Stock Exchange Agreement

EXHIBIT 10.1


AGREEMENT FOR THE EXCHANGE OF SHARES


BETWEEN


THE RAJENDRA B. VATTIKUTI TRUST UAD
DATED OCTOBER 19, 1990, AS AMENDED


AND


COMPLETE BUSINESS SOLUTIONS, INC.


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TABLE OF CONTENTS ARTICLE ONE - DEFINITIONS................................................................................1
1.1 1933 Act........................................................................................1
1.2 Affiliate.......................................................................................2
1.3 Agreement.......................................................................................2
1.4 Buyer...........................................................................................2
1.5 CBSI............................................................................................2
1.6 CBSI Competitive Activity.......................................................................2
1.7 CBSI Plan.......................................................................................2
1.8 CBSI Superior Proposal..........................................................................2
1.9 Closing.........................................................................................2
1.10 Closing Date.................................................................................2
1.11 COBRA........................................................................................2
1.12 Code.........................................................................................2
1.13 Code Section 125 Plan........................................................................3
1.14 ERISA........................................................................................3
1.15 Exchange Common Stock........................................................................3
1.16 Financial Advisor............................................................................3
1.17 Indemnified Party............................................................................3
1.18 Indemnifying Party...........................................................................3
1.19 Indemnity Claim..............................................................................3
1.20 Knowledge....................................................................................3
1.21 Losses.......................................................................................3
1.22 Special Committee............................................................................4
1.23 Synova.......................................................................................4
1.24 Synova Common Stock..........................................................................4
1.25 Synova Competitive Activity..................................................................4
1.26 Threshold Amount.............................................................................4
1.27 Welfare Plan.................................................................................4


ARTICLE TWO - EXCHANGE OF SHARES.........................................................................4
2.1 Exchange of Shares..............................................................................4


ARTICLE THREE - THE CLOSING..............................................................................4
3.1 Time and Place of Closing.......................................................................4
3.2 Action to Be Taken..............................................................................5
3.3 Further Assurances..............................................................................5


ARTICLE FOUR - REPRESENTATIONS AND WARRANTIES OF CBSI....................................................5
4.1 Title to Shares.................................................................................5
4.2 Organization....................................................................................5
4.3 Necessary Authorization and Approval............................................................6
4.4 Third Party Consents and Approvals..............................................................6
4.5 Organization, Powers and Capitalization of Synova...............................................6


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4.6 Subsidiaries and Joint Ventures.................................................................6
4.7 Books and Records...............................................................................7
4.8 Tax Matters.....................................................................................7


ARTICLE FIVE - REPRESENTATIONS AND WARRANTIES OF BUYER...................................................7
5.1 Title to Common Stock...........................................................................7
5.2 Necessary Authorization or Approvals............................................................7
5.3 Third Party Consents and Approvals..............................................................8
5.4 Purchase for Investment.........................................................................8
5.5 Tax Matters.....................................................................................8


ARTICLE SIX - AGREEMENTS OF BUYER, CBSI AND SYNOVA.......................................................9
6.1 Consents; Preservation of Business..............................................................9
6.2 Reasonable Efforts..............................................................................9
6.3 Course of Conduct...............................................................................9
6.4 Trade Secrets...................................................................................9
6.5 Information.....................................................................................9
6.6 Non-Competition................................................................................10
6.7 Specific Enforcement...........................................................................11
6.8 Benefit Plans..................................................................................11
6.9 Additional Covenants of CBSI...................................................................12
6.10 Additional Covenants of Buyer and Synova....................................................12
6.11 Further Assurances..........................................................................12


ARTICLE SEVEN - CONDITIONS OF CLOSING...................................................................13
7.1 Conditions Precedent to the Obligations of the Buyer...........................................13
7.2 Conditions Precedent to the Obligations of CBSI................................................14


ARTICLE EIGHT - SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...........................................................................................15
8.1 Representations and Warranties.................................................................15
8.2 Survival of Covenants..........................................................................16


