary:</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From the second anniversary, but prior to the third anniversary:</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From the third anniversary, but prior to the fourth anniversary:</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="left" valign="top"><FONT size="2">
From the fourth anniversary:</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left">
<I>Put Purchase Date: </I>has the meaning specified in
Section 9(b).
<P align="left">
<I>Redemption Date: </I>has the meaning specified in
Section 8(b).
<P align="left">
<I>Senior Stock: </I>has the meaning specified in Section 2.
<P align="left">
<I>Shareholder Approval Deadline: </I>August 30, 2000, if
and only if the sale to the Purchasers at a time after the
Original Issuance Date of additional shares of Series A
Preferred Stock and warrants to acquire Common Stock, as
contemplated by the Stock Purchase Agreement, has not been
approved as required under the NASD Rules by the requisite vote
of the Corporation’s shareholders.
<P align="center">11
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<I>Subsidiary: </I>shall mean, with respect to the Corporation,
any Person of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at
the time directly or indirectly owned by the Corporation or a
Subsidiary of the Corporation.
<P align="left">
<I>Transaction: </I>has the meaning specified in
Section 7(g).
<P align="left">
<I>Voting Rights Event: </I>has the meaning specified in
Section 10(a).
<P align="left">
<I>Voting Stock: </I>means at any time with respect to any Person
shares of any class of capital stock of such Person which are
then entitled to vote generally in the election of directors.
<P align="left">
<I>Warrants: </I>shall mean the Warrants purchased from the
Corporation by the Purchasers pursuant to the Stock Purchase
Agreement, dated
[ ],
2000, between the Corporation and the Purchasers (the “<I>
Stock Purchase Agreement</I>”).
<P align="center">12
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "[SIGNATURE PAGE OF CERTIFICATE OF DESIGNATION]" -->
<DIV align="center">
<B>[SIGNATURE PAGE OF CERTIFICATE OF DESIGNATION]</B>
</DIV>
<P align="left">
IN WITNESS WHEREOF, the undersigned hereby executes this document
and affirms that the facts set forth herein are true under
penalty of perjury this day of
,
2000.
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
COMPLETE BUSINESS SOLUTIONS, INC.</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
a Michigan corporation</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="2%"></TD>
<TD width="60%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: <HR size="1" align="left"></TD>
<TD align="left">
---------------------------------------</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name:</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title:</TD>
</TR>
</TABLE>
<P align="left">
ATTEST:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="2%"></TD>
<TD width="98%"></TD>
</TR>
<TR valign="top">
<TD>By: </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
</TABLE>
<DIV align="left">
Name:
</DIV>
<DIV align="left">
Title:
</DIV>
<P align="center">13
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="right"><B>Appendix III</B>
<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>
<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>
<P align="center">
<B>COMPLETE BUSINESS SOLUTIONS, INC.</B>
<P align="center">
<B>REGISTRATION RIGHTS AGREEMENT</B>
<P align="center">
<B>Dated as of April 20, 2000</B>
<P align="center">
<HR size="1" width="100%" align="center">
<DIV align="center">
<HR size="1" width="100%" align="center">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<P align="left">
<!-- link1 "Table of Contents" -->
<DIV align="center">
<B>Table of Contents</B>
</DIV>
<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">
<TR>
<TD width="5%"> </TD>
<TD width="3%"> </TD>
<TD width="5%"> </TD>
<TD width="3%"> </TD>
<TD width="75%"> </TD>
<TD width="3%"> </TD>
<TD width="2%"> </TD>
<TD width="3%"> </TD>
<TD width="1%"> </TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><FONT size="2"><B>Page</B></FONT></TD>
</TR>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="center" nowrap colspan="3"><HR size="1"></TD>
</TR>
<TR>
<TD align="right" valign="top"><FONT size="2">
1.</FONT></TD>
<TD></TD>
<TD colspan="3" align="left" valign="bottom"><FONT size="2">Background</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="right" valign="top"><FONT size="2">
2.</FONT></TD>
<TD></TD>
<TD colspan="3" align="left" valign="bottom"><FONT size="2">Definitions</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="right" valign="top"><FONT size="2">
3.</FONT></TD>
<TD></TD>
<TD colspan="3" align="left" valign="bottom"><FONT size="2">Registration</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.1.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Registration on Request</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(a) Requests</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(b) Obligation to Effect Registration</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(c) Registration Statement Form</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(d) Expenses</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(e) Inclusion of Other Securities</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(f) Effective Registration Statement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(g) Pro Rata Allocation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.2.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Piggyback Registration</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.3.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Registration Procedures</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.4.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Underwritten Offerings</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(a) Underwritten Offerings Exclusive</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(b) Underwriting Agreement</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(c) Selection of Underwriters</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(d) Incidental Underwritten Offerings</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(e) Hold Back Agreements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.5.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Preparation; Reasonable Investigation</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.6.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Other Registrations</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
3.7.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Indemnification</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(a) Indemnification by the Company</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(b) Indemnification by the Sellers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(c) Notices of Claims, etc. </FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(d) Other Indemnification</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(e) Other Remedies</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
(f) Officers and Directors</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD align="right" valign="top"><FONT size="2">
4.</FONT></TD>
<TD></TD>
<TD colspan="3" align="left" valign="bottom"><FONT size="2">Miscellaneous</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.1.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Rule 144; Legended Securities; etc. </FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.2.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Amendments and Waivers</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.3.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Nominees for Beneficial Owners</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.4.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Successors, Assigns and Transferees</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">13</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.5.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Notices</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.6.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Inconsistent Agreements</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.7.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Remedies</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.8.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Stock Splits, etc. </FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.9.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Term</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.10.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Severability</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.11.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Headings</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.12.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Counterparts</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.13.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Governing Law</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.14.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
Waiver of Jury Trial</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
<TD></TD>
</TR>
<TR><TD><TR><TD><TR><TD><TR><TD>
<TR>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom"><FONT size="2">
4.15.</FONT></TD>
<TD></TD>
<TD align="left" valign="bottom"><FONT size="2">
No Third Party Beneficiaries</FONT></TD>
<TD></TD>
<TD></TD>
<TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
<TD></TD>
</TR>
</TABLE>
</CENTER>
<P align="center">i
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<!-- link1 "REGISTRATION RIGHTS AGREEMENT" -->
<DIV align="center">
<B>REGISTRATION RIGHTS AGREEMENT</B>
</DIV>
<P align="left">
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of April 20, 2000, is entered into by and among
CD&R-COOKIE Acquisition L.L.C., a Delaware limited liability
company (“CDR-Cookie VI”) and CDR-COOKIE Acquisition
VI-A L.L.C., a Delaware limited liability company
(“CDR-Cookie VI-A” and, together with CDR-Cookie VI,
the “Shareholders”) and COOKIE, a Michigan corporation
(the “Company”).
<P align="left">
1. <I>Background.</I>
<P align="left">
(a) Pursuant to a stock purchase agreement, dated as of
March 17, 2000, by and among the Shareholders and the
Company (the “Company Stock Purchase Agreement”), the
Shareholders agreed to purchase from the Company, and the Company
agreed to sell to the Shareholders, at the Initial Closing and
at the Subsequent Closing (each, as defined in the Stock Purchase
Agreement): (i) an aggregate of 200,000 shares of the
Company’s Series A preferred stock, without par value
(the “Preferred Shares”), which shall be convertible
into shares of the Company’s common stock, without par value
(the “Common Stock”), pursuant to the certificate of
designation with respect to the Preferred Shares filed with the
Department of Consumer and Industry Services of the State of
Michigan (the “Certificate of Designation”);
(ii) a warrant to purchase 3.5 million shares of Common
Stock at an exercise price of $25 per share (the
“25 Warrant”) and (iii) a warrant to purchase
1.8 million shares of Common Stock at an exercise price of
$31 per share (the “31 Warrant” and, together with
the 25 Warrant, the “Warrants”).
<P align="left">
(b) The Shareholders, the Fund or any of their respective
Affiliates may in the future acquire additional shares of Common
Stock (“Additional Common Stock”) from the Company or
other Shareholders.
<P align="left">
2.<I> Definitions.</I> For purposes of this
Agreement, the following terms have the following respective
meanings:
<P align="left">
“25 Warrant”: is defined in Section 1(a).
<P align="left">
“31 Warrant”: is defined in Section 1(a).
<P align="left">
“Additional Common Stock”: is defined in
Section 1(b).
