<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 1-10991
VALASSIS COMMUNICATIONS, INC.
(Exact Name of Registrant
as Specified in its Charter)
Delaware 38-2760940
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
36111 Schoolcraft
Livonia, Michigan 48150
(address of principal executive offices)
Telephone Number: (313) 591-3000
(registrant's telephone number, including area code)
______________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and, (2) has been
subject to such filing requirements for the past 90 days:
Yes /X/ No
As of July 31, 1996, there were 42,904,893 shares of the Registrant's
Common Stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
JUNE 30, DEC. 31,
(unaudited) (note)
---------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,436 $ 34,408
Accounts receivable (less allowance for doubtful
accounts of $743 at June 30, 1996 and $810 at
December 31, 1995) 91,251 84,427
Inventories:
Raw materials 17,249 13,840
Work in progress 7,546 14,267
Prepaid expenses and other 4,015 3,686
Deferred income taxes 4,330 4,330
Refundable income taxes 569 97
----------- ---------
Total current assets 143,396 155,055
----------- ---------
Property, plant and equipment, at cost:
Land and buildings 19,627 19,617
Machinery and equipment 105,569 107,615
Office furniture and equipment 17,742 17,215
Automobiles 769 789
Leasehold improvements 1,443 1,443
---------- ---------
145,150 146,679
Less accumulated depreciation and amortization (111,021) (111,792)
---------- ---------
Net property, plant and equipment 34,129 34,887
---------- ---------
Intangible assets:
Goodwill 68,631 68,631
Other intangibles 88,524 88,524
--------- ---------
157,155 157,155
Less accumulated amortization (97,163) (93,038)
--------- ---------
Net intangible assets 59,992 64,117
--------- ---------
Other assets (primarily debt issuance costs) 5,230 4,873
--------- ---------
Total assets $242,747 $258,932
======== ========
</TABLE>
<PAGE> 3
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DEC. 31
1996 1995
(unaudited) (note)
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,290 $ 71,936
Accrued interest 6,066 6,425
Accrued expenses 18,416 21,204
Progress billings 33,882 49,209
--------- ---------
Total current liabilities 130,654 148,774
--------- ---------
Long-term debt 403,107 416,034
Deferred income taxes 3,029 3,029
Minority interest 474 369
Stockholders' deficit:
Common stock of $.01 par value. Authorized
100,000,000 shares; issued 43,360,145 shares
at June 30, 1996 and 43,302,500 at
December 31, 1995; outstanding 42,980,145
shares at June 30, 1996 and 43,302,500 at
June 30, 1995 433 433
Additional paid-in capital 40,395 39,590
Accumulated deficit (328,991) (349,457)
Foreign currency translations 196 160
Treasury stock, at cost (380,000 shares at
June 30, 1996) (6,550) 0
--------- ---------
Net stockholders' deficit (294,517) (309,274)
--------- ---------
Total liabilities and stockholders' deficit $ 242,747 $ 258,932
======== ========
NOTE: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 4
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
---------------- -----------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $162,117 $154,563 $342,113 $311,177
Other 534 947 1,071 1,705
-------- -------- -------- --------
162,651 155,510 343,184 312,882
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of products sold 116,994 116,356 251,284 231,582
Selling, general and admin 16,994 15,809 33,490 30,470
Amortization of intangibles 2,058 2,329 4,125 4,676
Interest 9,892 10,054 20,155 20,260
Sale of business-Valcheck --- 950 --- 950
Minority interest (7) (498) (36) (764)
-------- -------- -------- --------
145,945 145,000 309,018 287,174
-------- -------- -------- --------
Earnings before income taxes 16,706 10,510 34,166 25,708
Income taxes 6,700 3,815 13,700 10,175
-------- -------- -------- --------
Net earnings $ 10,006 $ 6,695 $ 20,466 $ 15,533
======== ======= ======= =======
Net earnings per common share $ .23 $ .16 $ .47 $ .36
======== ======= ======= =======
Shares used in computing net
earnings per share 43,166,929 43,302,500 43,238,751 43,301,250
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 4
VALASSIS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
JUNE 30, JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 20,466 $ 15,533
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 7,638 9,653
Provision for losses on accounts receivable 300 300
Minority interest 105 (764)
(Gain)/loss on sale of property, plant and equipment 208 (24)
Deferred income taxes --- 2
Changes in assets and liabilities which increase
(decrease) cash flow:
Accounts receivable (7,124) (7,306)
Inventories 3,312 448
Prepaid expenses and other (329) (110)
Other assets (357) 425
Accounts payable 354 (5,222)
Accrued expenses and interest (3,147) 2,603
Income taxes (472) 1,439
Progress billings (15,327) (2,002)
-------- --------
Total adjustments (14,839 (559)
-------- --------
Net cash provided by operating activities 5,627 14,975
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,976) (2,497)
Contribution to Valcheck by minority shareholder --- 850
Sale of business operations and assets of Valcheck --- 950
Purchase of McIntyre & Dodd (Valassis of Canada) --- (6,575)
Proceeds from the sale of property, plant and equipment 86 187
Other 36 (16)
-------- --------
Net cash used in investing activities (2,854) (7,101)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (13,000) ---
Proceeds from the issuance of common stock 805 24
Purchase of treasury shares (6,550) ---
-------- --------
Net cash provided (used) by financing activities (18,745) 24
-------- --------
Net increase (decrease) in cash (15,972) 7,898
Cash at beginning of period 34,408 21,166
-------- --------
Cash at end of period $18,436 $29,064
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $20,514 $20,531
Cash paid during the period for income taxes $14,172 $ 8,533
Dividends declared but unpaid $ --- $ ---
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 5
VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the information contained
herein reflects all adjustments necessary for a fair presentation of the
information presented. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods are not necessarily indicative
of results to be expected for the fiscal year. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
2. CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position.
3. SIGNIFICANT ACCOUNTING POLICIES - INVENTORIES
Inventories are stated at the lower of cost or market (net realized value).
Cost has been principally determined by the last-in, first-out (LIFO) method.
If the first-in, first-out (FIFO) method of determining cost had been used,
inventories would have been $2,270,000 higher than reported at June 30, 1996,
and $5,175,000 higher than reported at December 31, 1995. The change in LIFO
reserve reduced paper expense by $2,775,000 and $2,905,000 for the quarter and
six months ended June 30, 1996, respectively.
4. STOCK COMPENSATION PLANS
The following stock compensation plans have been implemented in 1996:
EMPLOYEE AND DIRECTOR RESTRICTED STOCK AWARD PLAN
The Employee and Director Restricted Stock Award Plan provides for the grant of
restricted stock to executives in lieu of a cash raise, to non-employee, non-
affiliated directors as a portion of their fee, and to participants in the
Employee Stock Purchase Plan as described in the following paragraph. A total
of 200,000 shares of restricted stock have been reserved for this plan.
Pursuant to an employment agreement between the Company and its Chief Operating
Officer, Alan F. Schultz, 7,500 shares of restricted stock will be issued to
<PAGE> 6
VALASSIS COMMUNICATIONS, INC.
Notes to Condensed Consolidated Financial Statements (Cont.)
Mr. Schultz annually as of January, in 1996, 1997, 1998 and 1999, respectively,
with each grant vesting ratably from date of grant over a three-year period.
The expense related to the aggregate of such restricted stock will be
recognized on the straight-line method over the vesting period. Such pre-tax
expense was approximately $20,000 for the quarter ended June 30, 1996, and
$40,000 year-to-date. In addition, several executives received one-time
restricted stock grants totaling 36,500 shares and vesting over a three-year
period. The related expense will be recognized over the vesting period and was
approximately $51,000 in the quarter ended June 30, 1996, and $106,000 year to
date. Also during 1996, one-half of the annual Director's fee of $40,000, to
the four outside directors, will be paid in restricted stock from this plan.
EMPLOYEE STOCK PURCHASE PLAN
All full-time employees are eligible to participate in VCI's Employee Stock
Purchase Plan. The plan provides that participants may authorize VCI to
withhold a portion of earnings to be used to purchase VCI's common stock at
prevailing market prices. Under the plan, VCI contributes, on behalf of each
participant, 15% of the participant's contributions. The Company's
contribution is made in the form of restricted stock with a one-year transfer
restriction and vesting. The value of the Company's stock contributed by the
Company and expensed for the quarter ended June 30, 1996 totaled approximately
$4,000, and $50,000 year-to-date.
EXECUTIVE RESTRICTED STOCK PLAN
The Executive Restricted Stock Plan provides for the grant of restricted stock,
with one-year vesting, to certain executive officers. Currently, the Company's
Chief Executive Officer, David A. Brandon, is the only executive eligible to
receive restricted stock under this plan. The maximum number of restricted
shares which may be issued under this plan is 250,000, provided that not more
than 60% of such shares are awarded to any one participant. Pursuant to an
employment agreement between the Company, CPH and Mr. Brandon, Mr. Brandon
is eligible to receive 30,000 shares of restricted stock each year beginning
with 1996 through 2000, if 70% or more of the year's performance target, set by
the Compensation/Stock Option Committee, is met. The remaining 100,000 shares
are undesignated as of June 30, 1996. Compensation expense will be recognized
over the vesting period and will be dependent on the market value of stock at
the end of each quarter. Pre-tax compensation expense related to this plan for
the quarter and six months ended June 30, 1996 was approximately $70,000 and
$135,000, respectively.