ARTICLE NINE - INDEMNIFICATION..........................................................................16
9.1 Indemnification By CBSI........................................................................16
9.2 Indemnification by Buyer.......................................................................16
9.3 Indemnification by Synova......................................................................16
9.4 Delivery of Claims Notice......................................................................17
9.5 Obligation to Defend...........................................................................17
9.6 Time Period for Asserting Indemnification......................................................17


ARTICLE TEN - TERMINATION OF AGREEMENT PRIOR TO CLOSING
DATE...............................................................................................18
10.1 Termination by Buyer or CBSI................................................................18
10.2 Termination by Buyer........................................................................18


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10.3 Termination by CBSI.........................................................................18
10.4 Effect of Termination.......................................................................19


ARTICLE ELEVEN - GENERAL................................................................................19
11.1 Amendment or Waiver.........................................................................19
11.2 Governing Law...............................................................................19
11.3 Brokers.....................................................................................19
11.4 Notices.....................................................................................20
11.5 Article, Section and Paragraph Headings.....................................................21
11.6 Counterparts................................................................................21
11.7 Successors and Assigns......................................................................21
11.8 Entire Agreement............................................................................21


SCHEDULE 4.4 Third Party Consents and Approvals..............................................23


SCHEDULE 6.6(b) Buyer Exceptions to Non-competition.............................................24


EXHIBIT 6.8(a)(i) Agreement.......................................................................25


SCHEDULE 6.9 Services Provided By CBSI.......................................................26


EXHIBIT 7.2(h) Synova Promissory Note..........................................................27


EXHIBIT 7.2(i)(a) Trust Guaranty..................................................................28


EXHIBIT 7.2(i)(b) Trust Pledge....................................................................29


EXHIBIT 7.2(i)(c) Trust Assignment Separate From Certificate......................................30


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AGREEMENT FOR THE EXCHANGE OF SHARES


This Agreement For The Exchange Of Shares dated September 25, 2000, is by and among The Rajendra B. Vattikuti Trust UAD Dated October 19, 1990, as amended, as Buyer, Synova, Inc., a Michigan corporation (only with respect to Articles Six, Eight, Nine and Eleven) and Complete Business Solutions, Inc., a Michigan corporation. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the meanings given to them in Article One.


RECITALS


A. CBSI is the owner of all of the issued and outstanding capital stock of Synova, Inc., a Michigan corporation.


B. Buyer is the record and beneficial owner of 9,361,759 outstanding shares of CBSI Common Stock.


C. CBSI and Buyer wish to complete a transaction pursuant to which Buyer would become the owner of all of the issued and outstanding capital stock of Synova and would surrender to CBSI 750,000 shares of CBSI Common Stock owned by Buyer, on the terms and conditions set forth herein.


D. The Special Committee, based in part upon a fairness opinion received from the Financial Advisor, has approved, deemed it to be in the best interests of the shareholders of CBSI, and recommended to the Board of Directors of CBSI, that CBSI sell and transfer all of the issued and outstanding capital stock of Synova to Buyer upon the terms and conditions set forth in this Agreement.


E. The Board of Directors of CBSI, based on the unanimous recommendation of the Special Committee, has approved and deems it advisable and in the best interests of the shareholders of CBSI to sell and transfer all of the issued and outstanding capital stock of Synova to Buyer as contemplated by this Agreement.


F. The parties intend that the transaction contemplated hereunder qualify as a non-taxable spin-off pursuant to the provisions of Section 355 of the Code and the rules and regulations promulgated thereunder.


NOW THEREFORE, in consideration of the mutual agreements, covenants and provisions herein contained, the parties agree as follows:


ARTICLE ONE
DEFINITIONS


As used herein, the following capitalized terms shall have the following meanings:


1.1 "1933 ACT" means the Securities Act of 1933, as amended.


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1.2 "AFFILIATE" of a person means a person who controls, is controlled by, or is under common control with such person. For purposes of this definition, "control" means the ability to control the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise.


1.3 "AGREEMENT" means this Agreement For The Exchange Of Shares.


1.4 "BUYER" means The Rajendra B. Vattikuti Trust UAD dated October 19, 1990, as amended, and Rajendra B. Vattikuti, as Trustee, and individually.


