Exhibit 4
STANDSTILL AND SHAREHOLDER RIGHTS AGREEMENT
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TABLE OF CONTENTS
STANDSTILL AND SHAREHOLDER RIGHTS AGREEMENT
1. Corporate Governance........................................................ 2
1.1 Composition of the Board of Directors, etc.............................. 2
1.2 Directors' Expenses; Fees............................................... 3
1.3 Consent Requirement..................................................... 3
1.4 CEO and CFO............................................................. 4
1.5 By-Laws................................................................. 5
2. Certain Equity Matters...................................................... 5
2.1 Subscription Rights..................................................... 5
2.2 Issuance and Delivery of New Securities................................. 6
2.3 Limitation on Purchases of Equity Securities............................ 7
2.4 Voting Restrictions..................................................... 8
2.5 Other Restrictions...................................................... 8
2.6 Additional Provisions................................................... 9
3. Definitions................................................................. 10
4. Miscellaneous............................................................... 13
4.1 Specific Enforcement.................................................... 13
4.2 Entire Agreement........................................................ 13
4.3 Counterparts............................................................ 13
4.4 Notices................................................................. 13
4.5 Amendments; Waivers, etc................................................ 13
4.6 Successors and Assigns.................................................. 14
4.7 Governing Law, etc...................................................... 14
4.8 No Inconsistent Agreements.............................................. 15
4.9 Termination............................................................. 15
4.10 No Third Party Beneficiaries........................................... 15
4.11 Affiliates of the Purchaser............................................ 15
4.12 Confidentiality........................................................ 15
This Standstill and Shareholder Rights Agreement (this "Agreement"), dated as of
April 26, 2004, is entered into by and among Fidelity Information Services,
Inc., an Arkansas corporation, as purchaser (the "Purchaser") and Covansys
Corporation, a Michigan corporation (the "Company").
R E C I T A L S:
This Agreement is executed and delivered in connection with the following
agreements and transactions:
A. A Stock Purchase Agreement, dated as of April 26, 2004, by and
between the Purchaser and the Company (the "Stock Purchase Agreement"), pursuant
to which the Purchaser has agreed to purchase from the Company, and the Company
has agreed to sell to the Purchaser (i) certain shares (the "Shares") of the
Company's common stock (the "Common Stock") and (ii) a warrant to purchase
certain shares of Common Stock at exercise prices ranging from $15.00 to $24.00
per share (the "Warrants").
B. A Master Services Agreement dated as of April 26, 2004 by and
between the Company and the Purchaser, pursuant to which the Company has agreed
to provide to the Purchaser and its Affiliates outsourced information technology
services as may be requested from time to time in accordance with the terms of
the Master Services Agreement.
C. A Recapitalization Agreement (the "Recapitalization Agreement"),
dated as of April 26, 2004, by and between CDR-Cookie Acquisition, L.L.C., a
Delaware limited liability company ("CDR") and the Company, pursuant to which
CDR has agreed to exchange 200,000 shares of the Company's Series A Voting
Convertible Preferred Shares and warrants to acquire 3,500,000 million shares of
Common Stock at an exercise price of $25 per share and 1,800,000 million shares
of Common Stock at an exercise price of $31 per share, for receipt from the
Company of $180 million in cash, a promissory note in the amount of $15,000,000,
2,000,000 shares of the Company's Common Stock, and warrants to purchase an
aggregate of 5,000,000 shares of Common Stock at an exercise price of $18 per
share.
D. A Registration Rights Agreement, to be entered at the date of
Closing, by and among CDR, the Purchaser and the Company, conferring certain
rights upon the Purchaser and CDR to have shares of the Company's securities
registered under the Securities Act of 1933.
E. A Common Stock Purchase Agreement (the "▇▇▇▇▇▇▇▇▇ Stock Purchase
Agreement"), dated as of April 26, 2004, by and among the Purchaser, ▇▇.
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇▇▇") and the ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trust,
dated October 19, 1990, as amended and restated on February 1, 1995 (the
"Trust"), pursuant to which the Purchaser has agreed to purchase from ▇▇.
▇▇▇▇▇▇▇▇▇ and the Trust, and ▇▇. ▇▇▇▇▇▇▇▇▇ and the Trust have agreed to sell to
the Purchaser, an aggregate of 2,300,000 shares of Common Stock.
F. A Shareholder's Agreement dated April 26, 2004 by and among the
Purchaser, ▇▇. ▇▇▇▇▇▇▇▇▇, and the Trust (the "▇▇▇▇▇▇▇▇▇ Shareholder's
Agreement").