<P align="left">
“Affiliate”: With respect to any Person, any
other Person directly or indirectly Controlling, Controlled by or
under common Control with such first Person. “Control”
means the power to direct the affairs of a Person by reason of
ownership of voting securities, by contract or otherwise. Any
director, member of management or other employee of the Company
or any of its subsidiaries who would not otherwise be an
Affiliate shall not be deemed to be an Affiliate of the
Shareholders.
<P align="left">
“Agreement”: is defined in the introductory paragraph
hereof.
<P align="left">
“Board”: The Board of Directors of the Company.
<P align="left">
“Business Day”: A day other than a Saturday, Sunday or
other day on which commercial banks in New York City are
authorized or required to close.
<P align="left">
“CD&R”: Clayton, Dubilier & Rice, Inc., a
Delaware corporation.
<P align="left">
“CDR — Cookie VI”: is defined in the
introductory paragraph to this Agreement.
<P align="left">
“CDR — Cookie VI-A” is defined in the
introductory paragraph to this Agreement.
<P align="left">
“Certificate of Designation”: is defined in
Section 1(a).
<P align="left">
“Common Stock”: is defined in Section 1(a).
<P align="left">
“Company”: is defined in the introduction to this
Agreement.
<P align="left">
“Company Stock Purchase Agreement”: is defined in
Section 1(a).
<P align="left">
“Conversion Shares”: means the shares of Common Stock
issuable upon the conversion of the Preferred Shares.
<P align="center">
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<P align="left">
“Exchange Act”: The Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and
regulations thereunder which shall be in effect at the time. Any
reference to a particular section thereof shall include a
reference to the corresponding section, if any, of any such
successor Federal statute, and the rules and regulations
thereunder.
<P align="left">
“Fund”: means any of Clayton, Dubilier & Rice
Fund VI Limited Partnership, a Cayman Islands exempted limited
partnership, Clayton, Dubilier & Rice Fund VI-A Limited
Partnership, a Cayman Islands exempted limited partnership, and
any other entity organized or managed by or affiliated with
CD&R.
<P align="left">
“NASD”: National Association of Securities Dealers,
Inc.
<P align="left">
“NASDAQ”: The NASD Automated Quotation System.
<P align="left">
“New York Court”: is defined in Section 4.14.
<P align="left">
“Other Registrable Securities”: means shares of Common
Stock subject to a contractual registration obligation arising
under an agreement entered into by the holders thereof and the
Company prior to the date hereof and set forth in
Schedule 2.12(c) of the Company Disclosure Schedule
delivered under the Company Stock Purchase Agreement.
<P align="left">
“Person”: Any natural person, firm, partnership,
association, corporation, company, trust, business trust,
governmental entity or other entity.
<P align="left">
“Preferred Shares”: is defined in Section 1(a).
<P align="left">
“Public Offering”: An underwritten public offering of
Common Stock led by at least one underwriter of nationally
recognized standing.
<P align="left">
“Registrable Securities”: (a) (i) the Conversion
Shares, (ii) the Additional Common Stock and (iii) the
Warrant Shares; provided that the Warrant Shares shall be deemed
to constitute “Registrable Securities” only after the
first anniversary of the date of the Company Stock Purchase
Agreement; and (b) any securities issued or issuable with respect
to any Common Stock referred to in the foregoing clauses
(w) upon any conversion or exchange thereof, (x) by way
of stock dividend or stock split, (y) in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or (z) otherwise, in all cases subject
to the last paragraph of Section 3.3. As to any particular
Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration
statement, (B) such securities shall have been distributed
to the public in reliance upon Rule 144, (C) such
securities become eligible for sale under Rule 144(k) by the
holder thereof without volume limitations, (D) such
securities shall have been otherwise transferred, new
certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require
registration or qualification of such securities under the
Securities Act or any similar state law then in force, or
(E) such securities shall have ceased to be outstanding.
<P align="left">
“Registration Expenses”: All expenses incident to the
Company’s performance of its obligations under or compliance
with Section 3, including, but not limited to, all
registration and filing fees, all fees and expenses of complying
with securities or blue sky laws, all fees and expenses
associated with listing securities on exchanges or NASDAQ, all
fees and other expenses associated with filings with the NASD
(including, if required, the fees and expenses of any
“qualified independent underwriter” and its counsel),
all printing expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants, and the
expenses of any special audits made by such accountants required
by or incidental to such performance and compliance, but not
including (a) fees and disbursements of counsel retained by
the holders of Registrable Securities or (b) any
underwriting discounts or commissions or any transfer taxes
payable in respect of the sale of Registrable Securities by the
holders thereof.
<P align="left">
“Requisite Percentage of Shareholders”: The holder or
holders of at least 50% (by number of shares) of the Registrable
Securities at the time outstanding.
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<P align="left">
“Rule 144”: Rule 144 (or any successor
provision) under the Securities Act.
<P align="left">
“Rule 144A”: Rule 144A (or any successor
provision) under the Securities Act.
<P align="left">
“Rule 144(k)”: Rule 144(k) (or any successor
provision) under the Securities Act.
<P align="left">
“Rule 145”: Rule 145 (or any successor
provision) under the Securities Act.
<P align="left">
“Securities Act”: The Securities Act of 1933, as
amended, or any successor Federal statute, and the rules and
regulations thereunder which shall be in effect at the time. Any
reference to a particular section thereof shall include a
reference to the corresponding section, if any, of any such
successor Federal statute, and the rules and regulations
thereunder.
<P align="left">
“Securities and Exchange Commission”: The Securities
and Exchange Commission or any other Federal agency at the time
administering the Securities Act or the Exchange Act.
<P align="left">
“Shareholders”: is defined in the introductory
paragraph of this Agreement.
<P align="left">
“Special Registration”: (a) The registration of
shares of equity securities or options or other rights in respect
thereof to be offered to directors, members of management,
employees, consultants or sales agents, distributors or similar
representatives of the Company or its direct or indirect
subsidiaries or (b) the registration of equity securities
and/ or options or other rights in respect thereof solely on
Form S-4 or S-8 or any successor form.
<P align="left">
“Warrants”: is defined in Section 1(a).
<P align="left">
“Warrant Shares”: means the shares of Common Stock
issuable upon the exercise of the Warrants.
<P align="left">
3. <I>Registration.</I>
<P align="left">
3.1. <I>Registration on Request.</I>
<P align="left">
(a) <I>Requests. </I>Subject to the provisions of
Section 3.6, at any time or from time to time, the Requisite
Percentage of Shareholders shall have the right to make written
requests that the Company effect registrations under the
Securities Act of all or part of the Registrable Securities of
the holder or holders making such request, which requests shall
specify the intended method of disposition thereof by such holder
or holders.
<P align="left">
(b) <I>Obligation to Effect Registration. </I>Upon
receipt by the Company of any request for registration pursuant
to Section 3.1(a), the Company will promptly give written
notice of such requested registration to all holders of
Registrable Securities, and thereupon will use its best efforts
to effect the registration under the Securities Act of
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
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<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) the Registrable Securities which the Company has been
so requested to register pursuant to Section 3.1(a), and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) all other Registrable Securities which the Company has
been requested to register by the holders thereof by written
request given to the Company within 30 days after the
Company has given such written notice (which request shall
specify the intended method of disposition of such Registrable
Securities),</TD>
</TR>
</TABLE>
<P align="left">
all to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered. Notwithstanding the
preceding sentence:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(x) the Company shall not be required to effect a
registration requested pursuant to Section 3.1(a) if
(A) with respect to the first three such requests, the
aggregate number of Registrable Securities referred to in
clauses (i) and (ii) of the preceding sentence to be
included in such registration shall be less than 1,480,000,
shares and (B) thereafter, the number of Registrable
Securities to be so included shall be less than 740,000,
provided, that in no event shall the Company be required to
effect a registration requested pursuant to Section 3.1(a)
if the Board determines, in its good faith judgment, after
consultation with a firm of nationally recognized underwriters
that the aggregate net proceeds from</TD>
</TR>
</TABLE>
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<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
the disposition of the Registrable Securities for which
registration has been so requested would be less than
$50,000,000; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(y) if the Board determines in its good faith judgment,
after consultation with a firm of nationally recognized
underwriters, that there will be an adverse effect on a then
contemplated Public Offering, the Requisite Percentage of
Shareholders shall be given notice of such fact and shall be
deemed to have withdrawn such request and such registration shall
not be deemed to have been effected or requested pursuant to
this Section 3.1; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(z) the Company shall be entitled to postpone for a
reasonable period of time not to exceed 60 days from the
date a request pursuant to Section 3.1(a) is received, the
filing of any registration statement otherwise required to be
prepared and filed by it pursuant to this Section 3.1, if
the Board of Directors of the Company (i) in good faith
determines that such registration and offering would materially
adversely affect or interfere with any proposed or pending
financing, acquisition, corporate reorganization or other
material transaction or the conduct or outcome of any material
litigation involving the Company or any of its subsidiaries, and
(ii) as promptly as practicable gives the relevant holders
of Registrable Securities written notice of such postponement,
setting forth the duration of and reasons for such postponement;
provided, however, that the Company shall not effect such a
postponement more than twice in any 180 day period, for no
more than an aggregate total of 60 days. If the Company
shall so postpone the filing of a registration statement, the
holder or holders of Registrable Securities making the request
pursuant to Section 3.1(a) shall within 10 days after
receipt of the notice of postponement advise the Company in
writing whether or not it has determined to withdraw its request
for registration. Failure by such holder or holders to timely
notify the Company of its determination shall for all purposes be
treated as a withdrawal of the request for registration. In the
event of a withdrawal, such request for registration shall not be
deemed exercised for purposes of determining whether such holder
or holders still have the right to make a request for
registration pursuant to this Section 3.1.</TD>
</TR>
</TABLE>
<P align="left">
(c) <I>Registration Statement Form. </I>Each
registration requested pursuant to this Section 3.1 shall be
effected by the filing of a registration statement on
Form S-1, Form S-2 or Form S-3 (or any other form
which includes substantially the same information as would be
required to be included in a registration statement on such forms
as presently constituted), the choice of such form to be made by
holders holding at least a majority (by number of shares) of the
Registrable Securities as to which registration has been
requested pursuant to this Section 3.1, unless the use of a
specific or different form is required by law.