1.5 "CBSI" means Complete Business Solutions, Inc., a Michigan corporation.


1.6 "CBSI COMPETITIVE ACTIVITY" means information technology services, including: (a) emerging technologies; (b) information technology consulting; (c) systems applications development and maintenance; (d) reengineering legacy applications to client/server technology; (e) client/server applications development; (f) packaged software implementation; and (g) web integration activities; which are delivered either onsite at the client facility, offsite at a local development facility or at an offshore development facility; provided that CBSI Competitive Activity does not include information technology contract programming services in the foregoing areas if such services are not provided to clients or customers by Synova on a project basis in which Synova contracts to supply deliverables.


1.7 "CBSI PLAN" means a tax-qualified Code Section 401(k) defined contribution plan sponsored by CBSI in which Synova is a contributing employer.


1.8 "CBSI SUPERIOR PROPOSAL" means any proposal which the Board determines in its good faith judgment, based on consultation with the Financial Advisor or any other investment banking firm of national reputation and outside counsel, is more favorable to CBSI's shareholders than the transactions contemplated by this Agreement, considering all factors, including without limitation the net after tax proceeds or economic benefit to CBSI which would result from such proposal.


1.9 "CLOSING" means the consummation of the transactions contemplated by this Agreement.


1.10 "CLOSING DATE" means September 28, 2000, at 10:00 a.m., or such other date as may be mutually agreed upon by CBSI and Buyer.


1.11 "COBRA" means Section 4980B of the Code and Section 601, et seq, of ERISA.


1.12 "CODE" means the Internal Revenue Code of 1986, as amended.


1.13 "CODE SECTION 125 PLAN" means any flexible benefits plan within the meaning of Code Section 125.


1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C.ss.1001 et seq.).


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1.15 "EXCHANGE COMMON STOCK" means 750,000 shares of the CBSI Common Stock owned by Buyer on the Closing Date.


1.16 "FINANCIAL ADVISOR" means Legg Mason Wood Walker Incorporated.


1.17 "INDEMNIFIED PARTY" means any person entitled to be indemnified under Article Nine.


1.18 "INDEMNIFYING PARTY" means any person required to provide indemnification under Article Nine.


1.19 "INDEMNITY CLAIM" means the following:


(a) any claim of a party resulting from


(i) any breach of the representations and warranties given by
the other party or parties under this Agreement;


(ii) the non-fulfillment of any covenants of the other party
or parties contained in this Agreement or in any agreement or document
to be delivered pursuant to this Agreement; or


(iii) any other material breach by the other party or parties
of the terms of this Agreement or any agreement or document to be
delivered pursuant to this Agreement.


1.20 "KNOWLEDGE" or "to the knowledge" of any person, or words of similar import, mean the actual knowledge of such person after due inquiry, where, if such person is a corporation, inquiry was made of senior executive level employees, officers or directors of such person who would reasonably be expected to know the matters within the scope of the representation or warranty in question.


1.21 "LOSSES" means any and all loss, cost, damage (including without limitation consequential damages) or expense arising or resulting from any Indemnity Claim, including but not limited to reasonable fees and disbursements of counsel, accountants and other experts, incident to any and all actions, suits, demands, assessments and judgments related to any claim made hereunder, but excluding amounts for which Synova or CBSI has recovered proceeds under any insurance policy or third party guaranty, indemnity or other obligation.


1.22 "SPECIAL COMMITTEE" means the Special Committee of the Board of Directors of CBSI, which was appointed for the purpose of evaluating the acquisition of Synova by Buyer.


1.23 "SYNOVA" means Synova., Inc., a Michigan corporation.


1.24 "SYNOVA COMMON STOCK" means 100 shares of the common stock, without par value, of Synova, which shares constitute, and will constitute on the Closing Date, all of the issued and outstanding capital stock of Synova.


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1.25 "SYNOVA COMPETITIVE ACTIVITY" means information technology programming services provided to customers or clients on an hourly or per diem basis, which are delivered either onsite at the client facility or offsite at a North American development facility (but not a development facility located outside of North America) and which do not include services provided to clients or customers on a project basis in which Synova contracts to supply deliverables.


