-----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, AHlLJn5tP5VgeDJFStxs30STeCShC047S9xlkYH64VzETr02s/LchBOHRlieie4u 5waotFlGNYMn3GNMuYfnWg== 0000950131-02-003230.txt : 20020814 0000950131-02-003230.hdr.sgml : 20020814 20020814143859 ACCESSION NUMBER: 0000950131-02-003230 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10991 FILM NUMBER: 02734867 BUSINESS ADDRESS: STREET 1: 19975 VICTOR PARKWAY CITY: LIVONIA STATE: MI ZIP: 48152 BUSINESS PHONE: 3135913000 MAIL ADDRESS: STREET 1: 19975 VICTOR PARKWAY CITY: LIVONIA STATE: MI ZIP: 48152 10-Q 1 d10q.txt FORM 10-Q 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, 2002 [ ] 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) 19975 Victor Parkway Livonia, Michigan 48152 (address of principal executive offices) Registrant's Telephone Number: (734) 591-3000 ----------------------------------------------- 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 August 9, 2002, there were 53,261,967 shares of the Registrant's Common Stock outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, ASSETS 2002 2001 - ------ ---------------- -------------- (unaudited) Current assets: Cash and cash equivalents $ 51,469 $ 10,615 Accounts receivable (less allowance for doubtful accounts of $1,794 at June 30, 2002 and $1,051 at December 31, 2001) 103,524 131,777 Inventories: Raw materials 12,020 13,965 Work in progress 9,339 13,935 Prepaid expenses and other 6,543 7,499 Deferred income taxes 1,479 1,479 Refundable income taxes 2,060 4,277 ---------------- -------------- Total current assets 186,434 183,547 ---------------- -------------- Property, plant and equipment, at cost: Land and buildings 27,968 22,960 Machinery and equipment 117,010 120,548 Office furniture and equipment 34,686 31,674 Automobiles 984 900 Leasehold improvements 1,956 1,954 ---------------- -------------- 182,604 178,036 Less accumulated depreciation and amortization (112,641) (113,967) ---------------- -------------- Net property, plant and equipment 69,963 64,069 ---------------- -------------- Intangible assets: Goodwill 115,756 115,756 Other intangibles 85,591 85,347 ---------------- -------------- 201,347 201,103 Less accumulated amortization (123,513) (123,408) ---------------- -------------- Net intangible assets 77,834 77,695 ---------------- -------------- Equity investments and advances to investees 41,870 33,955 Other assets 2,950 3,759 ---------------- -------------- Total assets $ 379,051 $ 363,025 ================ ==============
VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, DECEMBER 31, LIABILITIES AND STOCKHOLDERS' DEFICIT 2002 2001 - ------------------------------------- ------------- ------------ (unaudited) Current liabilities: Current portion long-term debt $ - $ 2,600 Accounts payable 74,570 82,750 Accrued interest 3,096 3,105 Accrued expenses 29,804 32,846 Progress billings 36,834 51,766 ------------- ------------ Total current liabilities 144,304 173,067 ------------- ------------ Long-term debt 254,689 252,383 Deferred income taxes 3,259 3,259 Commitments and contingencies Stockholders' deficit: Preferred stock of $.01 par value. Authorized 25,000,000 shares; no shares issued or outstanding at June 30, 2002 and December 31, 2001 Common stock of $.01 par value. Authorized 100,000,000 shares; issued 63,041,116 at June 30, 2002 and 62,992,763 at December 31, 2001; outstanding 53,208,740 at June 30, 2002 and 53,698,382 at December 31, 2001 630 630 Additional paid-in capital 104,744 99,116 Deferred compensation (1,358) (1,342) Retained earnings 258,180 191,822 Foreign currency translations (460) (560) Treasury stock, at cost (9,832,376 shares at June 30, 2002 and 9,294,381 shares at December 31, 2001) (384,937) (355,350) ------------- ------------ Total stockholders' deficit (23,201) (65,684) ------------- ------------ Total liabilities and stockholders' deficit $ 379,051 $ 363,025 ============= ============