401(K) PLAN
The Company has also amended its 401(k) Plan to include a 15% match, payable in
VCI stock, on each participant's annual contributions to the Plan that are
invested in VCI stock at the end of the year. The expense related to this plan
for the six months ended June 30, 1996 was approximately $50,000.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding declines in paper prices and any impact on
the Company's financial performance related thereto and shifts in customer
promotional strategies, are based upon current expectations. These statements
are forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could affect
expectations are the following: a new competitor in the Company's core free-
standing insert business and consequent price war, new technology that would
make free-standing inserts less attractive, shifts in customer preference for
different promotional materials or an increase in the Company's paper
costs.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Total revenues for the quarter ended June 30, 1996 increased 4.6% from $155.5
million to $162.7 million. Total revenues rose as a result of higher volumes in
the Valassis Impact Promotions (VIP) and Run-of-Press (ROP) product lines. VIP
revenue was up 25.5% from $18.4 million for the second quarter 1995 to $23.1
million for the same quarter in 1996. This growth in VIP revenue is
attributable to increased activity by several major customers, along with
strong demand for VIP's expanded product line. ROP revenue rose a significant
81.0% to $7.6 million from $4.2 million in the prior year quarter. The increase
in ROP revenue was driven by several large ROP promotions and increased activity
in the health and beauty aid category. Free-standing insert (FSI) revenue
remained relatively level for the second quarter rising just .7% from $119.9
million to $120.7 million for the quarter ended June 30, 1996. Even though FSI
pricing continued to improve during the second quarter of 1996, the impact on
revenue was offset by a decline in industry pages. Recent announcements by
certain package goods manufacturers to offer lower prices to their customers has
caused what management believes to be a short-term reduction in FSI pages.
Higher revenues during the quarter ended June 30, 1996 were somewhat offset by
increased print, paper and media costs, resulting in an overall increase in the
gross profit margin to 28.1% in the quarter ended June 30, 1996 from 25.2% in
the same quarter last year. Print and media costs were up on a unit basis due to
lower average pages per book. Although paper prices began declining during the
quarter, the cost still exceeded that of the prior year. Management anticipates
further declines in paper prices during the second half of 1996.
Selling, general and administrative expenses increased 7.5% to $17.0 million for
the three months ended June 30, 1996 from $15.8 million in the comparable period
of 1995, partly as a result of the expenses associated with the new restricted
stock plans. Management expects selling, general and administrative expenses to
return to levels consistent with last quarter.
Net earnings were $10.0 million compared to $6.7 million for the same quarter
last year. Net earnings rose as a result of stronger FSI pricing and higher VIP
and ROP sales.
<PAGE> 8
SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
The Company's revenue for the first six months of 1996 was up 9.7% to $343.2
million as compared to $312.9 million for the same period in 1995. This increase
was fueled by an 8.8% gain in FSI revenue from $244.5 million in the first six
months of 1995 to $265.9 million in the comparable 1996 period. FSI revenue rose
as a result of stronger pricing which more than offset the decline in market
share and industry volume during the first six months of 1996. In addition,
stronger VIP and Sampling sales contributed to the overall increase in revenue.
VIP revenue was up 20.9% to $41.7 million for the six months of 1996, as
compared to $34.5 million in the same period of 1995. VIP's growth was spurred
by increased promotions by several major customers, along with stronger demand
for VIP's expanded product line. Sampling revenue rose 68.3% from $6.0 million
for the first six months of 1995 to $10.1 million for the same six months of
1996. Sampling revenue rose due to improved lead times and manufacturing
efficiencies. ROP revenue declined 5.8% to $11.4 million for the six months
ended June 30, 1996, compared to $12.1 million for the six months ended
June 30, 1995. ROP revenue was negatively impacted by declines in ROP pricing
during the first six months of 1996, as management focused on improving FSI
pricing during this period.
Despite the growth in FSI, VIP and Sampling revenues, gross margin only
increased 3.1% from 26.0% during the first six months of 1995 to 26.8% for the
same period of 1996 as pricing gains were offset by escalating paper costs.
Although the Company has experienced a paper cost decrease from the first
quarter of 1996 to the second quarter, paper prices still remain higher than
average 1995 pricing. Management expects further paper price decreases will have
a positive impact on the remainder of 1996.
Selling, general and administrative expenses rose 9.8% to $33.5 million for the
six months ended June 30, 1996 compared with $30.5 million for the same period
last year. This was partially due to the expense associated with the new
restricted stock plans.
Net earnings were $20.5 million versus $15.5 million for the same six months
last year. The increase in net earnings is attributable to increased pricing in
the FSI business, combined with the increased volume of VIP and Sampling sales.
FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents totaled $18.4 million at June 30, 1996, down $16.0
million from December 31, 1995. Cash flow from financing activities decreased
by $18.7 million, as the Company repurchased 380,000 shares of common stock and
$13.0 million of the Company's long-term debt during the six-months ended
June 30, 1996.
Management believes the Company will generate sufficient funds from operations
and will have sufficient lines of credit available to meet current anticipated
liquidity needs, including interest and required principal payments on
indebtedness.
<PAGE> 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Company held its Annual Meeting of Stockholders on May 21, 1996.
c. The following matters were voted upon at the Annual Meeting of
Stockholders:
1. The election of the nominees for directors who will serve for a term
to expire at the next Annual Meeting of Stockholders or until their
respective successors have been duly elected and qualified was voted on
by the stockholders. The nominees, all of whom were elected and the vote
tabulations certified by the Inspector of Election with respect therto,
were:
DIRECTOR FOR WITHHELD BROKER NON-VOTES
David A. Brandon 37,312,352 168,077 0
Graham A. Cubbin 36,623,792 856,637 0
Mark C. Davis 37,325,742 154,687 0
Cartha D. DeLoach 37,323,678 156,751 0
Jon M. Huntsman, Jr. 37,312,352 154,437 0
James D. Packer 37,312,352 154,437 0
Brian M. Powers 36,624,292 856,137 0
Robert L. Recchia 37,326,057 154,372 0
Alan F. Schultz 37,320,846 159,583 0
Faith Whittlesey 37,325,992 154,437 0
2. A proposal to approve the Company's Executive Restricted Stock Plan,
as amended by Amendment No. 1 to such Plan was approved by the
stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
37,126,355 221,407 63,967 68,700
3. A proposal to approve the Company's Employee and Director Restricted
Stock Plan was approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
37,124,026 224,730 62,973 68,700
4. A proposal to approve the Company's Employee Stock Purchase Plan was
approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
37,317,363 59,096 35,270 68,700
<PAGE> 10
5. A proposal to approve Amendment No. 3 to the Company's 1992 Long-Term
Incentive Plan was approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
37,121,258 224,827 65,644 68,700
6. A proposal to approve Amendment No. 1 to the Company's Senior Executive's
Bonus Plan was approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
35,725,395 1,646,080 40,254 68,700
7. A proposal to ratify the re-appointment of Ernst & Young, Detroit,
Michigan, as auditors of the Company for the 1996 fiscal year was approved
by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
37,438,062 19,053 23,314 0
8. A proposal to approve an agreement with Conpress Cayman, LDC, the
Company's principal stockholder was approved by the stockholders.
The Inspector of Election certified the following vote tabulations:
FOR AGAINST ABSTAIN BROKER NON-VOTES
35,982,733 48,692 77,834 1,371,170
The number of votes cast other than shares beneficially owned by
Consolidated Press Holdings Limited were certified by the Inspector of
Election as follows:
FOR AGAINST ABSTAIN BROKER NON-VOTES
14,782,733 48,692 77,834 22,571,170
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following exhibits are included herein:
10.20 Conpress Stock Option Agreement
10.21 Lease for New Headquarters Building
27 Financial Data Schedule
b. Forms 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: August 14, 1996
Valassis Communications, Inc.
(Registrant)
By:/s/ Robert L. Recchia
--------------------------------------
Robert L. Recchia
V.P. of Finance - Chief Financial Officer
Signing on behalf of the Registrant and
as principal financial officer.
<PAGE> 12
Exhibit 10.20
STOCK OPTION AGREEMENT
Stock Option Agreement made as of this 9th day of May, 1996 among Valassis
Communications, Inc., a Delaware corporation ("Valassis" or the "Company"),
Conpress Cayman, LDC, a Cayman Islands corporation ("Conpress") and Consolidated
Press International Limited, a Bahamian corporation ("CPIL").
WHEREAS, Conpress is the direct holder of 21,200,000 shares of common stock,
par value $.01 per share of Valassis; and
WHEREAS, Conpress is 100% indirectly owned by CPIL; and
WHEREAS, Conpress and CPIL are both affiliates of Consolidated Press Holdings
Limited, an Australian capital territory corporation; and
WHEREAS, Valassis may acquire from time to time up to 5,000,000 shares of
common stock through open market transactions and from Conpress; and
WHEREAS, the parties have agreed to the sale to Valassis of shares of common
stock of Valassis owned by Conpress upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual premises,
covenants, representations and warranties contained herein, it is hereby agreed
as follows:
1. TRANSFER OF STOCK; CONPRESS OPTION TO SELL
For such period of time as Valassis continues its share repurchase program (the
"Repurchase Term"), Valassis grants to Conpress an option to sell shares of
common stock of Valassis on the terms and subject to the conditions hereof.
Each month during the Repurchase Term, Conpress shall have the option (an
"Option") to sell up to the Monthly Purchase Number (as hereinafter defined) of
shares of Valassis common stock at a sales price equal to the Average Purchase
Price (as hereinafter defined). For purposes of this Option Agreement, the
term "Monthly Purchase Number" shall mean the amount of shares of its Common
Stock that Valassis bought on the open market during the month prior to the one
in question. For purposes of this Option Agreement, the term "Average Purchase
Price" shall mean the aggregate price paid before commissions for shares of
common stock of Valassis bought by Valassis on the open market during the month
in question divided by the number of shares of common stock of Valassis bought
by Valassis on the open market during the month in question. On the first
business day of each month during the Repurchase Term, commencing with the
second month of the Repurchase Term, Valassis will notify Conpress, in
accordance with Section 10.4 hereof (the "Purchase Notice"), of the Monthly
Purchase Number and the Average Purchase Price. Each Option shall be
exercisable by Conpress giving notice to Valassis within five business days
following the Purchase Notice (each such five days being referred to herein as
an "Option Period") in accordance with Section 10.4 hereof (the "Sale Notice"),
of the number of shares Conpress shall sell, such amount not to exceed the
Monthly Purchase Number. If during any given month, Conpress does not give
Valassis a Sale Notice during an Option Period, then Conpress' option to sell
with respect to the shares in the Purchase Notice for such month shall expire.