<P align="left">
(d) <I>Expenses. </I>The Company will pay all
Registration Expenses in connection with the first three
registrations effected pursuant to a request under
Section 3.1(a). The Registration Expenses in connection with
each other registration, if any, requested under
Section 3.1(a) shall be apportioned among the holders whose
Registrable Securities are then being registered, on the basis of
the respective amounts (by number of shares) of Registrable
Securities then being registered. However, in the case of each
registration requested under Section 3.1(a), the Company
shall pay all amounts in respect of (A) any allocation of
salaries of personnel of the Company and its subsidiaries or
other general overhead expenses of the Company and its
subsidiaries or other expenses for the preparation of financial
statements or other data normally prepared by the Company and its
subsidiaries in the ordinary course of its business,
(B) the expenses of any officers’ and directors’
liability insurance, (C) the expenses and fees for listing
the securities to be registered on each exchange on which similar
securities issued by the Company are then listed or, if no such
securities are then listed, on an exchange selected by the
Company or on NASDAQ and (D) all fees associated with
filings required to be made with the NASD (including, if
required, the fees and expenses of any “qualified
independent underwriter” and its counsel). Notwithstanding
the provisions of this Section 3.1(d) or of
Section 3.2, each seller of Registrable Securities shall pay
all Registration Expenses to the extent required to be paid by
such seller by applicable law.
<P align="left">
(e) <I>Inclusion of Other Securities. </I>The Company
shall neither register, nor enter into any agreement obligating
it to register, securities (other than Registrable Securities
and, to the extent contractually required as of the date hereof,
Other Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested
pursuant to Section 3.1(a) unless permitted to do so by the
written
<P align="center">4
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<DIV align="left">
consent of holders holding at least a majority (by number of
shares) of the Registrable Securities proposed to be sold in such
registration, which consent shall not unreasonably be withheld,
it being understood and agreed that such holders shall not be
deemed to be unreasonable if they in their good faith judgment
believe that the inclusion of the securities of any such other
Person will adversely affect the price or marketability of the
shares such holders of Registrable Securities or the Company
propose to sell in such registration.
</DIV>
<P align="left">
(f) <I>Effective Registration Statement. </I>A
registration requested pursuant to Section 3.1(a) will not
be deemed to have been effected unless it has become effective
for the period specified in Section 3.3(b). Notwithstanding
the preceding sentence, a registration requested pursuant to
Section 3.1(a) that does not become effective after the
Company has filed a registration statement with respect thereto
solely by reason of the refusal to proceed of the holder or
holders of Registrable Securities requesting the registration
shall be deemed to have been effected by the Company at the
request of such holder or holders.
<P align="left">
(g) <I>Pro Rata Allocation. </I>If any registration
statement made pursuant to Section 3.1(a) involves an
underwritten offering and the managing underwriter of such
offering (or, in connection with an offering that is not
underwritten, an investment banker) shall advise the Company
that, in its view, the number of securities requested to be
included in such registration exceeds the largest number that can
be sold in an orderly manner in such offering without adversely
affecting the price range of such offering, the Company shall
include in such registration:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) first, all shares of Common Stock requested to be
included in such registration by the Requisite Percentage of
Shareholders (and, to the extent contractually required as of the
date hereof, Other Registrable Securities);</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) second, to the extent that the number of securities to
be registered pursuant to clause (i) is less than the
largest number that can be sold in an orderly manner in such
offering within a price range acceptable to the selling holders
of Registrable Securities, securities that the Company proposes
to register; and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(iii) third, to the extent that the number of shares
registered pursuant to clauses (i) and (ii) is less
than the largest number that can be sold in an orderly manner in
such offering within a price range acceptable to the selling
holders of Registrable Securities, the securities requested to be
included by holders of Other Registrable Securities and, if
permitted by the holders of Registrable Securities pursuant to
Section 3.1(e), any other holders.</TD>
</TR>
</TABLE>
<P align="left">
The securities to be included in any such registration pursuant
to clauses (i) and, except as otherwise contractually
required as of the date hereof, (iii) shall be allocated on
a pro rata basis among all holders requesting that securities be
included in such registration pursuant to such clause on the
basis of the number of securities requested to be included by
such holders. If a holder of Registrable Securities requesting a
registration pursuant to Section 3.1 is unable to sell at
least 75% of the number of securities it requested to be included
therein by virtue of the inclusion of other holders of the
Company’s securities included in such offering, such request
for registration shall not be deemed exercised for purposes of
determining whether such holder of Registrable Securities shall
have the right to make a further request for registration
pursuant to Section 3.1
<P align="left">
3.2. <I>Piggyback Registration. </I>If the Company at
any time proposes to register any of its equity securities (as
defined in the Exchange Act) under the Securities Act (other than
pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and
the registration form to be used may be used for the registration
of Registrable Securities, it will at such time give prompt
written notice to all holders of Registrable Securities of its
intention to do so and, upon the written request of any holder of
Registrable Securities given to the Company within 30 days
after the Company has given any such notice (which request shall
specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the
Company will use its best efforts to effect the registration
under the Securities Act of all Registrable Securities that the
Company has been so requested to register by the
<P align="center">5
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<DIV align="left">
holders thereof, to the extent required to permit the disposition
(in accordance with the intended methods thereof as aforesaid)
of the Registrable Securities so to be registered, provided that:
</DIV>
<P align="left">
(a) if, at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Board shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of
Registrable Securities that was previously notified of such
registration and, thereupon, shall not register any Registrable
Securities in connection with such registration (but shall
nevertheless pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities to request that a
registration be effected under Section 3.1; and
<P align="left">
(b) if the Company shall be advised in writing by the
managing underwriters (or, in connection with an offering which
is not underwritten, by an investment banker) that in their or
its opinion the number of securities requested to be included in
such registration (whether by the Company, pursuant to this
Section 3.2 or pursuant to any other rights granted by the
Company to a holder or holders of its securities to request or
demand such registration or inclusion of any such securities in
any such registration) exceeds the number of such securities
which can be sold in such offering,
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) the Company shall include in such registration the
number (if any) of Registrable Securities so requested to be
included that in the opinion of such underwriters or investment
banker, as the case may be, can be sold and shall not include in
such registration any securities (other than securities being
sold by the Company, which shall have priority in being included
in such registration) so requested to be included other than
Registrable Securities (and, to the extent contractually required
as of the date hereof, Other Registrable Securities), unless all
Registrable Securities requested to be so included are included
therein, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) if in the opinion of such underwriters or investment
banker, as the case may be, some but not all of the Registrable
Securities may be so included, all holders of Registrable
Securities requested to be included therein (and, to the extent
contractually required as of the date hereof, holders of Other
Registrable Securities) shall share pro rata in the number of
shares of Registrable Securities included in such Public Offering
on the basis of the number of Registrable Securities requested
to be included therein by such holders, provided that, in the
case of a registration initially requested or demanded by a
holder or holders of securities other than Registrable
Securities, pursuant to a contractual registration obligation,
the holders of the Registrable Securities requested to be
included therein and the holders of such other securities shall
share pro rata (based on the number of shares if the requested or
demanded registration is to cover only Common Stock and, if not,
based on the proposed offering price of the total number of
securities included in such Public Offering requested to be
included therein), except to the extent contractually required as
of the date hereof in the case of Other Registrable Securities
requesting registration, in which case such Other Registrable
Securities shall have priority over Registrable Securities,</TD>
</TR>
</TABLE>
<P align="left">
and the Company shall so provide in any registration agreement
hereinafter entered into with respect to any of its securities.