The parties wish to set forth certain agreements regarding respective
rights and limitations applicable to the Purchaser and its Affiliates.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth in this Agreement and in the Stock Purchase
Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. CORPORATE GOVERNANCE
1.1. Composition of the Board of Directors, etc.
(a) Initial Composition. At and immediately after the Closing,
the Board shall have ten directors, divided into three classes. ▇▇▇▇▇
▇▇▇▇▇▇▇ (as a Class I Director), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇ (as a Class II
Director) and a third director who shall qualify as Independent, to be
designated prior to the Closing, (as a Class III Director) are hereby
designated by the Purchaser and shall be elected by the Board to serve
effective at and immediately after the Closing. Members of the Board which
the Purchaser designates under any section of this Agreement are referred
to as the "Purchaser Directors."
(b) Committee Participation. Subject to applicable Law and
Nasdaq or any applicable stock exchange listing requirements, each
committee of the Board (other than any committee evaluating a transaction
or relationship INVOLVING THE PURCHASER or ANY OF ITS AFFILIATES) will
either (i) provide a Purchaser Director with observation rights to all
meetings and acts of such committee or (ii) include a Purchaser Director
as a member of such Committee.
(c) Other Parties' Designees. The parties acknowledge that
pursuant to a separate agreement between the Company and ▇▇. ▇▇▇▇▇▇▇▇▇,
two directors will be designated by ▇▇. ▇▇▇▇▇▇▇▇▇ (one of whom will be ▇▇.
▇▇▇▇▇▇▇▇▇), and that pursuant to a separate agreement between the Company
and CD&R-Cookie Acquisition, L.L.C. initially, one director will be
designated by CDR-Cookie Acquisition, L.L.C. The parties further
acknowledge that the four remaining directors on the Board (who will be
the initial Public Directors) will be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
(d) Purchaser's Right to Designate. Following the Closing
Date:
(i) The Purchaser will be entitled to designate, for
election to the Board, a number of Purchaser Directors (rounded down
to the nearest whole number), not exceeding four, in proportion to
the Purchaser's and its Affiliates' percentage ownership of the
Company's Outstanding Voting Power. The Company shall use its best
efforts to cause the Purchaser Directors to be elected at each
shareholder meeting at which directors are elected (and if such
Purchaser Directors are not elected, the Company shall take all
action permitted by Law to appoint such Purchaser Directors to the
Board).
(ii) If a vacancy exists in the office of a Purchaser
Director, including upon the death, resignation, retirement,
disqualification or removal (with or without cause) of any Purchaser
Director, the Purchaser will be entitled to designate a successor
who shall be appointed by the Board to fill the vacancy. In
connection with the next meeting of the Company's shareholders
following creation of the vacancy, the Purchaser will be entitled to
designate a successor for election as director by the shareholders.
The Company will use its best efforts to cause the successor to be
elected.
(iii) Without the express written consent of the
Purchaser, the size of the Board may not be decreased to less than
10 members and may not be increased to more than 12 members. If the
size of the Board is increased to more than 10 directors, the number
of
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Purchaser Directors will be proportionately increased (rounded to
the nearest whole number) to reflect the Purchaser's proportionate
percentage ownership of the Company's Outstanding Voting Power.
(iv) Unless the Purchaser expressly agrees in writing,
the Company shall use its best efforts to ensure that no Purchaser
Director is removed without cause.
(e) Independence. At least one of the members initially
designated by Purchaser shall be Independent. At any time, not more than
two Purchaser Directors may fail to qualify as Independent.
(f) Cessation of Rights.
(i) Purchaser's rights under this Section 1.1 will
cease:
(A) at any time when the Purchaser and its
Affiliates do not own more than 10% of the
Outstanding Voting Power; or
(B) following the occurrence of a Termination
Event (but will resume if this Agreement is
reinstated as contemplated herein).
(ii) Upon cessation of the Purchaser's right to
designate Purchaser Directors pursuant to Section 1.1(f)(i)(A), the
Purchaser shall use its best efforts to cause the Purchaser
Directors immediately to resign.
1.2. Directors' Expenses; Fees. The Company shall promptly reimburse
the Purchaser Directors for all reasonable expenses incurred by them in
connection with their attendance at meetings and any other activities undertaken
in their capacity as directors. The Purchaser Directors who are not employees of
the Purchaser or its Affiliates 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.