1.26 "THRESHOLD AMOUNT" means $500,000.


1.27 "WELFARE PLAN" means any employee welfare benefit plan as defined in ERISA Section 3(1).


ARTICLE TWO
EXCHANGE OF SHARES


2.1 EXCHANGE OF SHARES. Subject to the terms and conditions herein contained, including the conditions set forth in Section 7.1 and 7.2 hereof:


(a) Buyer agrees to assign and transfer to CBSI on the Closing Date the Exchange Common Stock, free and clear of any lien, encumbrance, equity or adverse claim; and


(b) CBSI agrees to assign and transfer to Buyer on the Closing Date the Synova Common Stock, free and clear of any lien, encumbrance, equity or adverse claim.


It is the intention of the parties that the exchange referenced in this Section 2.1 qualify as a nontaxable transaction pursuant to the provisions of Section 355 of the Code and the regulations promulgated thereunder. The parties will take all steps as are reasonably necessary or appropriate to satisfy the requirements of Section 355 of the Code and such regulations, including but not limited to, preparation and timely submission of the information required by Treas. Reg.ss.1.355-5.


ARTICLE THREE
THE CLOSING


3.1 TIME AND PLACE OF CLOSING. Unless this Agreement is earlier terminated as hereinafter provided, the Closing shall be held at the offices of Butzel Long in Detroit, Michigan, on the Closing Date or at such other place and at such other time as may be mutually agreed upon by CBSI and Buyer.


3.2 ACTIONS TO BE TAKEN. The following actions shall be taken at the Closing:


(a) Buyer shall deliver to CBSI certificates representing the Exchange Common Stock, duly endorsed for transfer, or with appropriate stock powers attached.


(b) CBSI shall deliver to Buyer certificates representing the Synova Common Stock, duly endorsed for transfer, or with appropriate stock powers attached.


3.3 FURTHER ASSURANCES. Buyer agrees that after the Closing Date, upon the request of CBSI, Buyer will from time to time execute and deliver to CBSI all such instruments and documents as shall be necessary to vest in CBSI title to and possession of the Exchange Common


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9 Stock or to otherwise effectuate the transactions contemplated in this Agreement. CBSI agrees that after the Closing Date, upon the request of Buyer, it will from time to time execute and deliver to Buyer all such instruments and documents as shall be necessary to vest in Buyer title to and possession of the Synova Common Stock or to otherwise effectuate the transactions contemplated in this Agreement.


ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF CBSI


CBSI warrants to Buyer that the representations and warranties set forth herein are true and correct as of the date of this Agreement and will be true and correct on the Closing Date as if made on that date.


4.1 TITLE TO SHARES. CBSI has valid and full legal title to the Synova Common Stock, free and clear of any lien, encumbrance, equity or adverse claim. The Synova Common Stock constitutes the only capital stock of Synova issued and outstanding. CBSI has full right, power and authority to sell, transfer and deliver the Synova Common Stock to Buyer and upon the occurrence at Closing of the actions specified in Section 3.2 CBSI will have transferred to Buyer valid and full legal title to the Synova Common Stock, free and clear of any liens, encumbrances, equities and adverse claims of any kind or nature.


4.2 ORGANIZATION. CBSI is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan and has the full corporate power and authority to carry on its business as now being conducted.


4.3 NECESSARY AUTHORIZATION AND APPROVAL. CBSI has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All acts and other proceedings required to be taken by or on the part of CBSI to authorize it to carry out this Agreement and the transactions contemplated hereby have been duly and properly taken. This Agreement has been duly executed and delivered by CBSI and constitutes the legal, valid and binding obligation of CBSI enforceable in accordance with its terms.


4.4 THIRD PARTY CONSENTS AND APPROVALS. Except as set forth in Schedule 4.4, neither the execution, delivery or performance of this Agreement by CBSI nor the consummation of the transactions contemplated hereby is prohibited by, or requires CBSI or Synova to obtain any consent, authorization, approval or registration under, any law, rule or regulation, or any judgment, order, writ, injunction, or decree, which is binding upon CBSI or Synova or any property or asset of Synova, or the terms of any contra ...