<PAGE> 13
2. PURCHASE PRICE
In full consideration for each sale of Valassis common stock to Valassis
hereunder and subject to the terms and conditions hereinafter set forth,
Valassis hereby agrees to pay to Conpress a purchase price per share equal to
the Average Purchase Price during the month preceding the month in which the
Sale Notice is given.
3. PAYMENT OF PURCHASE PRICE
Subject to the terms and conditions hereof, on or before the third business
following the Company's receipt of a Sale Notice (the "Purchase Date"),
Valassis shall pay the Average Purchase Price to Conpress by wire transfer to
such bank as Conpress may specify in accordance with Section 10.4 hereof. All
such payments shall be net of any withholding required by applicable tax laws.
4. DOCUMENTS TO BE DELIVERED BY CONPRESS
Subject to the terms and conditions hereof, on each Purchase Date, Conpress
agrees to deliver to Valassis, at such address as Valassis may specify, a duly
issued certificate for all of the shares of Valassis common stock to be sold in
accordance with Section 1. hereof duly endorsed in blank or with blank stock
powers attached with signatures guaranteed and with all required stock transfer
stamps attached.
5. REPRESENTATIONS AND WARRANTIES OF CONPRESS AND CPIL
Conpress and CPIL jointly and severally represents and warrants to Valassis as
of the date hereof and as of each Purchase Date as follows:
5.1 AUTHORITY. Each of Conpress and CPIL is a corporation duly organized,
validly existing and in good standing under the laws of the Cayman Islands and
Bahamas, respectively, and has full corporate power and authority to execute,
deliver and perform this Agreement. The execution and delivery of this
Agreement and the performance by each of Conpress and CPIL of their respective
obligations hereunder have been duly authorized by Conpress' and CPIL's Board of
Directors, respectively, and constitutes the legal, valid and binding
obligation of Conpress and CPIL enforceable against such entities in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors'
rights generally now or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies. No other
action on the part of Conpress or CPIL is necessary to authorize the execution
and delivery of this Agreement or the performance of their respective
obligations hereunder.
5.2 NO CONFLICTS. Except for the release from pledge of the Valassis shares
of common stock owned by Conpress which Conpress and CPIL covenant and agree to
effectuate, the execution, delivery and performance of this Agreement by
Conpress and CPIL and the consummation by Conpress and CPIL of all of the
transactions contemplated hereby: (i) do not and will not require the consent,
waiver, approval, license, designation or authorization of, or declaration with,
any person or public authority; (ii) do not and will not with or without the
giving of notice or the passage of time or both, result in a breach of any
provision of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by the terms of the articles of
incorporation, bylaws or any other applicable organization documents of either
Conpress or CPIL or any agreement, mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument or obligation to which Conpress or
CPIL is a party or by which Conpress or CPIL is bound.
<PAGE> 14
5.3 CAPITAL STOCK. All of the shares of Valassis common stock owned by
Conpress and sold to Valassis hereunder are beneficially owned by Conpress.
Conpress has good and marketable title to such shares, and, upon consummation of
the sale of such shares hereunder, Valassis will acquire good and marketable
title to such shares free and clear of any liens, encumbrances, pledges,
security interests, restrictive agreements, transfer restrictions, voting trust
arrangements, claims and imperfections of any nature whatsoever.
6. Valassis hereby represents and warrants to Conpress and CPIL as of the date
hereof and as of each Purchase Date as follows:
6.1 AUTHORITY. Valassis is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has full corporate power and
authority to execute, deliver and perform this Agreement. The execution and
delivery of this Agreement and the performance by Valassis of its obligations
hereunder have been duly authorized by Valassis' Board of Directors and
constitutes the legal, valid and binding obligation of Valassis enforceable
against Valassis in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, reorganization, or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies. All corporate and other acts or proceedings required to be
taken by Valassis to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby have been duly and properly
taken.
6.2 NO CONFLICTS. The execution, delivery and performance of this Agreement
by Conpress and CPIL and the consummation by Valassis of all of the transactions
contemplated hereby: (i) do not and will not require the consent, waiver,
approval, license, designation or authorization of, or declaration with, any
person or public authority except for the approval by Comerica Bank pursuant to
a Revolving Credit Agreement dated as of August 11, 1995 between Valassis and
Comerica Bank, as Agent and the consent of a majority of the holders of the
outstanding shares of Valassis other than the shares beneficially owned by
Conpress; (ii) do not and will not, with or without the giving of notice or the
passage of time or both, result in a breach of any provision of, or constitute a
default under, or accelerate or permit the acceleration of the performance
required by the terms of the Amended and Restated Certificate of Incorporation
or bylaws of Valassis or any agreement, mortgage, deed of trust, indenture,
license, permit or any other agreement or instrument or obligation to which
Valassis is a party or by which Valassis is bound other than the shareholder
consent described herein.
7. COVENANTS.
7.1 CONSENTS. The parties hereto shall each use their reasonable efforts to
obtain at the earliest practicable date, and in any event before any Purchase
Date, by instruments in form and substance reasonably satisfactory to the other,
all consents and approvals required in connection with the transactions
contemplated by this Agreement.
7.2 FURTHER ASSURANCES. At any time and from time to time after a Purchase
Date, each party shall, without further consideration, execute and deliver to
the other such other instruments of transfer and shall take such other action
as the other may reasonably request to carry out the transfer of common stock
contemplated by this Agreement.
<PAGE> 15
8. CONDITIONS PRECEDENT
8.1 CONDITIONS TO PERFORMANCE BY VALASSIS. The obligations of Valassis under
this Agreement shall be subject to the fulfillment of each and all of the
following conditions at or before each Purchase Date, each of which is hereby
individually deemed material, and any one or more of which may be waived in
writing by Valassis.
8.1.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made
by Conpress and CPIL contained in this Agreement shall be true and correct as of
the Purchase Date to the same extent and with the same effect as if made on the
Purchase Date.
8.1.2 PERFORMANCE OF COVENANTS. Conpress and CPIL shall have performed each
and all of the obligations and complied with each and all of the covenants,
agreements and conditions required to be performed or complied with by it on or
prior to each Purchase Date.
8.1.3 OTHER AUTHORIZATIONS. Any and all necessary consents and assignments
that are required for the transfer of the common stock hereunder or for the
consummation of the transactions contemplated hereby shall have been obtained
and be in effect, and Valassis shall have received all such opinions, appraisals
and other documents as it shall deem necessary or appropriate to establish the
legality of its stock repurchase program.
8.1.4 APPROVAL OF DOCUMENTS. All instruments and documents delivered to
Valassis pursuant to the provisions of this Agreement, or incident to the
transactions contemplated hereby, shall be satisfactory to Valassis' counsel as
to form, scope, substance and execution.
8.2 CONDITIONS TO PERFORMANCE BY CONPRESS AND CPIL. The obligations of
Conpress and CPIL under this Agreement shall be subject to the fulfillment of
each and all of the following conditions at or before each Purchase Date, each
of which is hereby individually deemed material, and any one or more of which
may be waived in writing by CPIL and Conpress.
8.2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made
by Valassis contained in this Agreement shall be true and correct as of the
Purchase Date to the same extent and with the same effect as if made on the
Purchase Date.
8.2.2 PERFORMANCE OF COVENANTS. Valassis shall have performed each and all of
the obligations and complied with each and all of the covenants, agreements and
conditions required to be performed or complied with by it on or prior to each
Purchase Date.
8.2.3 OTHER AUTHORIZATIONS. Any and all necessary consents and assignments
that are required for the transfer of common stock hereunder or for the
consummation of the transactions contemplated hereby shall have been obtained
and be in effect.
8.2.4 APPROVAL OF DOCUMENTS. All instruments and documents delivered to
Conpress and CPIL pursuant to the provisions of this Agreement, or incident to
the transactions contemplated hereby, shall be satisfactory to Conpress and
CPIL's counsel as to form, scope, substance and execution.
<PAGE> 16
9. TERMINATION.
This Agreement may be terminated by either party hereto upon 30 days' written
notice of termination to the other in accordance with Section 10.4 hereof.
10. MISCELLANEOUS.
10.1 CONSENT TO JURISDICTION AND WAIVERS. Each of Valassis, Conpress and CPIL
irrevocably consents that any legal action or proceeding under, arising out of
or in any manner relating to this Agreement, or any other document delivered in
connection herewith, may be brought in any court of the State of Delaware or in
the United States District Court for Delaware. Valassis, Conpress and CPIL by
the execution and delivery of this Agreement, expressly and irrevocably
consent and submit to the personal jurisdiction of any of such courts in any
such action or proceeding. Valassis, Conpress and CPIL further irrevocably
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to it by hand or
by any other manner provided for in Section 10.4. Valassis, Conpress and CPIL
hereby expressly and irrevocably waive any claim or defense in any such action
or proceeding based on any alleged lack of personal jurisdiction, improper
venue or forum non conveniens or any similar basis. Nothing in this Section
shall affect or impair in any manner or to any extent the right of any party
hereto to commence legal proceedings or otherwise proceed against the other in
any jurisdiction or to serve process in any manner permitted by law. Valassis,
Conpress and CPIL hereby waive their rights, if any, to trial by jury.
10.2 EXPENSES. Each of the parties hereto shall bear its own expenses, costs
and fees (including attorneys' and auditors' fees) in connection with the
transactions contemplated hereby, including the preparation and execution of
this Agreement and compliance herewith, whether or not the transactions
contemplated hereby shall be consummated.