<P align="left">
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant
to this Section 3.2. No registration effected under this
Section 3.2 shall relieve the Company from its obligation to
effect registrations upon request under Section 3.1.
<P align="left">
3.3. <I>Registration Procedures. </I>If and whenever
the Company is required to use its best efforts to effect the
registration of any Registrable Securities under the Securities
Act as provided in Sections 3.1 and 3.2, the Company will
promptly:
<P align="left">
(a) subject to clauses (x), (y) and (z) of
Section 3.1(b), prepare and file with the Securities and
Exchange Commission as soon as practicable and in any event
within 120 days, after receipt of a request pursuant to
Section 3.1 a registration statement with respect to such
securities, make all required filings with
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the NASD and use best efforts to cause such registration
statement to become effective at the nearest practicable date;
</DIV>
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(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith and
such other documents as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement until
such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller
or sellers thereof set forth in such registration statement, but
in no event for a period of more than six months after such
registration statement becomes effective;
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(c) furnish to counsel (if any) selected by the holders of
a majority (by number of shares) of the Registrable Securities
covered by such registration statement and to counsel for the
underwriters in any underwritten offering copies of all documents
proposed to be filed with the Securities and Exchange Commission
(including all documents to be filed on a confidential basis) in
connection with such registration, which documents will be
subject to the review of such counsel; the Company shall not file
any registration statement or prospectus or any amendments or
supplements thereto pursuant to a registration under
Section 3.1(a) if the holders of a majority of the
Registrable Securities covered by such registration statement,
their counsel, or the underwriters, if any, shall reasonably
object in writing;
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(d) furnish to each seller of such securities, without
charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case, including all exhibits and documents filed therewith
(other than those filed on a confidential basis), except that the
Company shall not be obligated to furnish any seller of
securities with more than two copies of such exhibits and
documents), such number of copies of the prospectus included in
such registration statement (including each preliminary
prospectus and any summary prospectus) in conformity with the
requirements of the Securities Act, and such other documents, as
such seller may reasonably request in order to facilitate the
disposition of the securities owned by such seller;
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(e) use its best efforts to register or qualify the
securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each
seller shall request, and do any and all other acts and things
which may be necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it
is not so qualified, subject itself to taxation in any
jurisdiction wherein it is not so subject, or take any action
which would subject it to general service of process in any
jurisdiction wherein it is not so subject;
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(f) furnish to each seller a signed counterpart, addressed
to the sellers, of
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the
registration statement, and</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) a “comfort” letter signed by the independent
public accountants who have issued an audit report on the
Company’s financial statements included in the registration
statement, subject to such seller having executed and delivered
to the independent public accountants such certificates and
documents as such accountants shall reasonably request,</TD>
</TR>
</TABLE>
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covering substantially the same matters with respect to the
registration statement (and the prospectus included therein) and,
in the case of such accountants’ letter, with respect to
events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer’s counsel and
in accountants’ letters delivered to the underwriters in
underwritten Public Offerings of securities;
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(g)(i) notify each seller of any securities covered by such
registration statement if such registration statement, at the
time it or any amendment thereto became effective, contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and, as promptly as
practicable, prepare and file with the Securities and Exchange
Commission a post-effective amendment to such registration
statement and use best efforts to cause
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such post-effective amendment to become effective such that such
registration statement, as so amended, shall not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) notify each
holder of Registrable Securities covered by such registration
statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, if the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, as
promptly as is practicable, prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
</DIV>
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(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security holders, as soon
as reasonably practicable, an earnings statement of the Company
complying with the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act;
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(i) notify each seller of any securities covered by such
registration statement (i) when such registration statement,
or any post-effective amendment to such registration statement,
shall have become effective, or any amendment of or supplement to
the prospectus used in connection therewith shall have been
filed, (ii) of any request by the Securities and Exchange
Commission to amend such registration statement or to amend or
supplement such prospectus or for additional information,
(iii) of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of such
registration statement or of any order preventing or suspending
the use of any preliminary prospectus, and (iv) of the
suspension of the qualification of such securities for offering
or sale in any jurisdiction, or of the institution of any
proceedings for any of such purposes;
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(j) use its best efforts (i) (A) to list such
securities on any securities exchange on which the Common Stock
is then listed or, if no Common Stock is then listed, on an
exchange selected by the Company, if such listing is then
permitted under the rules of such exchange or (B) if such
listing is not practicable or the Board determines that quotation
as a NASDAQ National Market System security is preferable, to
secure designation of such securities as a NASDAQ “national
market system security” within the meaning of
Rule 11Aa2-1 under the Exchange Act or, failing that, to
secure NASDAQ authorization for such securities, and, without
limiting the foregoing, to arrange for at least two market makers
to register as such with respect to such securities with the
NASD, (ii) to provide a transfer agent and registrar for
such Registrable Securities not later than the effective date of
such registration statement and (iii) to obtain a CUSIP
number for the Registrable Securities; and
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(k) use every reasonable effort to obtain the lifting of
any stop order that might be issued suspending the effectiveness
of such registration statement or of any order preventing or
suspending the use of any preliminary prospectus.
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The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company
such information regarding such seller and the distribution of
such securities as the Company may from time to time reasonably
request in writing and as shall be required by law in connection
therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make
the information previously furnished to the Company by such
holder not materially misleading.
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The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable
Securities, or any amendment of or supplement to the prospectus
used in connection therewith, which refers to any seller of any
securities covered thereby by name, or otherwise identifies such
seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably
withheld, except that no such consent shall be required for any
disclosure that is required by law.
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By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon
receipt of any notice from the Company pursuant to
Section 3.3(g), such holder will promptly discontinue such
holder’s disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities
until such holder shall have received, in the case of clause
(i) of Section 3.3(g), notice from the Company that
such registration statement has been amended, as contemplated by
Section 3.3(g), and, in the case of clause (ii) of
Section 3.3(g), copies of the supplemented or amended
prospectus contemplated by Section 3.3(g). If so directed by
the Company, each holder of Registrable Securities will deliver
to the Company (at the Company’s expense) all copies, other
than permanent file copies, in such holder’s possession of
the prospectus covering such Registrable Securities at the time
of receipt of such notice. In the event that the Company shall
give any such notice, the period mentioned in Section 3.3(b)
shall be extended by the number of days during the period from
and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities
covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by
Section 3.3(g).
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Notwithstanding any other provision of this Agreement, the
parties hereto acknowledge that the Company shall have no
obligation to prepare or file any registration statement prior to
the time that financial information required to be included
therein is available for inclusion therein.
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3.4. <I>Underwritten Offerings. </I>The provisions of
this Section 3.4 do not establish additional registration
rights but instead set forth procedures applicable, in addition
to those set forth in Sections 3.1 through 3.3, to any
registration which is an underwritten offering.
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(a) <I>Underwritten Offerings Exclusive. </I>Whenever
a registration requested pursuant to Section 3.1 is for an
underwritten offering, only securities which are to be
distributed by the underwriters may be included in the
registration.
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(b) <I>Underwriting Agreement. </I>If requested by
the underwriters for any underwritten offering by holders of
Registrable Securities pursuant to a registration requested under
Section 3.1, the Company shall enter into an underwriting
agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to
the holders of a majority (by number of shares) of the
Registrable Securities to be covered by such registration and to
the underwriters and to contain such representations and
warranties by the Company and such other terms and provisions as
are customarily contained in agreements of this type, including,
but not limited to, indemnities to the effect and to the extent
provided in Section 3.7, provisions for the delivery of
officers’ certificates, opinions of counsel and
accountants’ “comfort” letters and hold-back
arrangements. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any
or all of the representations and warranties by, and the
agreements on the part of, the Company to and for the benefit of
such underwriters be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the
obligations of such holders of Registrable Securities. If any
condition to the obligations under such underwriting agreement
are not met or waived, and such failure to be met or waived is
not attributable to the fault of the holders of Registrable
Securities requesting a demand registration pursuant to
Section 3.1(a), such request for registration shall not be
deemed exercised for purposes of determining whether such
registration has been effected for purposes of Section 3.1.