1.3. Consent Requirement.
(a) Following the Closing Date, neither the Company nor the
Board shall cause or permit to occur any of the following events without
the affirmative vote of at least a majority of the Purchaser Directors:
(i) any issuance of Equity Securities, other than (A)
options to acquire Common Stock pursuant to Company stock option
plans or shares of Common Stock under the Company's stock purchase
plan, up to a combined aggregate limit of 10% of the Fully Diluted
common stock then outstanding, (B) Common Stock pursuant to
acquisitions not exceeding 10% of the Fully Diluted common stock
then outstanding in a single instance or 25% of the Fully Diluted
common stock then outstanding in the aggregate, (C) Common Stock
issuable pursuant to the Warrants to Purchaser under the Stock
Purchase Agreement or to CDR pursuant to the Recapitalization
Agreement, (D) securities 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,
(E) Common Stock pursuant to public offerings not exceeding 10% of
the Fully Diluted common stock then outstanding in a single instance
or 25% of the Fully Diluted common stock then outstanding in the
aggregate or (F) Common Stock on exercise of any of the foregoing or
on exercise of options to acquire Common Stock outstanding on the
date hereof (as reflected in the Stock Purchase Agreement).
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(ii) 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 paid by the Company in all such transactions in any
fiscal year of the Company would exceed $50 million;
(iii) 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;
(iv) the entering by the Company into any new line of
business (the parties agree and acknowledge that providing
technology solutions and consulting to both the public and private
sector and any form of offshore outsourcing are included in the
Company's existing business);
(v) incurring Net Indebtedness (excluding Indebtedness
to CDR incurred pursuant to the promissory note issued in connection
with the Recapitalization Agreement) in excess at any time of the
lesser of (A) $50 million or (B) two times the Company's earnings
before interest, taxes, depreciation and amortization for the
previous fiscal year (determined based on the Company's audited
financial statements for such fiscal year);
(vi) making Capital Expenditures for the Company in any
year in excess of the greater of (x) 5% of the Company's revenues
for the previous fiscal year or (y) $25 million (the "Capital
Expenditure Cap"); provided, that no approval under this Section
1.3(a)(vi) shall be required for Capital Expenditures of up to $5
million in excess of the Capital Expenditure Cap in any given year
if such excess relates to Covansys India Private Limited; and
(vii) 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.
(b) Section 1.3(a) will not apply:
(i) at any time when the Purchaser and its Affiliates do
not own more than 10% of the Outstanding Voting Power;
(ii) to the approval or recommendation of a Change of
Control Transaction and, to the extent necessary to consummate a
Change of Control Transaction, to the actions enumerated in Section
1.3(a); or
(iii) following consummation of a Change in Control
Transaction.
1.4. CEO and CFO.
(a) Selection Criteria. In the event that the Board determines
to appoint a new Chief Executive Officer or Chief Financial Officer at any
time or times, the Company shall select persons for such positions who
meet criteria agreed to in advance by the Board in consultation with the
Purchaser.
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(b) Purchaser Veto.
(i) For bona fide, good faith reasons, communicated in
writing in reasonable detail by the Purchaser to the Company within
a reasonable time after the Company notifies the Purchaser of the
identity of a proposed candidate, the Purchaser shall have the right
to veto the selection of two proposed candidates for Chief Executive
Officer of the Company (such candidate, a "CEO Candidate").
(ii) In the event the Purchaser has already vetoed two
CEO Candidates, the Purchaser will have the right to veto a third
CEO Candidate so long as the Purchaser withdraws its veto and waives
its veto right with respect to both of the previously vetoed CEO
Candidates, and the Company will have the right to appoint as Chief
Executive Officer either of the first two CEO Candidates.
(iii) Notwithstanding anything in this Section 1.4 to
the contrary,
(A) a simple majority of the Board may appoint an
interim Chief Executive Officer to serve for a
term not to exceed (unless otherwise agreed in
writing by the Purchaser) 120 calendar days
(the "Interim Term"); and
(B) a simple majority of the Board may extend the
Interim Term by successive increments of 60
calendar days until a Chief Executive Officer
is appointed, so long as the Company is
proceeding in good faith with the process set
forth in this Section 1.4.
(c) Section Inapplicable. This Section 1.4 shall not apply:
(i) at any time when the Purchaser and its Affiliates do
not own more than 10% of the Outstanding Voting Power; or
(ii) following consummation of a Change in Control
Transaction.