10.3 SEVERABILITY. If any provision of this Agreement shall be held or deemed
to be or shall, in fact, be inoperative or unenforceable as applied in any
particular case because it conflicts with any other provision or provisions
hereof or any constitution or statute or rule of public policy, or for any other
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 whatever. 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.
10.4 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 personally
or sent by registered or certified mail (return receipt requested), postage
prepaid, or by facsimile transmission (i) if to Valassis at 36111 Schoolcraft
Road, Livonia, MI 48150 (facsimile (313)/591-4460), Attn: Barry P. Hoffman;
and (ii) if to Conpress at 2nd Floor, Block A, Russell Court, St. Stephen's
Green, Dublin 2, The Republic of Ireland (facsimile 353-1-475-6605),
Attn: Peter Beer; and (iii) if to CPIL at 2nd Floor, Block A, Russell Court,
St. Stephen's Green, Dublin 2, The Republic of Ireland
(facsimile 353-1-475-6605), Attn: Peter Beer; or, in each case, at such other
address as may be specified in writing to the other parties.
<PAGE> 17
10.5 WAIVER. Any party may waive compliance by another with any of the
provisions of this Agreement. No waiver of any provisions shall be construed
as a waiver of any other provision. Any waiver must be in writing.
10.6 MISCELLANEOUS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement
may be executed in several counterparts, each of which shall be deemed an
original, and all of which constitute one and the same instrument. This
Agreement shall be governed in all respects, including validity, interpretation
and effect, by the laws of the State of Delaware, applicable to contracts made
and to be performed in Delaware. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the parties hereto. Any
amendment or modification of this Agreement must be in writing, signed by the
party against whom enforcement of such amendment or modification is sought.
The rights and obligations contained in this Agreement are solely for the
benefit of the parties hereto and are not intended to benefit or be enforceable
by any other party, under the third party beneficiary doctrine or otherwise.
10.7 JOINT AND SEVERAL OBLIGATIONS. All of the representations, warranties,
covenants and agreements of Conpress hereunder shall be the joint and several
representations, warranties, covenants and agreements of CPIL and Conpress.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
Valassis Communications, Inc.
By /s/ Barry P. Hoffman
______________________________
Title Secretary
Conpress Cayman, LDC
By /s/ P. G. Beer
________________________________
Title Authorized Representative
Consolidated Press International Limited
By /s/ P. G. Beer
________________________________
Title Director
1414
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet at June 30, 1996 (unaudited) and the
condensed consolidated statement of operations for the three months ended
June 30, 1996 (unaudited) and is qualified in its entirety by reference to
such said financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 18,436
<SECURITIES> 0
<RECEIVABLES> 91,994
<ALLOWANCES> 743
<INVENTORY> 24,795
<CURRENT-ASSETS> 143,396
<PP&E> 145,150
<DEPRECIATION> 111,021
<TOTAL-ASSETS> 242,747
<CURRENT-LIABILITIES> 130,654
<BONDS> 403,107
0
0
<COMMON> 433
<OTHER-SE> (294,950)
<TOTAL-LIABILITY-AND-EQUITY> 242,747
<SALES> 342,113
<TOTAL-REVENUES> 343,184
<CGS> 251,284
<TOTAL-COSTS> 251,284
<OTHER-EXPENSES> 37,279
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 20,155
<INCOME-PRETAX> 34,116
<INCOME-TAX> 13,700
<INCOME-CONTINUING> 20,466
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,466
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
<PAGE> 18
LEASE AGREEMENT Exhibit 10.21
THIS LEASE made as of this 27th day of June, 1996,
by and between SIRO, L.L.C., a Michigan Limited Liability
Company, whose address is c/o W. Sidney Smith, 108 S. University,
Suite 6, Mt. Pleasant, MI 48858, hereinafter referred to as
"Landlord," and VALASSIS COMMUNICATIONS, INC., a Delaware
Corporation, whose address is Westwood Office Park, 36111
Schoolcraft, Livonia, MI 48150, hereinafter referred to as
"Tenant."
WITNESSETH:
1. DESCRIPTION AND USE OF PREMISES
Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, that certain real property located in the City of
Livonia , County of Wayne, State of Michigan, commonly known as
19975 Victor Parkway, Livonia, MI 48152, and more particularly
described on Exhibit A attached hereto and made a part hereof,
together with all appurtenances, improvements, easements and
rights-of-way thereunto pertaining ("Premises"). Tenant shall
use and occupy the Premises as a corporate office building only
and for no other uses. The building to be constructed on the
premises is agreed to be One Hundred Thousand Five Hundred
Ninety-Seven (100,597) square feet ("Building").
2. CONSTRUCTION
A. LANDLORD'S WORK. Landlord shall perform the work
and make the installations in the Premises substantially as
set forth in the Plans and Specifications prepared by Harley
Ellington Design for Perini Building Company (Perini), which
Tenant acknowledges it has reviewed and approved (such work
and installations being hereinafter referred to as
("Landlord's Work"). Tenant agrees to pay all design and
construction costs incurred prior to Landlord's closing a
certain bond issue in the amount of approximately Twenty
Million ($20,000,000.00) Dollars (Bond Issue) to finance
the construction of the building and improvements. Landlord
shall reimburse Tenant for the amounts advanced in a lump
sum from the Bond Issue. Landlord agrees to pay all design
and construction costs incurred after the closing of the
Bond Issue to Perini. In no event shall Landlord's
reimbursement to Tenant plus payment to Perini or others for
design and building costs (Maximum Costs) exceed, the sum of
Ten Million Five Hundred Thirty-Five Thousand Two Hundred
Eighty-Two & 00\100 ($10,535,282.00) Dollars ("Maximum Cost ").
The Maximum Cost includes an allowance on the Valassis
Communications Headquarters Design Budget Update dated May
6, 1996 (Budget) of One Million Nine Hundred Thirty-Two
Thousand Six Hundred Fifty-Six & 00/100 ($1,932,656.00)
Dollars for interior work performed by Tenant, in accordance
with Paragraph 2.B. hereof. Landlord agrees to increase
this allowance to Two Million Eleven Thousand Nine Hundred-
Forty & 00/100 ($2,011,940.00) Dollars. This allowance
increase shall not increase the Maximum Cost. Tenant shall
cause the scope of interior work set forth in the Budget to
<PAGE> 19
be performed. See Exhibit B. If Tenant is able to perform
the interior work described in the Budget for less than
$2,011,940.00, it shall be entitled to the savings. If the
interior work costs more, Tenant shall pay the additional
cost. Tenant shall be solely and exclusively responsible
for and pay all design and construction costs that exceed
the Maximum Cost and shall pay for same forthwith upon
demand. In the event that the actual cost of the Landlord s
Work is less than the Maximum Cost, Landlord shall be
entitled to retain the difference. Landlord's obligation to
perform Landlord's Work shall not require Landlord to incur
overtime costs and expenses and shall be subject to
unavoidable delays due to acts of God, governmental
restrictions, strikes, labor disturbances, shortages of
material and supplies, and for any other cause or event
beyond Landlord's reasonable control. Landlord shall, when
construction progress so permits, notify Tenant in advance
of the approximate date on which the Premises will be
substantially completed and ready for Tenant's occupancy, as
evidenced by a temporary occupancy permit, and will notify
Tenant when the Premises is, in fact, so completed and
ready, which latter notice shall constitute delivery of pos-
session of the Premises to Tenant. If any dispute shall
arise as to whether the Premises are substantially completed
and ready for Tenant's occupancy, a certificate furnished by
Landlord's architect or designer certifying the date of
substantial completion shall be conclusive and binding of
that fact and date upon Landlord and Tenant.
B. TENANT'S WORK. Landlord agrees that prior to the
commencement of Tenant s right to possession, Tenant may, at
Tenant's sole cost and expense, provide additional work to
or on the Premises, provided that Tenant has furnished to
Landlord design drawings and/or working drawings and
specifications with respect to the work Tenant wishes to
have performed and Landlord has approved of the same in
writing. All such Tenant's work shall be done at such times
and in such manner as Landlord may designate, and only by
such contractors or mechanics as are approved by Landlord.
No deviations from the final set of plans and
specifications, once approved by Landlord, shall be made by
Tenant without Landlord's prior written consent. Approval
of the plans and specifications by Landlord shall not
constitute the assumption of and responsibility by Landlord
for their accuracy or sufficiency, and Tenant shall be
solely responsible for such items. If such designs and/or
working drawings and specifications are not furnished by
Tenant to the Landlord for approval in time to permit
Landlord's approval, or improvements are commenced or
constructed on the Premises by Tenant without Landlord's
approval, then the Landlord may, at its option, declare the
Tenant in default of this provision, and in addition to any
and all remedies provided in this Lease to the Landlord,
cancel and terminate the Tenant's interest in and to this
Lease by notice in writing to Tenant and forthwith re-enter
and re-take possession of the Premises, it being understood
that time is of the essence.
<PAGE> 20
C. Upon completion of construction, all the improvements on the
Premises shall be the property of Landlord, and Tenant, except as to
its interest under this Lease, shall have no interest in or to any of
the improvements.
3. RENT
Tenant shall pay Landlord rent of One Million, Six Hundred
Fifty-Nine Thousand Eight Hundred Fifty-One & 00/100
($1,659,851.00) Dollars per year for each year. The rent shall be
payable in semi-annual installments of Eight Hundred Twenty-Nine
Thousand, Nine Hundred Twenty-Five & 00/100 ($829,925.00)
Dollars. The first payment shall be due on the commencement date of
Tenant s right to possession as set forth in Article 4 hereof. Future
payments shall be due in advance of the first day of every six (6)
months thereafter. If the commencement date of this Lease shall fall
on a day other than the first day of a calendar month, then an
additional rental of an amount calculated by prorating the semi-
annual payment set forth above shall be paid by Tenant to Landlord
for the month in which said commencement date shall occur. Tenant
agrees to make all rental payments to Landlord at 108 S. University,
Suite 6, Mt. Pleasant, MI 48858. The rental is calculated at the rate of
sixteen dollars and fifty cents ($16.50) per square foot of the Building.