No such holder of Registrable Securities shall be required by the
Company to make any representations or warranties to, or
agreements with, the Company or the underwriters other than as
set forth in Section 3.4(e) and representations, warranties
or agreements regarding such holder and such holder’s
intended method of distribution.
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(c) <I>Selection of Underwriters. </I>Whenever a
registration requested pursuant to Section 3.1 is for an
underwritten offering, the holders of a majority of the shares
requested to be included in such registration will have the right
to select one or more underwriters to administer the offering at
least one of which shall be an underwriter of nationally
recognized standing reasonably satisfactory to the Company. If
the Company at any time proposes to register any of its
securities under the Securities Act for sale for its own account
and such securities are to be distributed by or through one or
more underwriters, the Company will have the right to
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<DIV align="left">
select one or more underwriters to administer the offering at
least one of which shall be an underwriter of nationally
recognized standing.
</DIV>
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(d) <I>Incidental Underwritten Offerings. </I>Subject
to the provisions of the proviso to the first sentence of
Section 3.2, if the Company at any time proposes to register
any of its equity securities under the Securities Act (other
than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for its own account, and such
securities are to be distributed by or through one or more
underwriters, the Company will give prompt written notice to all
holders of Registrable Securities of its intention to do so and,
if requested by any holder of Registrable Securities, will
arrange for such underwriters to include the Registrable
Securities to be offered and sold by such holder among those to
be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be
parties to the underwriting agreement between the Company and
such underwriters and may, at their option, require that any or
all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of the underwriters
under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Registrable
Securities. No such holder of Registrable Securities shall be
required by the Company to make any representations or warranties
to, or agreements with, the Company or the underwriters other
than as set forth in Section 3.4(e) and representations,
warranties or agreements regarding such holder and such
holder’s intended method of distribution.
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(e) <I>Hold Back Agreements. </I>If and whenever the
Company proposes to register any of its equity securities under
the Securities Act, whether or not for its own account (other
than pursuant to a Special Registration), or is required to use
its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 3.1
or 3.2, each holder of Registrable Securities, if required by the
managing underwriter, agrees by acquisition of such Registrable
Securities not to effect (other than pursuant to such
registration) any public sale or distribution, including, but not
limited to, any sale pursuant to Rule 144 or
Rule 144A, of any Registrable Securities, any other equity
securities of the Company or any securities convertible into or
exchangeable or exercisable for any equity securities of the
Company during the 20 day period prior to or the 90 day
period following the effective date of such registration,
provided that each holder of Registrable Securities further
agrees that, if required by the managing underwriter for such
registered offering, such holder shall not effect any such public
sale or distribution during the 180 day period following
the effective date of such registration, or during such lesser
period that is applicable to any of Other Registrable Securities
and securities held by the Company’s officers and directors
and [R], and the Company agrees to cause each holder of any
equity security, or of any security convertible into or
exchangeable or exercisable for any equity security, of the
Company purchased or acquired from the Company at any time other
than in a Public Offering to enter into a similar agreement with
the Company.
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3.5. <I>Preparation; Reasonable Investigation. </I>In
connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities
Act, the Company will give the holders of such Registrable
Securities so to be registered and their underwriters, if any,
and their respective counsel and accountants the opportunity to
participate in the preparation of such registration statement,
each prospectus included therein or filed with the Securities and
Exchange Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants
who have issued audit reports on its financial statements as
shall be necessary, in the opinion of such holders’ and such
underwriters’ respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
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3.6. <I>Other Registrations. </I>If and whenever the
Company is required to use its best efforts to effect the
registration of any Registrable Securities under the Securities
Act pursuant to Section 3.1 or 3.2, and if such registration
shall not have been withdrawn or abandoned, the Company shall
not be obligated to and shall not file any registration statement
with respect to any of its securities (including Registrable
Securities and Other Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own
accord or at the request or demand of any holder or holders of
such securities, until a period of 270 days shall
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<DIV align="left">
have elapsed from the effective date of such previous
registration. The Company agrees not to effect (other than
pursuant to such registration or pursuant to a Special
Registration) any public sale or distribution, or to file any
registration statement (other than such registration or a Special
Registration) covering any, of its equity securities, or any
securities convertible into or exchangeable or exercisable for
such securities, for 180 days after, and during the
20 days prior to, the effective date of any registration
effected pursuant to Sections 3.1 or 3.2 hereunder, if so
required by the managing underwriter.
</DIV>
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3.7. <I>Indemnification.</I>
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(a) <I>Indemnification by the Company. </I>In the
event of any registration of any Registrable Securities under the
Securities Act pursuant to Section 3.1 or 3.2, the Company
will indemnify and hold harmless the seller of such securities,
its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering
or sale of such securities and each other person, if any, who
controls such seller or any such participating person within the
meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which such
seller or any such director, officer, employee, participating
person or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a fact contained in any
registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or
related thereto, or any amendment or supplement thereto, or
(ii) any omission or alleged omission to state a fact
required to be stated in any such registration statement,
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or necessary to make the statements
therein not misleading; and the Company will reimburse such
seller and each such director, officer, employee, participating
person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding,
provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or
omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such seller or
participating person expressly for use in the preparation thereof
and provided, further, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission in the prospectus, if such untrue statement or alleged
untrue statement or omission or alleged omission is completely
corrected in an amendment or supplement to the prospectus and the
seller of Registrable Securities thereafter fails to deliver
such prospectus as so amended or supplemented prior to or
concurrently with the sale of Registrable Securities to the
person asserting such loss, claim, damage, liability or expense
after the Company had furnished such seller with a sufficient
number of copies of the same or if the seller received notice
from the Company of the existence of such untrue statement or
alleged untrue statement or omission or alleged omission and the
seller continued to dispose of Registrable Securities prior to
the time of the receipt of either (A) an amended or
supplemented prospectus which completely corrected such untrue
statement or omission or (B) a notice from the Company that
the use of the existing prospectus may be resumed. Such indemnity
shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such
director, officer, employee, participating person or controlling
person and shall survive the transfer of such securities by such
seller.
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(b) <I>Indemnification by the Sellers. </I>In the
event of any registration of any Registrable Securities under the
Securities Act pursuant to Section 3.1 or 3.2, each of the
prospective sellers of such securities, will indemnify and hold
harmless the Company, each director of the Company, each officer
of the Company who shall sign such registration statement, each
other person who participates as an underwriter, broker or dealer
in the offering or sale of such securities and each other
person, if any, who controls the Company or any such
participating person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against
any and all losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer,
employee, participating person or controlling person may become
subject under the Securities
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<DIV align="left">
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged
untrue statement of a fact contained in any registration
statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein or related thereto, or any
amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written
information furnished to the Company by such seller expressly for
use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement or (ii) any omission or alleged
omission to state a fact with respect to such seller required to
be stated in any such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement or necessary to make the statements therein not
misleading; and the seller will reimburse the Company and each
such director, officer, employee, participating person and
controlling person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending
any such loss, claim, liability, action or proceeding, provided
that the liability of each such seller will be in proportion to
and limited to the net amount received by such seller (after
deducting any underwriting discount and expenses) from the sale
of Registrable Securities pursuant to such registration
statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Company or any such director, officer, participating person or
controlling person and shall survive the transfer of such
securities by such seller.
</DIV>
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(c) <I>Notices of Claims, etc. </I>Promptly after
receipt by an indemnified party of notice of the commencement of
any action or proceeding involving a claim referred to in the
preceding paragraphs of this Section 3.7, such indemnified
party will, if a claim in respect thereof is to be made against
an indemnifying party hereunder, give written notice to the
latter of the commencement of such action, provided that the
failure of any indemnified party to give notice as provided
therein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this
Section 3.7. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to
such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the
defense thereof, provided that if such indemnified party and the
indemnifying party reasonably determine, based upon advice of
their respective independent counsel, that a conflict of interest
may exist between the indemnified party and the indemnifying
party with respect to such action and that it is advisable for
such indemnified party to be represented by separate counsel,
such indemnified party may retain other counsel, reasonably
satisfactory to the indemnifying party, to represent such
indemnified party, and the indemnifying party shall pay all
reasonable fees and expenses of such counsel. No indemnifying
party, in the defense of any such claim or litigation, shall,
except with the consent of such indemnified party, which consent
shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
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(d) <I>Other Indemnification. </I>Indemnification
similar to that specified in the preceding paragraphs of this
Section 3.7 (with appropriate modifications) shall be given
by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of
such Registrable Securities under any Federal or state law or
regulation of governmental authority other than the Securities
Act.