1.5. Articles of Incorporation and By-Laws. Subject to any required
shareholder approvals, the Company and the Purchaser shall take or cause to be
taken all lawful action necessary to ensure at all times as of and following the
Closing Date that the Articles of Incorporation and the Company By-Laws are not
inconsistent with the provisions of this Agreement and the Stock Purchase
Agreement and the transactions contemplated hereby and thereby. Effective as of
the Closing (as defined in the Stock Purchase Agreement), the Company By-Laws
shall be amended to the extent necessary to give full force and effect to the
provisions of this Agreement to the fullest extent permitted under the Michigan
Business Corporation Act.
2. CERTAIN EQUITY MATTERS
2.1. Subscription Rights.
(a) Basic Rule. If the Board authorizes the issuance of New
Securities for cash, then, prior to each such issuance of New Securities,
the Company shall offer to the Purchaser a Pro Rata Share of such New
Securities.
(b) Exceptions. The Company's obligation to offer the
Purchaser a Pro Rata Share under subsection 2.1(a) will not apply:
(i) at any time when the Purchaser and its Affiliates do
not own more than 10% of the Outstanding Voting Power;
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(ii) to New Securities issued in connection with, or
following consummation of, a Change in Control Transaction; or
(iii) with respect to any New Securities permitted to be
issued without the consent of the Purchaser pursuant to Sections
1.3(a)(i)(A)-(D) and (F).
(c) Delivery of Notice. Any offer of New Securities made to
the Purchaser under this Section 2.1 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 Purchaser in compliance with the provisions of this Section
2.1 and (iv) the proposed date of issuance of such New Securities. Not
later than 5 Business Days after the Purchaser is notified in writing of
the price of the securities subject to a Subscription Notice, the
Purchaser shall notify the Company in writing whether it elects to
purchase all or any portion of the New Securities offered to the Purchaser
pursuant to the Subscription Notice.
(d) Consummation of Sale. If the Purchaser elects to purchase
any such New Securities, the New Securities which it elects to purchase
will be issued and sold to the Purchaser 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 (provided that such terms and conditions will not
limit or enlarge the rights and obligations of the Purchaser and its
Affiliates under this Agreement).
(e) Lapse of Right. If, for any reason, the issuance of New
Securities is not consummated, the Purchaser's right to its Pro Rata Share
of such issuance shall lapse, subject to the Purchaser's ongoing
subscription right with respect to issuances of New Securities at later
dates or times. The Purchaser agrees that the Company may grant rights to
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ equivalent (but not superior) to those set forth in
this Section 2.1.
(f) Subject to Standstill Equity Limit. Notwithstanding
anything herein to the contrary, the Purchaser's right under this Section
2.1 to a Pro Rata Share of issuances of New Securities is subject to the
Standstill Equity Limit. The Purchaser will not be entitled to its Pro
Rata Share of any issuances of New Securities if, at the time of such
issuance, the Purchaser and its Affiliates beneficially own Voting
Securities in excess of the Standstill Equity Limit, or if such issuance
would result in the Standstill Equity Limit being exceeded after giving
effect to the issuance of all New Securities proposed to be issued.
2.2. Issuance and Delivery of New Securities. The Company represents
and covenants to the Purchaser that (i) upon issuance against payment therefor,
all the shares of New Securities sold to the Purchaser pursuant to this Section
2 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
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Securities shall have the voting and other rights attributable to the
Common Stock or Preferred Stock under the Articles of Incorporation, 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 10.10 of the Stock Purchase Agreement.
2.3. Limitation on Purchases of Equity Securities.
(a) Standstill Equity Limit. During the period commencing on
the date hereof, the Purchaser and its Affiliates shall not, directly or
indirectly acquire, or offer or agree to acquire, Beneficial Ownership of
Voting Securities in excess of 40% of the outstanding Voting Securities
(the "Standstill Equity Limit").
(b) Exceptions. The following rules apply to the limitation
contained in Section 2.3(a):
(i) The warrants (for up to 4,000,000 shares of Common
Stock) issued to the Purchaser pursuant to the Stock Purchase
Agreement (the "Warrants"), to the extent not exercised, will not be
taken into account in computing the Purchaser's and its Affiliates'
Beneficial Ownership of Voting Securities. Shares acquired on any
exercise of the Warrants as well as all other Equity Securities will
be taken into account.
(ii) The Standstill Equity Limit will not apply at any
time when the Purchaser and its Affiliates do not beneficially own
more than 10% of the outstanding Voting Securities.