4. TERM
A. TERM OF RIGHT OF POSSESSION. Provided that the
contingencies herein are satisfied, the commencement of Tenant
s right to possess and use the Premises shall be the first to occur
of the following events: (i) the date Tenant commences
operation of its business on the Premises; (ii) the date the
improvements are substantially complete, as evidenced by a
temporary occupancy permit; or (iii) May 1, 1997. The term of
Tenant s right to possession shall be sixteen (16) years. If the
commencement date is the first day of a calendar month, the
sixteen (16) year term shall begin to run from that date. If the
commencement date is other than the first day of a month, the
sixteen (16) year term shall commence on the first day of the
following month. The term of Tenant s right to possession may
be extended in accordance with Article 5 hereof.
B. TERM OF OBLIGATIONS. Notwithstanding the term of
Tenant's right to possession, all of the provisions of this Lease
Agreement are binding on the parties from the date this
Agreement is executed. As such, Tenant acknowledges that
Tenant is responsible for payments and other obligations, set
forth herein, even though Tenant does not yet have physical
possession of the Premises.
C. Landlord agrees that Tenant shall have possession of the Premises with a
temporary certificate of occupancy issued by the City of Livonia on or before
April 15, 1997. If a temporary certificate of occupancy is not issued on or
before April 15, 1997, Landlord shall pay to Tenant forthwith, the Tenant's
then current rent and Hold-over penalty plus the difference between Tenant's
then current monthly rent and the monthly rent required under this Lease. For
each month or part thereof that a temporary certificate of occupancy is not
issued, three months or a proration thereof, shall be added to the term of this
Lease. The above shall not apply to any delays caused by Tenant's change
orders or natural disasters.
<PAGE> 21
5. OPTION TO RENEW
A. Provided that this Lease shall be in good standing and
in full force and effect and shall not theretofore have been
terminated and that Tenant shall not be in
default under any of the terms or conditions hereof, Tenant shall
have the option to extend the terms of this Lease, upon the
same terms and conditions, except as to rental, extension or
renewal, as are herein set forth, for an additional term of five (5)
years to commence upon the expiration of the original term
hereof. Such option shall be deemed exercised by Tenant unless
Tenant delivers to Landlord notice in writing of Tenant's election
not to renew between two hundred-ten (210) and one hundred-
eighty (180) days before the end of the original term hereof. In
the event the Tenant shall remain in possession of the Premises
beyond the term of Tenant s right to possession, Tenant shall be
deemed a holdover and subject to Article 39 hereof.
B. Provided the above option is exercised, Tenant shall
have one (1) additional option to extend the term of the Lease
for one (1) additional consecutive term of five (5) years under the
same terms and conditions, by giving Landlord notice at least
one hundred-eighty (180) days prior to the expiration of the then
current term. Rental shall be at an amount equal to the greater
of the then market rate or the rental rate for the preceding five
(5) years.
C. Rental for each five (5) year option period shall be set
at the beginning of each option, at an amount equal to the greater
of the then market rate or $16.50 per square foot per annum.
6. MAINTENANCE, REPAIRS AND ALTERATIONS
A. Tenant covenants and agrees to be responsible for all
maintenance repair and upkeep of the Premises during the term
of Tenant s right to possession. The Premises includes, but is
not limited to, for this purpose, all parking areas, the buildings,
improvements, foundations, exterior and interior walls, windows,
doors, floors, ceilings, downspouts, gutters, roof, skylights,
plumbing and sewerage facilities, air-condition system, heating
system, electrical facilities and equipment, glazing, lighting
fixtures and all other fixtures, equipment and appliances of
every kind and nature. Tenant agrees that Landlord shall not be
called upon or obligated to make any repairs, replacements,
rebuildings, restorations, improvements, alterations, remodeling
or additions whatsoever in or about the Premises.
B. Tenant shall be responsible for all janitorial service on
the Premises during the term hereof.
C. Tenant shall not, without the prior written consent of
Landlord, which shall not be unreasonably withheld, make
alterations, improvements or additions to the Premises and to
the building and improvements thereon. Consent is not required
if it involves less than Eight Thousand (8,000) square feet,
provided it does not diminish the value of the Premises. If
Landlord determines that same injures the Premises or decreases
the value thereof, it will be deemed to be reasonable cause for
withholding consent. Tenant shall pay all costs and expense in
connection with the same and shall hold Landlord harmless
therefrom.
<PAGE> 22
D. In a situation involving a need to repair, replace, or
restore any portion of the Premises, and which is not covered by
the provisions of "Eminent Domain" or "Damage and
Destruction," Tenant may, claim the benefit of any property
damage insurance which may be payable to Landlord by reason of
the loss or casualty giving rise to such need. However, the
benefits of such property damage insurance may be claimed only
for the purpose of and to the extent necessary to replace, repair
or restore the damaged or condemned portion of the Premises.
7. EFFECT OF BANKRUPTCY OR OTHER PROCEEDINGS
If at any time any bankruptcy or any reorganization proceeding
is instituted by or against Tenant either in the State or Federal
Courts, or if a receiver is appointed under Chapters X or XI of the
Bankruptcy Act, for its business or property on the Premises, Landlord
shall have the option, to be exercised by written notice given to
Tenant, to declare this Lease terminated at any time after the
expiration of twenty (20) days following the commencement of such
proceeding unless the proceeding is dismissed and unless all
payments of rent and other payments required by this Lease to be
made by Tenant to Landlord are paid promptly during said period of
twenty (20) days. Landlord shall under no circumstances be required
to permit a receiver to retain possession of said premises, and
Landlord need not lease said premises to such receivers, but Landlord
shall be entitled to immediate possession of said premises. Any
repossession or termination hereunder shall not operate in any way to
prejudice or affect the right of Landlord for recovery of rent or other
charges theretofore accrued, thereafter accruing or to any other
damages, nor shall any such termination or repossession ever be
construed as a waiver of or an election not to claim future damages on
account of such breach, but all such damages, including all future
rentals, shall be fully recoverable by Landlord.
8. QUIET POSSESSION
The Tenant, upon paying the rent herein provided and
performing all and singular the covenants and conditions of this Lease
on its part to be performed, shall and may peaceably and quietly have,
hold and enjoy the Premises during the term hereof, and Landlord
warrants that Landlord has full right and sufficient title to lease the
Premises for the term herein provided, and agrees to indemnify
Tenant for and against any and all loss and damage that may result to
Tenant on account of any failure of, or defect in, Landlord's title or
right to make and execute this Lease
9. ATTORNEY'S FEES
Should either party hereto institute any action or proceeding in
court to enforce any provision hereof or for damages by reason of any
alleged breach of any provision of this Lease or for a declaration of
such party's rights or obligations hereunder, or for any other judicial
remedy, the prevailing party shall be entitled to receive from the
losing party such amount as the court may adjudge to be reasonable
attorney's fees for the services rendered to the party finally prevailing
in such action or proceeding.
<PAGE> 23
10. CONSTRUCTION LIENS
Tenant shall keep the Premises free of construction liens and
other liens of like nature other than liens created or claimed by
reason of any work done by or at the instance of Landlord. Tenant
agrees to protect and indemnify Landlord against all such liens, or
claims which may ripen into such liens, and against all attorney's fees
and other costs and expenses arising from any such claim or lien. If
Tenant fails to fully discharge any such lien or claim, the Landlord, at
its option, may pay the same or any part thereof, and shall be the sole
judge of the legality of such lien or claim. Tenant shall repay Landlord
all amounts so paid by Landlord, together with interest thereon at the
maximum rate allowable by law from the time of payment by Landlord
until repayment by Tenant.
11. TENANT TO COMPLY WITH LAW
Tenant shall, from the date of this Lease, and at its own expense,
insure that the Premises conforms to and complies with all laws,
ordinances, and regulations now in force or that are enacted hereafter
affecting the use or occupancy of all or any part of the Premises.
Tenant indemnifies Landlord against and agrees to save Landlord
harmless from all expenses imposed or incurred for or because of any
violation by Tenant or anyone claiming under Tenant of any law,
ordinance, or regulation occasioned by the neglect or omission, or
willful act of Tenant or any person on the Premises by permission or
holding under Tenant unless such violation results solely from an act
or omission on the part of Landlord and/or the agents, servants or
employees of Landlord.
12. TITLE
Tenant acknowledges that Tenant has had the opportunity to
review the commitment for
the owner s policy of title insurance provided to Landlord from Phillip
R. Seaver Title Company, Inc., dated June 25, 1996. Tenant reviewed
all of the matters of record reflected in such commitment and agrees
to insure that the Premises shall at all times comply with those
matters of record affecting the Premises from the date of this
Agreement until the expiration of this Agreement. Tenant shall
indemnify and hold Landlord harmless from all expenses and costs
incurred by Landlord as a result of any of the matters of record
affecting the Premises.
13. SURVEY
Tenant acknowledges that Tenant had a survey of the Premises
prepared by Orchard, Hilz and McClement, Inc. Tenant has expressly
approved such survey and hereby accepts the Premises in accordance
with and subject to all matters set forth on the survey. Tenant
understands that Tenant shall not be released from any of its
obligations under this Agreement due to error(s) on the survey, or any
matters shown on the survey.
14. UTILITIES
Tenant agrees to pay all charges when due for water, gas,
electricity, or other utilities incurred by it in connection with the
Premises.
