-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESjCTRj32YgqsY/mQBVRvWW/F5TgD5k0mRsJ89Di3kMQ4/qS4pmxP49cjAeGMnMo Q69R1WDW9RKdfxn678rjPQ== 0000883293-96-000011.txt : 19960816 0000883293-96-000011.hdr.sgml : 19960816 ACCESSION NUMBER: 0000883293-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALASSIS COMMUNICATIONS INC CENTRAL INDEX KEY: 0000883293 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 382760940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10991 FILM NUMBER: 96613430 BUSINESS ADDRESS: STREET 1: 36111 SCHOOLCRAFT ROAD CITY: LIVONIA STATE: MI ZIP: 48150 BUSINESS PHONE: 3135913000 MAIL ADDRESS: STREET 1: 36111 SCHOOLCRAFT CITY: LIVONIA STATE: MI ZIP: 48150 10-Q 1 QUARTERLY REPORT FOR QUARTER ENDED JUNE 30, 1996 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. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
1996 1995 JUNE 30, DEC. 31, (unaudited) (note) ---------- --------- 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 ======== ========
3 VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DEC. 31 1996 1995 (unaudited) (note) --------- --------- 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.
4 VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED ---------------- ----------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1996 1995 1996 1995 -------- -------- -------- -------- 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.
4 VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
SIX MONTHS ENDED ------------------ JUNE 30, JUNE 30, 1996 1995 -------- -------- 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.
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 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. 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. 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. 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 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. 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. EX-10.20 2 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. 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. 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. 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. 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. 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 EX-27 3 FINANCIAL DATA SCHEDULE SIX MONTHS ENDED JUNE 30, 1996
5 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. 1000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 18,436 0 91,994 743 24,795 143,396 145,150 111,021 242,747 130,654 403,107 0 0 433 (294,950) 242,747 342,113 343,184 251,284 251,284 37,279 300 20,155 34,116 13,700 20,466 0 0 0 20,466 .47 .47
EX-10 4 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 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. 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. 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. 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. 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. 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. 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 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. 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. 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. 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 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. 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. 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. 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. 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. 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. 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----