(iii) The Purchaser and its Affiliates will not be in
violation of the Standstill Equity Limit if (A) they hold in excess
of the Standstill Equity Limit solely as a result of any transaction
initiated by the Company or its Affiliates in which any Voting
Securities are repurchased, redeemed or otherwise retired (a "Share
Reduction Transaction") and (B) they did not acquire any additional
Voting Securities (by exercise of the Warrants or the subscription
rights under Sections 2.1 and 2.2 or otherwise) after the earlier of
the date on which the Company delivered notice of the Share
Reduction Transaction to the Purchaser or the date on which the
Purchaser obtained actual knowledge that a proposed Share Reduction
Transaction was probable. However, following any Share Reduction
Transaction, the Purchaser and its Affiliates still may not acquire
any additional Voting Securities in excess of the Standstill Equity
Limit, whether by exercise of the Warrants or the subscription
rights under Sections 2.1 and 2.2 or otherwise.
(iv) The Purchaser and its Affiliates may exercise the
Warrants immediately prior to and in connection with the
consummation of any Change in Control Transaction for the purpose of
enabling the Purchaser to receive, with respect to the shares
covered by the Warrants, the economic consideration payable to the
Company's shareholders in the Change of Control transaction.
(v) The Purchaser and its Affiliates will not be deemed
to be in violation of the Standstill Equity Limit by virtue of the
voting agreements contained in the ▇▇▇▇▇▇▇▇▇ Shareholder's Agreement
or their exercise of any proxy granted thereunder to implement those
voting agreements.
(c) Interpretation. Notwithstanding anything to the contrary
in this Agreement, nothing contained in this Section 2.3 will prevent the
Purchaser from acquiring any of the Shares pursuant to the terms of the
Stock Purchase Agreement and the ▇▇▇▇▇▇▇▇▇
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Stock Purchase Agreement (and the Purchaser and its Affiliates shall not be
deemed to have breached any covenant in this Agreement solely as a result of
such acquisition by the Purchaser). This Section 2.3(c), however, shall not
entitle the Purchaser or its Affiliates to maintain Beneficial Ownership of
other securities of the Company that would cause them to exceed the Standstill
Equity Limit.
2.4. Voting Restrictions. The Purchaser and its Affiliates agree to
be bound by and to observe the following restrictions:
(a) First Voting Restriction. With respect to any proposal
submitted to the Company's shareholders regarding the election of
directors, the Purchaser and its Affiliates will vote all Purchaser Voting
Securities in favor of the nominees designated by the Public Directors.
(b) Second Voting Restriction. With respect to any proposal to
amend the Company's Articles of Incorporation or Bylaws, the Purchaser and
its Affiliates will vote all Purchaser Voting Securities against any such
proposal that has not been approved by a majority of the Public Directors.
(c) Third Voting Restriction. For all matters other than those
set forth in Sections 2.4(a) and 2.4(b), the Purchaser and its Affiliates
will vote all Purchaser Voting Securities as follows: (1) shares
representing up to 28% of the Outstanding Voting Power may be voted in the
discretion of the Purchaser and its Affiliates; and (2) shares
representing in excess of 28% of the Outstanding Voting Power will be
voted in the same proportion that the Public Shareholders of the Company
vote their shares.
(d) Special Rules and Exceptions. The following special rules
and exceptions apply:
(i) The foregoing Voting Restrictions do not apply at
any time when the Purchaser and its Affiliates do not beneficially
own more than 10% of the outstanding Voting Securities.
(ii) The Third Voting Restriction (Section 2.4(c)) does
not apply following a Termination Event (but will resume if this
Agreement is reinstated as contemplated herein).
(iii) At any time the Purchaser has the right to
designate Purchaser Directors pursuant to Section 1.1, the Purchaser
and its Affiliates may vote all Purchaser Voting Securities in their
discretion with regard to the election or removal of Purchaser
Directors.
(e) Definition. The "Public Shareholders" are defined as all
of the shareholders who have the right to vote Voting Securities other
than (A) the Purchaser and its Affiliates, (B) ▇▇. ▇▇▇▇▇▇▇▇▇ and his
Affiliates, (C) CDR-Cookie Acquisition, L.L.C. and its Affiliates and (D)
to the extent applicable, any Person conducting a "solicitation" of
"proxies" to vote, as those terms are used in the Exchange Act.