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(e) <I>Other Remedies. </I>If for any reason the
foregoing indemnity is unavailable, or is insufficient to hold
harmless an indemnified party, other than by reason of the
exceptions provided therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party
as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other from the offering
of Registrable Securities (taking into account the portion of
the proceeds of the offering realized by each such party) or
(ii) if the allocation provided by clause (i) above is
not permitted by applicable law, or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is
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appropriate to reflect not only the relative benefits received by
the indemnifying party on the one hand and the indemnified party
on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant
equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
No party shall be liable for contribution under this
Section 3.7(e) except to the extent and under such
circumstances as such party would have been liable to indemnify
under this Section 3.7 if such indemnification were
enforceable under applicable law.
</DIV>
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(f) <I>Officers and Directors. </I>As used in this
Section 3.7, the terms “officers” and
“directors” shall include the partners of the holders
of Registrable Securities which are partnerships and the trustees
and beneficiaries of the holders of Registrable Securities which
are trusts.
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4. <I>Miscellaneous.</I>
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4.1. <I>Rule 144; Legended Securities; etc.</I>
<P align="left">
(a) The Company shall file the reports required to be filed
by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder (or, if the
Company is not required to file such reports, it shall, upon the
request of any holder of Registrable Securities, make publicly
available such information as necessary to permit sales pursuant
to Rule 144 or Rule 145), and shall take such further
action as any such holder may reasonably request, all to the
extent required from time to time to enable such holder to sell
shares of Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided
by Rule 144 or Rule 145. Upon the request of any holder
of Registrable Securities, the Company shall deliver to such
holder a written statement as to whether it has complied with
such requirements.
<P align="left">
(b) The Company shall issue new certificates for
Registrable Securities without a legend restricting further
transfer if (i) such securities have been sold to the public
pursuant to an effective registration statement under the
Securities Act (other than Form S-8 if the holder of such
Registrable Securities is an Affiliate of the Company) or
Rule 144, or (ii) (x) such issuance is otherwise
permitted under the Securities Act, (y) the holder of such
shares has delivered to the Company an opinion of counsel to such
effect and (z) the holder of such shares expressly requests
the issuance of such certificates in writing.
<P align="left">
4.2. <I>Amendments and Waivers. </I>This Agreement
may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of
the holder or holders of at least 66% of the shares then
constituting Registrable Securities. Each holder of any
Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this
Section 4.2, whether or not such Registrable Securities
shall have been marked to indicate such consent. No amendment,
modification or discharge of this Agreement, and no waiver
hereunder, shall be valid or binding unless set forth in writing.
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 or parties granting such waiver
in any other respect or at any other time.
<P align="left">
4.3. <I>Nominees for Beneficial Owners. </I>In the
event that any Registrable Securities are held by a nominee for
the beneficial owner thereof, the beneficial owner thereof may,
at its election and unless notice is otherwise given to the
Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other
action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any holder
or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities
so elects, the Company may require assurances reasonably
satisfactory to it of such owner’s beneficial ownership of
such Registrable Securities.
<P align="left">
4.4. <I>Successors, Assigns and Transferees. </I>This
Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and
assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are
for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any
subsequent
<P align="center">13
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<P><HR noshade><P>
<DIV align="left">
holder of any Registrable Securities, subject to the provisions
respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to
certain rights, or take certain actions, contained herein.
</DIV>
<P align="left">
4.5. <I>Notices. </I>All notices and other
communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given if delivered personally or sent by certified or express
mail, return receipt requested, postage prepaid, or by any
recognized international equivalent of such delivery, to the
Company, the Fund or the other parties hereto, as the case may
be, at the following addresses or to such other address as the
Company, the Fund or the other parties hereto, as the case may
be, shall specify by notice to the others:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(i) if to the Company, to it at:</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="10%"></TD>
<TD width="90%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Complete Business Solutions, Inc. <BR>
32605 West Twelve Mile Road <BR>
Farmington Hills, Michigan 48334-3339 <BR>
Attention: General Counsel</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="3%"></TD>
<TD width="97%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(ii) if to the other parties hereto, to the address of such
party set forth on the signature page hereof.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(iii) if to the Shareholders, to:</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="10%"></TD>
<TD width="90%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The Clayton & Dubilier Private Equity <BR>
Fund VI Limited Partnership <BR>
Foulkstone Plaza, Suite 102 <BR>
1403 Foulk Road <BR>
Wilmington, Delaware 19803</TD>
</TR>
</TABLE>
<P align="left">
All such notices and communications shall be deemed to have been
received on the date of delivery if delivered personally or on
the third business day after the mailing thereof. Copies of any
notice or other communication given under this Agreement shall
also be given to:
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="10%"></TD>
<TD width="90%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Clayton, Dubilier & Rice, Inc. <BR>
375 Park Avenue, 18th Floor <BR>
New York, New York 10152 <BR>
Attention: Kevin Conway</TD>
</TR>
</TABLE>
<P align="left">
and
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="10%"></TD>
<TD width="90%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Debevoise & Plimpton <BR>
875 Third Avenue <BR>
New York, New York 10022 <BR>
Attention: Franci J. Blassberg, Esq.</TD>
</TR>
</TABLE>
<P align="left">
4.6.<I> No Inconsistent Agreements.</I> The Company
will not hereafter enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the
holders of Registrable Securities by this Agreement.
<P align="left">
4.7.<I> Remedies.</I> Each holder of Registrable
Securities, in addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages,
will be entitled to specific performance of its rights under
this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a
breach by it of any provision of this Agreement and hereby
agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
<P align="left">
4.8.<I> Stock Splits, etc.</I> Each party hereto
agrees that it will vote to effect a stock split (forward or
reverse, as the case may be) with respect to any Registrable
Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing
underwriter shall advise the Company in writing (or, in
connection with an offering that is not underwritten, if an
investment banker shall advise the Company in writing) that in
their or its opinion such a stock split would facilitate or
increase the likelihood of
<P align="center">14
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<DIV align="left">
success of the offering. Each party hereto agrees that any number
of shares of Common Stock referred to in this Agreement shall be
equitably adjusted to reflect any stock split, stock dividend,
stock combination, recapitalization or similar transaction.
</DIV>
<P align="left">
4.9.<I> Term.</I> This Agreement shall be effective
as of the date hereof and shall continue in effect thereafter
until the earliest of (a) its termination by the consent of
the parties hereto or their respective successors in interest,
(b) the date on which no Registrable Securities remain
outstanding, (c) the dissolution, liquidation or winding up
of the Company and (d) the tenth anniversary of the date
hereof.
<P align="left">
4.10.<I> Severability.</I> If any provision of this
Agreement is inoperative or unenforceable for any reason, such
circumstances shall not have the effect of rendering the
provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever. The invalidity of any one
or more phrases, sentences, clauses, Sections or subsections of
this Agreement shall not affect the remaining portions of this
Agreement.
<P align="left">
4.11.<I> Headings.</I> The headings contained in this
Agreement are for purposes of convenience only and shall not
affect the meaning or interpretation of this Agreement.
<P align="left">
4.12.<I> Counterparts.</I> This Agreement may be
executed in several counterparts, each of which shall be deemed
an original and all of which together constitute one and the same
instrument.
<P align="left">
4.13.<I> Governing Law.</I> This agreement shall be
governed in all respects, including as to validity,
interpretation and effects, by the laws of the State of New York,
without giving effect to its principles or rules of conflict of
laws to the extent such principles or rules would require or
permit the application of the laws of another jurisdiction. The
parties hereto hereby irrevocably submit to the jurisdiction of
the federal courts of the united states of America, in each case
located in the State, City and County of New York, solely in
respect of the interpretation and enforcement of the provisions
of this agreement, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the
interpretation or enforcement hereof, that it is not subject
thereto or 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 may not be
enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding
shall be heard and determined in such a New York federal court.
The parties hereto hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject
matter of any such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in
the manner provided in Section 4.5, or in such other manner
as may be permitted by law, shall be valid and sufficient service
thereof.
<P align="left">
4.14.<I> Waiver of Jury Trial.</I> (A) Each of
the parties hereto irrevocably and unconditionally
(i) agrees that any legal suit, action or proceeding brought
by any party hereto arising out of or based upon this agreement
or the transactions contemplated hereby may be brought in the
courts of New York, in the County of New York, or the United
States District Court for the Southern District of New York
(each, a “New York Court”), (ii) waives, to the
fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of venue of any such
proceeding brought in any New York Court, and any claim that any
such action or proceeding brought in any New York Court has been
brought in an inconvenient forum, and (iii) submits to the
non-exclusive jurisdiction of New York Courts in any suit, action
or proceeding. Each of the parties agrees that a judgment in any
suit, action or proceeding brought in a New York Court shall be
conclusive and binding upon it and may be enforced in any other
courts to whose jurisdiction it is or may be subject, by suit
upon such judgment.