<PAGE> 24
15. TAXES
A. From the date of this Agreement until the expiration of the
Term and any renewals thereof, Tenant shall pay all real
property taxes and assessments which may be levied upon
or assessed against those lands comprising the Premises;
except that Landlord shall pay the December, 1996 real
property taxes and assessments. Tenant shall also pay all
taxes or assessments levied upon or assessed against the
improvements situated within the Premises and all taxes
levied upon or assessed against any personal property
situated within the Premises. Tenant understands that
Landlord shall not be required to pay any taxes or
assessments whatsoever which may be or become a lien
upon the lands, improvements and personal property. Any
taxes or assessments which may be levied or assessed for a
period beginning before the commencement of this Lease
or ending after the termination hereof shall be paid by
Tenant. Tenant shall not be obligated to pay any income
tax or other tax, assessment or charge which may be levied
or become due by reason of the rents and profits received
by Landlord as a result of this Lease.
16. CONDOMINIUM
The Tenant agrees to comply with and abide by all the
covenants, conditions, restrictions and terms as set forth in the
condominium documents for Victor Corporate Park Condominium,
according to the Master Deed, all exhibits and condominium
documents. Tenant further agrees to pay any and all condominium
association fees, assessments, common area charges, or any other
charges of any kind attributable to the Condominium Unit, which
become due and payable from and after the commencement date of
Tenant s right to possession. Landlord shall be responsible for all
condominium assessments coming due prior to the commencement
date of Tenant s right to possession.
17. OFF-SET STATEMENT, ATTORNMENT AND SUBORDINATION;
LANDLORD S MORTGAGEE S APPROVAL OF THIS LEASE
A. Tenant agrees within ten (10) days after request
therefor by Landlord to execute in recordable form and deliver to
Landlord a statement, in writing, certifying if true (a) that this
Lease is in full force and effect, (b) the date of commencement of
the term of this Lease, (c) that rent is paid currently without any
off-set or defense thereto, (d) the amount of rent, if any, paid in
advance, (e) that there are no uncured defaults by Landlord or
stating those claimed by Tenant, and (f) such other information
as Landlord may reasonably request; provided that, in face, such
facts are accurate and ascertainable.
B. Tenant shall, in the event any proceedings are
brought for the foreclosure
of or in the event of exercise of the power of sale under any
mortgage made by Landlord covering the Premises, attorn to the
purchaser upon any such foreclosure or sale and recognize
such purchaser as the Landlord under this Lease.
<PAGE> 25
C. Tenant agrees that this Lease shall, at the request of
Landlord, be subordinate to any first mortgages or deeds of trust
that may hereafter be placed upon the leased premises and to
any and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in said mortgages or
trust deeds shall agree to recognize the lease of Tenant in the
event of foreclosure if Tenant is not in default. Tenant also
agrees that any mortgagee or trustee may elect to have this
Lease a prior lien to its mortgage or deed of trust, and in the
event of such election and upon notification by such mortgagee
or trustee to Tenant to that effect, this Lease shall be deemed
prior in lien to said mortgage or deed of trust, whether this Lease
is dated prior to or subsequent to the date of said mortgage or
deed of trust. Tenant agrees, that upon the request of Landlord,
any mortgagee or any trustee, it shall execute whatever
instruments may be required to carry out the intent of this
Section.
D. Failure of Tenant to execute any of the above
instruments within fifteen (15) days upon written request so to
do by Landlord, shall constitute a breach of this Lease and
Landlord may, at its option, cancel this Lease and terminate
Tenant's interest herein. Further, Tenant hereby irrevocably
appoints Landlord as attorney-in-fact for Tenant with full power
and authority to execute and deliver in the name of Tenant any
such instruments.
E. If Landlord's mortgagee will approve this Lease, only
upon the basis of modification of the terms and provisions of
this Lease, other than those provisions relating to the size
and location of the Premises, the amount of rent and charges
payable hereunder and the use for which Tenant is permitted to
operate the leased premises, Landlord shall have the right to
cancel this Lease if Tenant refuses to approve in writing any
such modifications within thirty (30) days after Landlord's
request therefor, which request may not be made later than
forty-five (45) days after the delivery of possession of the
Premises to Tenant. If such right to cancel is exercised, this
Lease shall thereafter be null and void, and neither party shall
have any liability to the other by reason of such cancellation.
18. LIABILITY INSURANCE
Tenant shall, from the date this Agreement is executed, keep in
force and effect a policy of public liability and property damage
insurance with respect to the Premises, and the business operated by
Tenant in which the limits of public liability shall be not less than
Three Million Dollars ($3,000,000) per occurrence, and in which the
limit of property damage liability shall be not less than Five Hundred
Thousand Dollars ($500,000). The policy shall name Landlord, any
other parties in interest designated by Landlord, and Tenant as
insured, and shall contain a clause that the insurer will not cancel or
change the insurance without first giving Landlord thirty (30) days
prior written notice. Such insurance may be furnished by Tenant
<PAGE> 26
under any blanket policy carried by it or under a separate policy
therefor. The insurance shall be with an insurance company approved
by Landlord and a copy of the paid-up policy evidencing such
insurance or a certificate of insurance certifying to the issuance of
such policy shall be delivered to Landlord prior to the commencement
of Tenant's work and upon renewals not less than thirty (30) days prior
to the expiration of such coverage.
19. PROPERTY INSURANCE.
(a) Tenant shall, from the date of this Agreement, carry
insurance for fire and special extended coverage (as determined
by Landlord) insuring the improvements located on the Premises
and all appurtenances thereto for the full insurable value thereof
(with deductibles accepted by Landlord) such insurance coverage
to include the improvements provided by Landlord and Tenant,
and such insurance coverage shall include rental insurance.
Landlord shall not be liable to Tenant for any loss or damage
suffered by Tenant which is not covered by such insurance
(including without limitation, the amount of any such
deductibles). If the cost to repair or replace the damaged
improvements exceeds the full insurable value, Tenant shall pay
the difference. The policy shall name Landlord, any other
parties in interest designated by Landlord, and Tenant as
insured, and shall contain a clause that the insurer will not
cancel or change the insurance without first giving Landlord
thirty (30) days prior written notice. Such insurance may be
furnished by Tenant under any blanket policy carried by it or
under a separate policy therefor. The insurance shall be with an
insurance company approved by Landlord and a copy of the paid-
up policy evidencing such insurance or a certificate of insurance
certifying to the issuance of such policy shall be delivered to
Landlord prior to the commencement of Tenant s work and upon
renewals not less than thirty (30) days prior to the expiration of
such coverage.
(b) Tenant shall pay the cost of the premiums for all such
insurance, and the expenses incurred by Landlord relative to
insurance appraisals, adjusters and reasonable attorneys' fees in
connection therewith. Such statements may include charges for
premiums covering more than a single year.
(c) Tenant will not do or suffer to be done, or keep or suffer to be
kept, anything in, upon or about the Premises which will
contravene policies insuring against loss or damage by fire or
other hazards (including, without limitation, public liability) or
which will prevent Tenant from procuring such policies in
companies acceptable to Landlord.
(d) Tenant agrees to carry, at its expense, insurance against
vandalism, malicious mischief, and such other perils as are from
time to time included in a standard extended coverage
endorsement, insuring Tenant's trade fixtures, furnishings,
operating equipment and personal property, such as signs, wall
coverings, carpeting and drapes located on or within the
Premises, in an amount equal to not less than one hundred
percent (100%) of the actual replacement cost thereof and to
furnish Tenant with a certificate evidencing such coverage.
<PAGE> 27
20. COVENANT TO HOLD HARMLESS
Tenant agrees, from the date of this Agreement, to indemnify
Landlord and save it harmless from and against any and all claims,
actions, damages, liability and expense in connection with (i) loss of
life, personal injury and/or damage to property arising from or out of
any occurrence in, upon or at the Premises, including the person and
property of Tenant, and its employees and all persons in the building
at its or their invitation or with their consent, (ii) the occupancy or
use by Tenant of the Premises or any part thereof, or (iii) occasioned
wholly or in part by any act or omission of Tenant, its agents,
contractors, employees, servants, customers or licensees. For the
purpose hereof, the Premises shall include the service areas adjoining
the same. All property kept, stored or maintained in the Premises
shall be so kept, stored or maintained at the risk of Tenant only. In
case Landlord shall, without fault on its part, be made a party to any
litigation commenced by or against Tenant, then Tenant shall protect
and hold Landlord harmless and shall pay all costs, expenses and
reasonable attorney fees incurred or paid by Landlord in connection
with such litigation. Tenant shall also pay all costs, expenses and
reasonable attorney fees that may be incurred or paid by Landlord in
enforcing the covenants and agreements of this Lease.
21. WASTE OR NUISANCE
Tenant shall not commit or suffer to be committed any waste or
any nuisance upon the Premises.
22. SUBLETTING AND ASSIGNMENT
A. Tenant shall not sublet the Premises, or any portion
thereof, without the written consent of Landlord, which shall not
unreasonably be withheld, conditioned or delayed. Any such
subletting shall not relieve Tenant of its obligations to Landlord
under this Lease.
B. Tenant shall not have the right to assign this Lease or
to hypothecate or encumber its leasehold interest
hereunder, without the written consent of Landlord, which
shall not be unreasonably withheld, conditioned or
delayed. If Landlord consents; (i) Tenant shall not by
reason of any such assignment be relieved of any
responsibility, liability or obligation to Landlord under the
terms of this Lease; (ii) that any assignee shall agree in
writing to be bound by all the terms, covenants and
conditions of this Lease; and (iii) that an executed original
of such assignment and agreement shall be delivered to
Landlord.
C. Tenant may assign or sublet to a wholly owned
subsidiary of Tenant.
Tenant shall not by reason of any such assignment or sublease
be relieved of any responsibility, liability or obligation under this
Lease.
<PAGE> 28
23. SURRENDER OF PREMISES
A. Tenant shall, upon termination of the term of Tenant's right to
possession or any earlier termination of this Lease,
surrender to Landlord the Premises, including without
limitations, all building apparatus not covered by Section B of
this Article, and all alterations, improvements and other
additions which may be made or installed by either party.