2.5. Other Restrictions. The Purchaser and its Affiliates agree to
be bound by and to observe, the following further restrictions:
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(a) Won't Call Special Meeting. Neither the Purchaser nor its
Affiliates will call, or support (by way of giving a proxy or written
consent) any Person in seeking to call, any special meeting of the
Company's shareholders.
(b) Won't Seek Removal. Neither the Purchaser nor its
Affiliates will seek or vote to remove, or support (by way of giving a
proxy or written consent) any Person (subject to its rights under Section
2.4(d)(iii)) in seeking to remove, without cause, any member or members of
the Board.
(c) Won't Transfer. Neither the Purchaser nor its Affiliates
will transfer any Equity Securities to a transferee if, after the
consummation of such transfer, such transferee would beneficially own 15%
or more of the outstanding Voting Securities.
(d) Won't Solicit or Hold Proxies. Neither the Purchaser nor
its Affiliates will solicit, obtain, hold or vote the written proxies of
any other shareholders of the Company (except for the proxy contemplated
under the ▇▇▇▇▇▇▇▇▇ Shareholder's Agreement).
(e) Won't Enter Agreement. Neither the Purchaser nor its
Affiliates will enter into any binding agreement, arrangement or
understanding with any other Person jointly to take or cause such other
person to take any action which would, if done by the Purchaser or its
Affiliates, result in a violation of Sections 2.5(a), 2.5(b) or 2.5(d) or
result in any amendment described in Section 2.4(b).
(f) Inapplicability. Subject to the obligations of the
Purchaser and its Affiliates under Sections 2.4(a) and (b), Sections
2.5(a) through (e) do not apply (i) at any time when the Purchaser and its
Affiliates do not beneficially own more than 10% of the outstanding Voting
Securities or (ii) following a Termination Event (but will resume if this
Agreement is reinstated as contemplated herein).
2.6. Additional Provisions.
(a) No Waiver. Neither the Purchaser nor its Affiliates will
publicly announce that it is seeking a waiver of any of the provisions of
this Section 2.
(b) Acknowledgment. The Company and the Purchaser agree and
acknowledge that nothing in this Agreement will prohibit or restrict:
(i) the Purchaser from submitting to the Board any
non-public proposal for a Change of Control Transaction which would
not reasonably be expected to require the Company to make public
disclosure of such offer; or
(ii) the manner in which the Purchaser Directors
participate in deliberations or discussions of the Board in
compliance with their fiduciary duties.
(c) Further Assurances. Following the 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 render effective the consummation of the transactions
contemplated hereby. Once each fiscal year, at the request of Purchaser,
the Chief Financial Officer and the principal legal officer of the Company
will prepare and deliver to the Purchaser or its Affiliates a complete and
accurate capitalization report for the Company setting forth in reasonable
detail the Fully Diluted capitalization of the Company.
9
(d) Compliance. Nothing contained in this Agreement will
prevent the Closing under, and as defined in, each of the Stock Purchase
Agreement, the ▇▇▇▇▇▇▇▇▇ Stock Purchase Agreement or the ▇▇▇▇▇▇▇▇▇
Shareholder's Agreement (and the Purchaser and its Affiliates shall not be
deemed to have breached any covenant in this Agreement solely as a result
of such Closings).
3. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
Affiliate: shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement); provided, that for
purposes of this Agreement only, the Company and its directors and executive
officers shall not be deemed to be Affiliates of the Purchaser, ▇▇. ▇▇▇▇▇▇▇▇▇,
CD&R-Cookie Acquisition, L.L.C., or any third party conducting a proxy
solicitation with respect to the Company.
Articles of Incorporation: The Company's restated articles of
incorporation, as amended from time to time.
Beneficial Ownership: As defined in Rule 13d-3 and 13d-5 under the
Exchange Act.
Board: the Board of Directors of the Company.
Business Day: any day on which banking institutions are open in the
New York, New York, Detroit, Michigan and Jacksonville, Florida.
Capital Expenditures: net additions to property, plant and equipment
as defined by GAAP and used for purposes of the Company's Statement of Cash
Flows, but excluding any such property, plant or equipment acquired by the
Company which is required by the terms of a customer contract entered into in
the ordinary course of business consistent with past practice.
CDR: is defined in the recitals to this Agreement.
Change of Control Transaction: (i) any direct or indirect
acquisition or purchase by any Person of (A) 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 (B) 50% or more of any class of securities of
the Company, (ii) any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 50% or more of any class of any
securities of the Company, or (iii) 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).
Closing: the closing of the sale of the Shares contemplated by the
Stock Purchase Agreement and the ▇▇▇▇▇▇▇▇▇ Purchase Agreement.