<P align="left">
(B) Each of the parties agrees and acknowledges that any
controversy that may arise under this Agreement is likely to
involve complicated and difficult issues, and therefore each such
party hereby irrevocably and unconditionally waives any right
such party may have to a trial by jury in respect of any
litigation directly or indirectly arising out of or relating to
this Agreement, or the breach, termination or validity of this
agreement.
<P align="center">15
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<P><HR noshade><P>
<P align="left">
4.15.<I> No Third Party Beneficiaries.</I> Except as
provided in Sections 3.7 and 4.4, nothing in this Agreement
shall confer any rights upon any person or entity other than the
parties hereto, each such party’s respective successors and
permitted assigns.
<P align="left">
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf
as of the date first written above.
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
COMPLETE BUSINESS SOLUTIONS, INC.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="4%"></TD>
<TD width="58%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ TIMOTHY S. MANNING</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name: Timothy S. Manning</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title: Executive Vice President</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
CD&R-COOKIE ACQUISITION L.L.C.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="4%"></TD>
<TD width="58%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ KEVIN J. CONWAY</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Name: Kevin J. Conway</TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Title: President</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
CD&R-COOKIE ACQUISITION VI-A L.L.C.</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="4%"></TD>
<TD width="58%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD>By: </TD>
<TD align="left">
/s/ KEVIN J. CONWAY</TD>
</TR>
</TABLE>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
<HR size="1" align="left"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
[Address]</TD>
</TR>
</TABLE>
<P align="center">16
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<P align="right"><B>Appendix IV</B>
<P align="left">
<!-- link1 "COMPLETE BUSINESS SOLUTIONS, INC." -->
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="center">
<B>COMPLETE BUSINESS SOLUTIONS, INC.</B></TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="center">
<B>STOCK OPTION PLAN</B></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="center">
<B>(As amended April 20, 2000)</B></TD>
</TR>
</TABLE>
<P align="left"><B>1. Establishment of Plan</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The Complete Business Solutions, Inc. Stock Option Plan (the
“Plan”) was formulated by Complete Business Solutions,
Inc. (the “Company”) to encourage employees of the
Company and its subsidiaries to acquire common stock in the
Company through Incentive Stock Options (as hereinafter defined)
and to permit the Company to offer Nonqualified Options (as
hereinafter defined) to persons including without limitation
directors, consultants and employees of the Company. It is
believed that the Plan will encourage such employees and other
persons to have a greater financial investment in the Company
through ownership of its common stock, will further stimulate
their efforts on the Company’s behalf, will tend to maintain
and strengthen their desire to remain with the Company, and
generally will be in the best interests of the Company and its
shareholders.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The following is a statement of the Plan, as adopted by the Board
of Directors on July 10, 1996 and approved by the
shareholders on September 10, 1996.</TD>
</TR>
</TABLE>
<P align="left"><B>2. Types of Options</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Options granted under the Plan may be of two types: (a)
“Incentive Stock Options” designed to comply with the
requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”) and (b) other
options (“Nonqualified Options”). Eligible Employees
(as defined in Section 14) under the Plan may be granted
either Incentive Stock Options, Nonqualified Options, or both but
the nature of each option shall be clearly designated at the
time of the grant. Persons who are not Employees of the Company
on the date of grant may only be granted Nonqualified Options. To
the extent that any option designated as an “Incentive
Stock Option” under the Code, on the date of grant, shall
fail, for any reason whatsoever, to qualify for treatment as an
“Incentive Stock Option” under the Code, such option
shall not lapse or terminate, but shall become a Nonqualified
Option for purposes of the Plan and the Code.</TD>
</TR>
</TABLE>
<P align="left"><B>3. Amount of Stock Subject to the Plan</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The total number of shares of common stock of the Company which
may be sold pursuant to options granted under the Plan from its
date of inception and pursuant to previously granted nonqualified
options shall not exceed 13,247,454. The shares sold under the
Plan may be either authorized and unissued stock or treasury
stock. In the event that any options granted under the Plan shall
terminate or expire for any reason without having been exercised
in full, the shares not purchased under the options shall be
available again for the purposes of the Plan.</TD>
</TR>
</TABLE>
<P align="left"><B>4. Administration</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Except as herein otherwise provided, the Plan shall be
administered by the Board of Directors (the “Board”) or
under the supervision and on behalf of the Board of Directors of
the Company by a Committee (the “Committee”) composed
of two or more directors who shall be appointed and may be
removed by a majority vote of the Board of Directors. Subject to
the express provisions of the Plan, the Board or the Committee
shall have authority in its discretion to determine the Employees
to receive Incentive Stock Options and Employees or other
persons to receive Nonqualified Options, the times when they
shall receive them, the option price and term of each option, the
period during which each option may be exercised, and the number
of shares to be subject to each option.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Subject to the express provisions of the Plan, the Board or the
Committee shall also have authority to construe the respective
option agreements and the Plan, to prescribe, amend and rescind
rules and regulations</TD>
</TR>
</TABLE>
<P align="center">
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<P><HR noshade><P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
relating to the Plan, to determine the fair market value of any
stock subject to the Plan, to determine the terms and provisions
of the respective option agreements (which need not be uniform)
and to make all other determinations necessary or advisable for
administering the Plan. The Board or the Committee may correct
any defect or supply any omission or reconcile any inconsistency
in the Plan or in any option agreement, in the manner and to the
extent that it shall deem necessary to carry it into effect, and
it shall be the sole and final judge of such correction. The
determination of the Board or the Committee on the matters
referred to in this paragraph shall be conclusive and binding on
the Company and the persons to whom options are granted.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
An option granted to a director, an option agreement, other
contract or other transaction under the Plan between the Company
and a director, or any other action taken by the Board or the
Committee under the Plan in which a director is otherwise
interested is not void or voidable solely because of such
interest, or solely because any such director is present at the
meeting of the Board or the Committee which authorizes or
approves any such option, option agreement, contract, transaction
or action, or solely because his vote is counted for such
purposes, if any of the following conditions is satisfied:</TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="41%"></TD>
<TD width="59%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(a) the option, option agreement, contract, transaction or
other action is fair and reasonable to the Company when it is
authorized, approved or ratified;</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(b) the material facts as to any such director’s
relationship or interest as to the option, option agreement,
contract, transaction or action are disclosed or known to the
Board or the Committee and the Board or the Committee authorizes,
approves or ratifies the option, option agreement, contract,
transaction or action by a vote sufficient for the purpose
without counting the vote of any such director, or</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
(c) the material facts as to any such director’s
relationship or interest and as to the option, option agreement,
contract, transaction or action are disclosed or known to the
shareholders and they authorize, approve or ratify the option or
transaction.</TD>
</TR>
</TABLE>
<P align="left"><B>5. Eligibility</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Only Employees shall be eligible to receive Incentive Stock
Options under the Plan. Employees and other persons shall be
eligible to receive Nonqualified Options under the Plan. An
Employee or other person who has been granted an option under the
Plan or any other stock option plan of the Company may be
granted additional options.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
No Incentive Stock Option shall be granted under the Plan to any
individual who, immediately before such option is granted, owns
stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or
its parent or subsidiary corporations, with the application of
the constructive attribution rules of Section 424 of the
Code. However, the foregoing restriction on granting of Incentive
Stock Options shall not apply it at the time the option is
granted the option price is at least 110% of the fair market
value of the stock subject to the option and such option by its
terms is not exercisable after the expiration of five years from
the date such option is granted. The aggregate fair market value
of the stock (determined at the time the option is granted) with
respect to which Incentive Stock Options granted to an individual
first become exercisable in any calendar year (under all plans
of the Company or any of its parent or subsidiary corporations)
shall not exceed $100,000.</TD>
</TR>
</TABLE>
<P align="left"><B>6. Option Prices and Payment</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The purchase price of each share of common stock provided under
each Incentive Stock Option granted pursuant to the Plan shall be
a price not less than the greater of the par value of the stock
or the fair market value of the stock on the date of the granting
of the Incentive Stock Option as is determined in good faith by
the Board or the Committee. The consideration to be paid for the
Shares to be issued upon exercise of an Option or pursuant to a
Sale, including the method of payment, shall be determined by the
Board and may consist entirely of cash, check, promissory note,
or other Shares having a fair market value on the date of
surrender equal to the aggregate exercise purchase price of the
Shares as to which said option shall be exercised or sale
consummated, or any combination of such methods of payment for
the issuance of shares.</TD>
</TR>
</TABLE>
<P align="center">2
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The proceeds of the sale of stock, subject to the options, are to
be added to the general funds of the Company and used for its
corporate purposes.</TD>
</TR>
</TABLE>
<P align="left"><B>7. Period of Option and Certain Limitations on the Right
to Exercise</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
The period of time which the Employee must remain in the
continuous employ of the Company or a parent or subsidiary of the
Company and the period of time other optionees must wait from
the date the options are granted before they can exercise any
part of the option shall be determined by the Board or the
Committee and shall be contained in the stock option agreement
between each such holder and the Company. In no event, may an
Employee or other optionee exercise any option granted under the
Plan after that date which is more than ten (10) years from
the date of the grant or after such earlier date as may be
provided herein. At the time of the exercise of the option, the
holder of the option (or the purchaser acting under
Section 11 below) may be required to represent to the
Company that (1) at that time of exercise it is such
holder’s present intention to acquire the shares for
investment and not with a view to distributing the shares and
(2) neither the option nor any shares acquired upon exercise
of the option will be sold or otherwise transferred unless such
transaction is registered under the Securities Act of 1933 and
any applicable state securities laws or an exemption from such
registration is available.</TD>
</TR>
</TABLE>
<P align="left"><B>8. Nontransferability of Options</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
No option granted under the Plan shall be transferable, otherwise
than by Will or by the laws of descent and distribution, nor
shall any option be pledged or hypothecated in any way (whether
by operation of law or otherwise). An option may be exercised
during the lifetime of its holder only by such holder. Any
attempt to circumvent this Section shall cause the option and the
rights and privileges conferred by the option to become
automatically null and void.</TD>
</TR>
</TABLE>
<P align="left"><B>9. Exercise of Option</B>
<P align="left"><B> </B>a). <I>Procedure for Exercise</I>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Any Option granted under this Plan shall be exercisable at such
times and under such conditions as determined by the Board or the
Compensation Committee, including performance criteria with
respect to the Company and/ or the Optionee, and as shall be
permissible under the terms of the Plan.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
An Option may not be exercised for a fraction of a Share.</TD>
</TR>
<TR>
<TD> </TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full
payment, as authorized by the Board, may consist of any
consideration and method of payment allowable under
Section 6 of the Plan. Each Optionee who exercises an Option
shall, upon notification of the amount due (if any) and prior to
or concurrent with delivery of the certificate representing the
Shares, pay to the Company amounts necessary to satisfy
applicable federal, state and local tax withholding requirements.