B. Notwithstanding Section A of this Article, Tenant
shall have the right to remove all trade fixtures, furniture,
equipment and signs, which may be installed in the Premises
prior to or during Tenant s right to possession at Tenant s cost,
if Tenant is not in default at the time of removal. The Tenant
shall at its own cost and expense repair any and all damage to
the Premises resulting from or caused by such removal, and shall
restore the premises to its original condition, reasonable wear
and tear excepted. Tenant shall have sixty (60) days after
termination of this Lease for any reason whatsoever to effect
such removal, repair and restoration; provided, however, no such
fixtures or equipment placed on or in the Premises by Tenant,
and which remain the property of Tenant, may be removed at a
time when Tenant is in default in payment of rent or any other
money payable hereunder, or in the performance of any other
covenant under this Lease.
C. Anything to the contrary herein notwithstanding,
Tenant shall have the right at any time to remove its signs and
other equipment bearing any of its trade names or trademarks,
whether registered or unregistered. Landlord shall have no right
to use and shall not have or acquire any interest in such trade
name and service mark by reason of any of the terms or
provisions of this Lease, or by reason of use of the same on the
Premises.
24. EMINENT DOMAIN
A. In the event that the whole of the Premises shall be
taken under the power of eminent domain, the Tenant shall
continue to pay the balance of the rentals minus the amount of
the condemnation proceeds received by Landlord, provided,
however, that Tenant shall have the right, but not the obligation,
to participate in the Landlord's condemnation proceedings.
B. In the event that a portion of the Premises shall be
taken under the power of eminent domain, the obligation of
Tenant under this Lease to pay rent and all of the other
provisions of this Lease shall remain in full force and effect. All
damages awarded for any such taking under the power of
eminent domain, whether for the whole or part of the Premises,
shall belong to and be the property of Landlord, whether such
damages shall be awarded as compensation for diminution in
value of the leasehold or for the fee of the Premises; provided,
however, that Tenant shall receive credit against rental equal to
the damages paid to Landlord.
<PAGE> 29
25. HAZARDOUS WASTE
Tenant shall not cause or permit any hazardous material (as
hereinafter defined) to be released, brought upon, stored, produced,
emitted, disposed of or used upon, about or beneath the premises by
Tenant, its agents, employees, contractors or invitees.
Tenant shall indemnify, defend and hold Landlord harmless from
and against any and all environmental damages which arise from: (1)
the presence upon, about or beneath the premises of any hazardous
material or of any chemical substance requiring remediation under
any Federal, State or local statute, regulation, ordinance or policy; or
(2) the breach of any of the provisions of this Lease. For the purpose
of this Lease, "environmental damages" shall mean: (1) all claims,
judgments, damages, penalties, fines, costs, liabilities and losses (in-
cluding, without limitation, diminution in the value of the premises,
damages for the loss of or restriction on rentable or usable space or of
any amenity of the premises and from any adverse impact on
Landlord's marketing of space); (2) all sums paid for settlement of
claims, attorney fees, consultant's fees and expert's fees; and (3) all
costs incurred by Landlord in connection with the investigation of
hazardous material upon, about or beneath the premises, the
preparation of any remedial investigation and feasibility studies or
reports in the performance of any clean up, remediation, removal or
restoration work required by an Federal, State or local governmental
agency or political subdivision necessary for Landlord to make full
economic use of the premises or otherwise required under this Lease.
Tenant's obligations under this Section shall survive the expiration of
this Lease.
Notwithstanding any other obligation of Tenant to indemnify
Landlord pursuant to this Lease, Tenant shall, at its sole cost and
expense, promptly take all actions required by any Federal, State or
local governmental agency or political subdivision necessary for
Landlord to make full economic use of the premises, which
requirements or necessity arise from presence upon, about or beneath
the premises of any hazardous material. Such action shall include, but
not be limited to, the investigation of the environmental condition of
the premises, the preparation of any remedial investigation and
feasibility studies or reports and the performance of any clean up,
remedial, removal or restoration work. Tenant shall take all actions
necessary to restore the premises to the condition existing prior to
the introduction of the hazardous material upon, about or beneath the
premises, notwithstanding any lesser standard of remediation
allowable under applicable law or government policies. Tenant shall
nevertheless obtain Landlord's approval prior to undertaking any
activities required by this Section, which approval shall not be
unreasonably withheld so long as such actions would not potentially
have a material adverse long-term or short-term affect on the
premises or any other property or business owned or operated by
Landlord. Tenant shall promptly supply Landlord with any notices and
correspondence concerning environmental damages received by
Tenant form the United States Environmental Protection Agency or
the Michigan Department of Natural Resources. The obligations of
Tenant pursuant to this Section shall not apply to situations where
hazardous materials are released, brought upon, stored, produced,
emitted, disposed of or used upon, about or beneath the premises at
the time or times other than during the term of this Lease except
<PAGE> 30
where such event occurs as a result of the acts or omissions of
Tenant, its agents, employees, contractors or invitees or as a result of
the acts or omissions of any agent, employee, contractor or invitee of
any permitted Sublessee or assignee of Tenant. Tenant's obligation
under this Section shall survive the expiration of this Lease.
"Hazardous Material" means any material or substance: (1)
defined as a "hazardous substance" pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act (42 USC
Section 9601 et. seq.) and amendments thereto and regulations
promulgated thereunder; (1) containing gasoline, oil, diesel fuel or
other petroleum products; (3) defined as a "hazardous waste" pursuant
to the Federal Resource Conservation and Recovery Act (42 USC
Section 6901 et. seq.) and amendments thereto and regulations
promulgated thereunder; (4) containing polychlorinated biphenyls
(PCB's); (5) containing asbestos; (6) radioactive; (7) biological or (8) the
presence of which requires investigation or remediation under any
Federal, hazardous substance, material or waste which is or becomes
regulated by any Federal, State or local governmental authority, or
which causes a nuisance upon or waste to the premises.
26. DAMAGE AND DESTRUCTION
A. From the date of this Agreement until the expiration
of the term, including
any renewals or holdover periods, Tenant shall be solely
responsible for the cost of repairing, restoring or replacing any
portion of the Premises (including the Building and any
improvements) that are partially or totally damaged or
destroyed. In such event, Tenant shall, as soon as reasonably
possible, commence and proceed diligently to restore the
Premises substantially to their condition at the time of such
damage or destruction. Tenant shall have the use of any
insurance proceeds resulting from the damage or destruction to
the extent necessary to repair and/or replace the damaged or
destroyed property.
B. Tenant understands that its rent and other
obligations hereunder shall not be abated during the period of
any damage, repair or restoration provided for in this Article.
27. DEFAULTS OF TENANT
The following occurrences shall be deemed defaults by Tenant:
(a) Tenant shall fail to pay when due any rent or
other sum payable under this Lease and such failure continues
for fifteen (15) days after written notice from Landlord.
(b) Tenant shall abandon or vacate the Premises
before the end of the term of this Lease, provided, however, that
Tenant shall not be deemed to have abandoned, vacated or
surrendered the Premises if Tenant meets all its financial and
maintenance obligations under the Lease.
(c) Tenant shall be in breach of any other obligation
under this Lease, and such breach shall continue for thirty (30)
days after written notice from Landlord.
<PAGE> 31
28. REMEDIES OF LANDLORD
In the event of a default by Tenant, Landlord shall have the
following rights and remedies
in addition to all other rights and remedies otherwise available to
Landlord:
(a) Landlord shall be entitled to immediately
accelerate upon written notice to Tenant the full balance of the
rent payable for the remainder of the term of this Lease.
(b) Landlord shall have the right to terminate this
Lease upon written notice, in accordance with the Summary
Proceedings Act, to Tenant without prejudice to any claim for
rents or other sums due or to become due under this Lease.
(c) Landlord shall have the immediate right of re-
entry and may remove all persons and property from the
Premises. Such property may be removed and stored at the cost
of Tenant. Should Landlord elect to re-enter as herein provided,
or should Landlord take possession pursuant to legal
proceedings, Landlord may either terminate this Lease or, from
time to time, without terminating this Lease, relet the Premises
or any part thereof for such term or terms (which may be for a
term extending beyond the term of this Lease) and at such rental
or rentals and upon such other terms and conditions as
Landlord, in the exercise of its sole discretion, deems advisable,
with the right to make alterations and repairs to the Premises.
Upon each such reletting, (i) Tenant shall be immediately liable
to pay to Landlord, in addition to any indebtedness other than
rent due hereunder, the cost and expense of such reletting and
of any such alterations and repairs incurred by Landlord, and the
amount, if any, by which the rent reserved in this Lease for the
period of the reletting as accelerated under Subparagraph (a) of
this Paragraph, exceeds the amount agreed to be paid for rent for
the Premises by the reletting Tenant; or (ii) at the option of
Landlord, rents received by Landlord from such reletting shall be
applied first, to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord; second, to the payment
of any costs and expenses of such reletting and of such
alterations and repairs; third, to the payment of rent unpaid
hereunder; and the residue, if any, held by Landlord and applied
in payment of future unaccelerated rent as the same may
become due and payable hereunder.
(d) Landlord may immediately sue to recover from
Tenant all damages Landlord may incur by reason of Tenant's
default, including the cost of recovering the Premises, and
including the rent reserved and charged in this Lease for the
remainder of the stated term as accelerated under Subparagraph
(a) of this Paragraph, all of which shall be immediately due and
payable along with attorneys' fees and Landlord shall attempt to
mitigate damages in a commercially reasonable manner.
<PAGE> 32
29. LATE CHARGES AND INTEREST FOR PAST DUE PAYMENTS
All installments of rent payable to Landlord under this Lease if
not paid within five (5)
days after they become due shall be subject to a late charge equal to
five percent (5%) of the installment amount. In addition, any
payment rent or other amount due from Tenant to Landlord which is
not made when due under this Lease shall bear interest at the rate of
seven percent (7%) per annum from the date of nonpayment to the
date of payment.