Common Stock: is defined in the recitals to this Agreement.
Company: is defined in the introductory paragraph to this Agreement.
Equity Security: (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.
10
Exchange Act: the Securities Exchange Act of 1934, as amended.
Fully Diluted: the calculation of the fully diluted securities of
the Company for any purpose under this Agreement shall be performed under the
Treasury Stock Method (which assumes that the Company will use the proceeds
received from the exercise of options, warrants and other rights to acquire
securities, for the purpose of repurchasing and retiring outstanding shares at
the market price then prevailing), taking into account only options and other
rights to acquire securities that have vested as of the date of the calculation.
Governmental Authority: any federal, state, local or foreign court,
legislative, executive or regulatory authority or agency.
Indebtedness: of any Person at any date, (a) all indebtedness of the
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 the Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all leases resulting in obligations of the Person that
are required to be capitalized in accordance with GAAP, (d) all obligations of
the Person in respect of acceptances issued or created for the account of the
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
the Person even though the Person has not assumed or otherwise become liable for
the payment thereof.
Independent: independent as determined by the Board in accordance
with Nasdaq Rule 4200 (as amended from time to time), any rule replacing it or
any similar applicable stock exchange rule.
Law: all applicable provisions of all (a) constitutions, treaties,
statutes, laws (including the common law), codes, rules, regulations, ordinances
or orders of any Governmental Authority, (b) approvals of Governmental
Authorities and (c) orders, decisions, injunctions, judgments, awards and
decrees of or agreements with any governmental authority.
Net Indebtedness: (i) Indebtedness of the Company or any of its
subsidiaries except any letters of credit or any other obligations used either
to secure surety bonds or otherwise guarantee the Company's performance under
customer contracts where such guarantee is a condition to entering into a
customer contract, minus (ii) all cash, cash equivalents and marketable
securities.
New Security: any Equity Security issued by the Company after the
Closing.
Outstanding Voting Power: at any date, the total number of votes
that would be entitled to be cast on that date in the election of directors of
the Company.
Person: any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity,
Pro Rata Share: the fraction of an entire issuance of New
Securities, the numerator of which shall be the number of shares of Common Stock
owned by Purchaser and its Affiliates 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.
11
Public Directors: the Company's Directors other than the Purchaser
Directors and directors designated by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and his Affiliates and
CDR-Cookie Acquisition, L.L.C. and its Affiliates.
Public Shareholders: is defined in Section 2.4(d).
Purchaser: is defined in the introductory paragraph to this
Agreement.
Purchaser Directors: is defined in Section 1.1.
Purchaser Voting Securities: all Voting Securities that the
Purchaser or its Affiliates have the right to vote.
Recapitalization Agreement: is defined in the recitals to this
Agreement.
Shares: is defined in the recitals to this agreement.
Stock Purchase Agreement: is defined in the recitals to this
Agreement.
Subscription Notice: is defined in Section 2.1.
Takeover Statute: Any "Fair price," "Moratorium," "control share
acquisition," "business combination" or other similar anti-takeover statute or
regulation enacted under state or federal laws in the United States applicable
to the Company or any of its Subsidiaries, including, without limitation,
Chapter 7A and Chapter 7B of the Michigan Business Corporation Act.
Termination Date: The date that is five years from the Closing Date.
Termination Event: The following provisions apply:
(a) A Termination Event shall occur on the first to occur of the
following: (i) the date on which the Company publicly announces its approval or
recommendation of a transaction that would constitute a Change of Control
Transaction; and (ii) the date on which a third party shall have publicly
commenced an unsolicited, bona fide tender or exchange offer or proxy
solicitation that, if consummated, would result in a Change of Control
Transaction.
(b) Notwithstanding subsection (a) but subject to subsection (c), a
Termination Event will not occur, and the rights or obligations terminated
hereunder by virtue a Termination Event will be immediately reinstated (the
"Reinstatement Event") and will continue until they subsequently terminate under
the terms of this Agreement, if (i) in the case of clause (a)(i) above, the
proposed transaction is terminated or (ii) in the case of clause (a)(ii) above,
the unsolicited offer is withdrawn or terminated or the proxy solicitation is
unsuccessful.