An Optionee must also provide a duly executed copy of any stock
transfer agreement. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock
certificate evidencing such shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with
respect to the stock received from exercising such options. No
adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is
issued.</TD>
</TR>
</TABLE>
<P align="left"><B>10. Termination of Employment</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Upon the termination of the employment of the holder of an option
for reasons other than death or disability, the rights of such
holder shall be those contained in his stock option agreement.
Incentive Stock Options granted under the Plan shall not be
affected by any change of employment if the holder continues to
be an Employee. Option agreements may contain such provisions as
the Board or the Committee shall approve</TD>
</TR>
</TABLE>
<P align="center">3
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
regarding the effect of leaves of absence guaranteed by statute
or contract. Nothing in the Plan or in any option granted under
it shall confer any right to continue in the employ of the
Company or any of its subsidiaries or interfere in any way with
the right of the Company or any of its subsidiaries to terminate
any employment at any time.</TD>
</TR>
</TABLE>
<P align="left"><B>11. Death or Disability of Holder of Option</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
In the event of the death or disability of a holder of an option
under the Plan, the option theretofore granted to him may be
exercised after is death or disability by his estate or is legal
representative if the option would have otherwise been
exercisable by him and, in the case of Incentive Stock Options,
if he was employed by the Company at the time of death or
disability and the Incentive Stock Option is exercised within
three months after the termination of employment because of death
or one year after the termination of employment because of
disability. Notwithstanding the foregoing, all options must be
exercised during the option term and also subject to all the
conditions of the Plan.</TD>
</TR>
</TABLE>
<P align="left"><B>12. Adjustments Upon Changes in Capitalization, etc.</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Notwithstanding any other provision of the Plan, in the event of
any change in the outstanding common stock of the Company by
reason of a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, split-off, spin-off,
combination, or exchange of shares, and the like, the aggregate
number and class of shares available under the Plan and the
number and class of shares subject to each outstanding option and
the option prices shall be appropriately adjusted by the Board
or the Committee whose determination shall be conclusive and in
accordance with each Option Agreement. In the event of any
merger, consolidation, or sale or transfer by the Company of
substantially all its assets, the date of termination of any
options outstanding under the Plan and the date on or after which
such options, or any portion of such options not then
exercisable, may be exercised, shall be advanced to a date to be
fixed by the Board or the Committee, which date shall not be more
than 15 days prior to such merger, consolidation or sale or
transfer; provided that the Company or the shareholders of the
Company, immediately after the transaction: (1) will not own
more than 50% of the voting power of the corporation surviving
the transaction; or (2) if the Company and the other
corporation both survive the transaction, will not own more than
50% of the voting power of the Company and more than 50% of the
corporation or business acquired.</TD>
</TR>
</TABLE>
<P align="left"><B>13. Amendment and Termination</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
Unless the Plan theretofore shall have been terminated as
hereinafter provided, the Plan shall terminate on
December 31, 2006 and no option under it shall be granted
thereafter. The Board of Directors of the Company at any time
prior to that date may terminate the Plan, or make such changes
in it and additions to it as the Board of Directors of the
Company shall deem advisable; provided that, to the extent
required by Section 422 of the Code, any such amendments
shall be approved by the shareholders within 12 months of
their adoption by the Board of Directors in order to be
effective. No termination or amendment of the Plan may, without
the consent of the holder of an option then existing, terminate
his option or materially and adversely affect his rights under
the option.</TD>
</TR>
</TABLE>
<P align="left"><B>14. Definition of Employee</B>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
<TD width="38%"></TD>
<TD width="62%"></TD>
</TR>
<TR valign="top">
<TD> </TD>
<TD align="left">
For purposes of the Plan, the term “Employee” means
regular employees of the Company and its parents or subsidiaries,
who are executive, managerial or other salaried employees,
including officers, whether or not directors of the Company.</TD>
</TR>
</TABLE>
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<P align="center"><B>COMPLETE BUSINESS SOLUTIONS, INC.</B>
<P align="center"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS</B>
<P>The undersigned shareholder of Complete Business Solutions, Inc. appoints
Timothy S. Manney, Thomas E. Sizemore and Rajendra B. Vattikuti or any of them,
proxies for the undersigned, with full power of substitution, to vote the capital
stock of the Company which the undersigned would be entitled to vote as of the
close of business on May 15, 2000 at the Annual Meeting of Shareholders to be
held on Tuesday, July 11, 2000.
<P align="center"><B>CONTINUED AND TO BE SIGNED ON THE OTHER SIDE</B>
Please mark your
votes as in this
example.
IF NO CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF MANAGEMENT'S FOUR NOMINEES AS DIRECTORS.
1. Approve the second step of the Investment by 4. Ratify appointment of Arthur Andersen LLP
Clayton, Dubilier & Rice as independent auditors for fiscal year
2000
For Against For Against
2. Amend the 1996 Stock Option Plan
For Against
3. Election of Directors
Nominees:
Rajendra B. Vattikuti
Kevin J. Conway
Ned C. Lautenbach
David H. Wasserman
For, Except vote withheld from the following nominee(s):
____________________________
The Undersigned hereby acknowledges
receipt of the Notice of Annual
Meeting of Shareholders and the
Proxy Statement furnished
therewith.
PLEASE FILL IN DATE, SIGN AND MAIL
THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
___________________________________
Note: Please sign name exactly as
your name appears on the Stock
Certificate. When signing as ___________________________________
attorney, executor, administrator, SIGNATURES DATE
trustee or guardian please give
full title. If more than one
trustee, all should sign. All joint
owners must sign.
<P align="center">
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<P align="center"><B>Admission Ticket</B>
<P align="center">Complete Business Solutions, Inc.
<P align="center"><B>Annual Meeting of Shareholders</B>
<P align="center">Tuesday, July 11, 2000 at 9:30 AM<BR>
The Detroit Athletic Club<BR>
241 Madison Avenue<BR>
Detroit, MI 48226
<P> This ticket admits the named Shareholder(s) and one guest. Photocopies
will not be accepted. You may be asked for identification at the time of
admission.
<P align="center">
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