30. LEGAL EXPENSES
In case suit shall be brought by Landlord for recovery of
possession of the Leased
Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other
covenant herein contained on the part of Tenant to be kept or
performed, all expenses incurred therefor (including attorneys' fees)
shall be awarded to Landlord if Landlord is the party prevailing in such
suit.
31. MEMORANDUM OF LEASE
A Memorandum of Lease, suitable for recording in the Office of
the County Register of Deeds of the County within which the Premises
are situated, and satisfactory in form to both Landlord and Tenant,
shall be executed and recorded. Said document shall be entitled
"Memorandum of Lease" and shall incorporate the legal description of
the Premises.
32. SERVICE OF NOTICE
A. All notices or demands of any kind which Landlord is
required to or desires to serve on Tenant with respect to this
Lease may be served by mailing a copy of such notice or demand
to Tenant by certified mail, with return receipt requested and
postage prepaid, addressed to Tenant at the place last
designated by it as the place at which notices may be served, or
if no such written designation is then in effect then addressed to
Tenant at the Premises. Tenant hereby designates the Premises
as the place at which notices shall be served. Service by mail
shall be deemed complete at the expiration of the third day after
the date of delivery thereof to the address specified.
B. All notices or demands of any kind which Tenant is
required to or desires to serve on Landlord with respect to this
Lease may be served by mailing a copy of such notice or demand
to Landlord by certified mail, with return receipt requested and
postage prepaid, addressed to Landlord at the place last
designated by it as the place at which notices may be served.
Landlord hereby designates 108 S. University, Suite 6, Mt.
Pleasant, MI 48858 as the place at which notices shall be served.
Service by mail shall be deemed complete at the expiration of
the third day after the date of delivery thereof to the address
specified.
<PAGE> 33
33. APPLICABLE LAW AND PARTIES BOUND
This Lease shall be construed under the laws of the State within
which the Premises are situated and shall be binding upon and inure
to the benefit, as the case may require, of the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
34. INTERPRETATION
The words "Landlord" and "Tenant" as used herein, shall include,
apply to, bind and benefit, as the context may permit or require, the
parties executing this Lease and their respective heirs, executors,
administrators, successors and assigns.
Wherever the context so permits or requires, words of any
gender used in this-Lease shall be construed to include any other
gender, and words in the singular number shall be construed to
include the plural.
35. INVALIDITY
In the event that any term, provision, condition or covenant
contained in this Lease, or the application thereof to any person or
circumstance, shall, to any extent, be invalid or unenforceable, or be
held to be invalid or unenforceable by any court of competent
jurisdiction, the remainder of this Lease, or the application of such
term, provision, condition or covenant to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall
not be affected thereby and all such remaining terms, provisions,
conditions and covenants in this Lease shall be deemed to be valid
and enforceable.
36. APPROVALS
Whenever in this Lease the Landlord's approval or consent is
required, such approval or consent shall be in writing and Landlord
covenants and agrees that such approval or consent shall not be
unreasonably withheld.
37. CAPTIONS
The headings and captions contained in this Lease are inserted
only as a matter of convenience and for reference and in no way
define, limit or describe the scope or intent of this Lease nor of any
provision herein contained.
38. CONFIDENTIALITY
Landlord and Tenant each agree that they shall hold in strict
confidence all documents and information concerning this transaction
and the business and property of the other. No press release or public
disclosure, either written or oral, of the terms of this Lease shall be
made by either party without the consent of the other.
Notwithstanding the foregoing, Landlord may make such disclosures
to its lenders or investors as is necessary to obtain the financing in
this transaction.
<PAGE> 34
39. HOLDING OVER
Any holding over after the expiration of the term, or any renewal
hereof, with or without
the consent of Landlord, shall be construed to be a tenancy from
month to month, at One Hundred-Fifty percent (150%) of the rents
specified for the period immediately preceding the expiration of the
last term or renewal term. The rent will be prorated on a monthly
basis, and payable monthly, and shall otherwise be on the terms and
conditions herein specified, so far as applicable.
40. LANDLORD S OPTION
In the event that Landlord does not close the Bond Issue on or
before November 1, 1996, Landlord has the right and option to sell,
and Tenant shall repurchase the Premises upon the terms and
conditions set forth below:
A. Term of Option: The option granted hereunder shall be
exercisable until November 30, 1996 and all rights hereunder shall expire at
5:00 o clock in the afternoon on said date.
B. Purchase Price: The purchase price, upon exercise of
this option, shall be Three Million Twelve Thousand Two
Hundred Eighty-Six & 00/100 ($3,012,286.00) Dollars, plus an
amount equal seven (7%) percent interest per annum plus any
amount equal to any money owed by Landlord to Tenant as
reimbursement for construction and design costs on or for the
Premises or for any other reason.
C. Exercise of Option: The option granted hereunder
shall be exercisable by the giving of a written notice to
Landlord by certified mail, return receipt requested. Notice shall
be deemed given on the day that the notice is mailed in any U. S.
Post Office.
D. Sale on Exercise: If this option is exercised, the
purchase and sale of the above described property shall then
be made upon the following terms and conditions:
(i) Upon exercise of the option, Landlord shall
secure and deliver to Tenant a commitment for
an owner s title insurance policy, subject to
permitted exceptions. Permitted Exceptions
shall mean all conditions, covenants,
restrictions and conditions which were on title
when Landlord received it from Tenant and
construction liens placed on the premises.
(ii) At time of closing, Landlord shall provide Tenant
with an owners policy of title insurance on ALTA
Owner s Policy Form No. B-1970 with the
standard exceptions for the full amount of the
purchase price.
<PAGE> 35
(iii) Landlord shall convey a good and marketable
title, subject to existing easements for public
utilities, to serve the premises and zoning
ordinances.
(iv) All real estate taxes and special assessments
shall be assumed by Tenant. All transfer taxes
shall be paid by Landlord.
(v) The sale shall be closed by payment of the full
purchase price upon delivery of an executed
Warranty Deed, subject to permitted exceptions.
(vi) This sale and purchase shall be closed on or
before thirty (30) days after exercise of option.
(vii) Possession shall be delivered at time of closing.
41. NET LEASE; NON-TERMINABILITY
A. Net Lease. This Lease is a net lease and, except as
otherwise expressly
provided herein, any present or future law to the contrary
notwithstanding, shall not terminate, nor shall Tenant be
entitled to any abatement, reduction, set-off, counterclaim,
defense or deduction with respect to any Basic Rent, Additional
Rent or other sum payable hereunder, unless expressly provided
to the contrary herein.
B. Non-Terminability. Tenant shall remain obligated under this Lease in
accordance with its terms and shall not take any action to terminate, rescind
or avoid this Lease, unless expressly provided to the contrary herein.
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed as of the day and year shown opposite their
respective signatures hereinbelow.
LANDLORD:
SIRO, L.L.C.,
a Michigan Limited Liability Company,
By: /s/ W. Sidney Smith
_____________________________________
W. Sidney Smith
Its: Member
By: /s/ Roger E. Hinman
______________________________________
Roger E. Hinman
Its: Member
By: /s/ Stacia S. Smith
______________________________________
Stacia S. Smith
Its: Member
TENANT:
VALASSIS COMMUNICATIONS, INC.,
a Michigan Corporation,
By: /s/ Robert L. Recchia
_______________________________________
Its: CFO
<PAGE> 37
STATE OF MICHIGAN
COUNTY OF ISABELLA
On June 27, 1996, before me, a Notary Public ln and for said
County and State, personally appeared W. Sidney Smith and Stacia S. Smith,
known to me to be the Authorized Signators of Siro, L.L.C., who executed the
within instrument, on behalf of the Company.
/s/ Peggy Mangum
__________________________________
Notary Public
Isabella County, Michigan
My commission expires: 9/10/96
STATE OF MICHIGAN
COUNTY OF ISABELLA
On June 27, 1996, before me, a Notary Public in and for said
County and State, personally appeared Roger E. Hinman who, known to be an
Authorized Signator of Siro, L.L.C., who executed the within instrument, on
behalf of the Company.
/s/ Peggy Mangum
_____________________________________
Notary Public
Isabella County, Michigan
My commission expires: 9/10/96
STATE OF MICHIGAN
COUNTY OF OAKLAND
On June 27, 1996, before me, a Notary Public in and for said County
and State, personally appeared Robert L. Recchia known to me to be the
Authorized Signator of Valassis Communication, Inc., who executed the within
instrument, on behalf of the Corporation.
/s/ Terry D. Bowlby
_____________________________________
Notary Public
Oakland County, Michigan
My commission expires: 12/18/96
<PAGE> 38
EXHIBIT A
Legal Description
Unit 2, Victor Corporate Park Condominium , according to the
Master Deed recorded in Liber 24532, Pages 729 through 797,
inclusive, Wayne County Records, and amended by First
Amendment to Master Deed recorded in Liber 26231, Pages 860
through 867, inclusive, Wayne County Records, and Second
Amendment to Master Deed recorded in Liber 26733, Pages 491
through 500, inclusive, Wayne County Records, and Third
Amendment to Master Deed recorded in Liber 27753, Pages 538
through 562, inclusive, Wayne County Records, and Fourth
Amendment to Master Deed recorded in Liber 28166, Page 912,
Wayne County Records,, and Fifth Amendment to Master Deed
recorded in Liber 28772, Pages 903 through 916, inclusive, Wayne
County Records, and designated as Wayne County Condominium
Subdivision Plan No. 284, together with rights in common elements
and limited common elements, as set forth in the above Master
Deed (and Amendments thereto) and as described in Act 59 of the
Public Acts of 1978, as amended.
Tax Item No: Part of 024-01-0002-000