(c) Any actions taken by the Purchaser or its Affiliates following
the occurrence of a Termination Event but prior to the occurrence of a
Reinstatement Event, that did not violate this Agreement at the time taken,
shall not be deemed a breach or violation of this Agreement following the
Reinstatement Event and shall be deemed exempted from the provisions hereof
provided that the Purchaser and its Affiliates cease all actions proscribed by,
and commence compliance with, this Agreement immediately upon the occurrence of
a Reinstatement Event.
Trust: is defined in the recitals to this Agreement.
▇▇▇▇▇▇▇▇▇ Shareholder's Agreement: is defined in the recitals to
this Agreement.
▇▇▇▇▇▇▇▇▇ Stock Purchase Agreement: is defined in the recitals to
this Agreement.
12
Voting Securities: at any time shares of any class of capital stock
of the Company which are then entitled to vote generally in the election of
directors.
Warrants: is defined in the recitals to this Agreement.
4. MISCELLANEOUS.
4.1. Specific Enforcement. The Purchaser, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage could occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Agreement 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.
4.2. Entire Agreement. This Agreement (including the documents set
forth in the Exhibits and Schedules hereto), together with the Stock Purchase
Agreement and the Ancillary Agreements (as defined in the Stock Purchase
Agreement), contains the entire understanding of the parties with respect to the
transactions contemplated hereby.
4.3. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
4.4. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered in the manner specified in Section 10.6 of the Stock Purchase
Agreement.
4.5. Amendments; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought. Any
such waiver shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the party
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of any
other breach or default of a similar nature, or as a waiver of any of such
provisions, rights or privileges hereunder. The rights and remedies of any party
based upon, arising out of or otherwise in respect of any inaccuracy or breach
of any representation, warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement as to which there is no inaccuracy or breach.
Notwithstanding anything to the contrary in this Agreement, the Purchaser agrees
that any amendment, waiver or
13
consent taken, given or made by the Company (including the Board) in respect of
this Agreement or the transactions contemplated hereby shall not be effective
unless such amendment, waiver or consent shall have received the prior approval
of a majority of the Public Directors. The Company will provide the Purchaser
with written evidence of the approval of the majority of the Public Directors in
connection with its execution and delivery of any such amendment, waiver or
consent in respect of this Agreement.
4.6. Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. In no event shall the rights and
obligations set forth in this Agreement shall be binding on, or inure to the
benefit of, any transferee of the Shares.
4.7. Governing Law, etc.
(a) EXCEPT TO THE EXTENT THAT THE MICHIGAN BUSINESS
CORPORATION ACT, AS AMENDED, AND CASE LAW INTERPRETING THAT ACT ARE
APPLICABLE TO THE COMPANY AND THE RIGHTS OF ITS SHAREHOLDERS, THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. 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.
(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 CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY
14
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 4.7(b).
4.8. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement which is inconsistent with the rights granted to the
Purchaser by this Agreement.
4.9. Termination. This Agreement shall automatically terminate (i)
on the date that the Stock Purchase Agreement is terminated in accordance with
its terms prior to the consummation of the transactions contemplated thereby or
(ii) on the Termination Date.
▇.▇▇.▇▇ Third Party Beneficiaries. Nothing contained in this
Agreement is intended to confer upon any person or entity other than the parties
hereto and their respective successors and permitted assigns, any benefit, right
or remedies under or by reason of this Agreement.
4.11.Affiliates of the Purchaser. The Purchaser hereby acknowledges
that this Agreement imposes obligations and restrictions on its Affiliates. The
Purchaser hereby agrees to cause its Affiliates to comply with the Sections of
this Agreement that impose obligations and restrictions on its Affiliates.
4.12.Confidentiality. Reference is made to the undated Mutual
Confidentiality Agreement between the Company and Fidelity National Financial,
Inc., the parent company of the Purchaser. The parties agree that the Company
and the Purchaser shall be bound by the terms and conditions, and subject to the
rights and obligations, thereof (but not those of the document entitled
"Amendment 1 to Confidentiality Agreement" dated as of February 25, 2004) as
though original mutual signatories thereto and the provisions thereof as they
affect the Company and the Purchaser are incorporated by reference into this
Agreement as though fully set forth herein.
15
IN WITNESS WHEREOF, each of the Purchaser and the Company has caused this
Standstill and Shareholder Rights Agreement to be duly executed as of the day
and year first above written.
COVANSYS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
Title: President / CEO
--------------------------------------
FIDELITY INFORMATION SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇,
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇,
Chairman and Chief Executive Officer
[SIGNATURE PAGE OF STANDSTILL AND SHAREHOLDER RIGHTS AGREEMENT]