See accompanying notes to condensed consolidated financial statements. VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2002 2001 2002 2001 ------------- ----------- ----------- ----------- REVENUES: Net sales $ 202,569 $ 217,192 $ 406,341 $ 444,921 Other 766 84 1,769 165 ------------- ----------- ----------- ----------- Total revenues 203,335 217,276 408,110 445,086 ------------- ----------- ----------- ----------- COSTS AND EXPENSES: Cost of products sold 124,587 133,845 251,403 278,905 Selling, general and administrative 22,289 23,130 44,466 46,728 Loss on equity investments 678 687 1,709 1,312 Amortization of intangible assets 52 858 105 1,714 Interest 3,347 4,819 6,569 10,532 ------------- ----------- ----------- ----------- Total costs and expenses 150,953 163,339 304,252 339,191 ------------- ----------- ----------- ----------- Earnings before income taxes 52,382 53,937 103,858 105,895 Income taxes 18,600 20,200 37,500 39,700 ------------- ----------- ----------- ----------- Net earnings $ 33,782 $ 33,737 $ 66,358 $ 66,195 ============= =========== =========== =========== Net earnings per common share, basic $ 0.63 $ 0.63 $ 1.24 $ 1.24 ============= =========== =========== =========== Net earnings per common share, diluted $ 0.62 $ 0.62 $ 1.22 $ 1.22 ============= =========== =========== =========== Shares used in computing net earnings per share, basic 53,345,996 53,430,534 53,606,538 53,477,624 ============= =========== =========== =========== Shares used in computing net earnings per share, diluted 54,061,755 54,418,567 54,316,744 54,423,829 ============= =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. VALASSIS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED ------------------------- JUNE 30, JUNE 30, 2002 2001 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 66,358 $ 66,195 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of intangibles 5,138 6,572 Amortization of bond discount 2,306 368 Provision for losses on accounts receivable 743 739 Gain on sale of property, plant and equipment (793) (88) Losses on equity investments 1,709 1,312 Stock-based compensation charge 903 1,288 Changes in assets and liabilities which increase (decrease) cash flow: Accounts receivable 27,510 10,226 Inventories 6,541 (290) Prepaid expenses and other 170 3,835 Other liabilities - (1,681) Other assets 565 (1,486) Accounts payable (8,181) (15,420) Accrued expenses and interest 5,766 (7,394) Income taxes 6,677 6,646 Progress billings (14,932) (14,770) ---------- ---------- Total adjustments 34,122 (10,143) ---------- ---------- Net cash provided by operating activities 100,480 56,052 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (11,068) (8,092) Proceeds from sale of property, plant and equipment 934 192 Investments in and advances to affiliated companies (9,624) (15,840) Payments of additional purchase price for acquisition of PreVision (8,000) - Other 99 (102) ---------- ---------- Net cash used in investing activities (27,659) (23,842) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of long-term debt - 150,000 Net payments under revolving line of credit (2,600) (163,850) Repurchase of common stock (52,184) (27,513) Proceeds from the issuance of common stock 22,817 8,921 ---------- ---------- Net cash used in financing activities (31,967) (32,442) ---------- ---------- Net increase/(decrease) in cash 40,854 (232) Cash at beginning of period 10,615 11,140 ---------- ---------- Cash at end of period $ 51,469 $ 10,908 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 3,418 $ 8,135 Cash paid during the period for income taxes $ 30,838 $ 33,135 Non-cash financing activities: Stock issued under stock-based compensation plan $ 1,138 $ 1,585 See accompanying notes to condensed consolidated financial statements 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 accounting principles generally accepted in the United States of America ("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, 2001. Certain amounts for 2001 have been reclassified to conform to current period classifications. 2. RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires an entity to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the related long-lived asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of SFAS No. 143 to have a material effect on its financial position or results of operations. During October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which replaces SFAS No. 121 and provisions of APB Opinion No. 30 for the disposal of segments of a business. The statement creates one accounting model, based on the framework established in Statement No. 121, to be applied to all long-lived assets including discontinued operations. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted the provisions of SFAS No. 144 as of January 1, 2002, and it did not have an effect on the Company's financial statements. 3. ADOPTION OF SFAS NO. 141 AND 142 During July 2001, the FASB issued two statements, SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets", that amend APB Opinion No. 16, "Business Combinations," and supersede APB Opinion No. 17, "Intangible Assets." The two statements modify the method of accounting for business combinations and address the accounting for intangible assets. As of January 1, 2002, the Company adopted the provisions of both SFAS No. 141 and SFAS No. 142. The adoption of SFAS No. 141 did not have any effect on the Company's financial statements. The provisions of SFAS No. 142 allow the Company to cease amortization of goodwill and other intangible assets with indefinite lives. However, goodwill and other intangibles are subject to annual impairment tests in which impairment is defined as fair market value less than the carrying value of the asset on the financial statements. SFAS No. 142 requires the Company to test all goodwill and other intangible assets with indefinite lives for impairment within six months of implementation. The Company has performed the first step of testing for impairment by utilizing the discounted cash flow method which does not indicate any impairment of goodwill or intangible assets with indefinite lives. Intangible assets as of June 30, 2002 are comprised of (dollars in thousands):
ACCUMULATED UNAMORTIZED WEIGHTED INTANGIBLE AMORTIZATION BALANCE AT AVERAGE ASSETS AT AT JUNE 30, JUNE 30, USEFUL LIFE COST 2002 2002 (IN YEARS) -------------- -------------- ------------- ----------- Amortizable intangible assets $ 52,455 $ (50,709) $ 1,746 11.9 NON-AMORTIZABLE INTANGIBLE ASSETS: Goodwill: FSI 65,401 (47,145) 18,257 Cluster-Targeted 4,195 (209) 3,986 All Others 47,196 (4,692) 42,505 The Valassis name and other 32,100 (20,759) 11,341 ------------------------------------------------ Total non-amortizable intangible assets 148,892 (72,805) 76,089 -------------- -------------- ------------- Total $ 201,347 $ (123,514) $ 77,835 ============== ============== =============
Amortizable intangible assets include a non-compete agreement, corporate logos and a fully amortized pressroom operating system. The associated amortization expense for the six months ended June 30, 2002 was $105,000. Amortization expense is expected to be $210,000 for each of the next five succeeding years including the current year. The following table presents actual results of operations for the second quarter 2002 and six months ended June 30, 2002 and a reconciliation of reported net income to the adjusted net income for the same periods of 2001:
QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 2002 2001 2002 2001 ------------ ----------- ----------- ------------ Net income: Reported net income $ 33,782 $ 33,737 $ 66,358 $ 66,195 Add back: goodwill and intangible amortization, after tax - 504 - 1,006 ------------ ----------- ----------- ------------ $ 33,782 $ 34,241 $ 66,358 $ 67,201 ============ =========== =========== ============ Basic earnings per share: Reported net income $ 0.63 $ 0.63 $ 1.24 $ 1.24 Add back: goodwill and intangible amortization - 0.01 - 0.02 ------------ ----------- ----------- ------------ $ 0.63 $ 0.64 $ 1.24 $ 1.26 ============ =========== =========== ============ Diluted earnings per share: Reported net income $ 0.62 $ 0.62 $ 1.22 $ 1.22 Add back: goodwill and intangible amortization - 0.01 - 0.02 ------------ ----------- ----------- ------------ $ 0.62 $ 0.63 $ 1.22 $ 1.24 ============ =========== =========== ============
4. CONTINGENCIES On July 27, 2001 a federal court jury returned a verdict against Dennis D. Garberg & Associates, Inc. d/b/a The Sunflower Group (Sunflower) awarding the Company $16.6 million which included damages for past and future lost profits. The lawsuit, brought by the Company against Sunflower in February of 1999, asserted that Sunflower wrongfully obtained proprietary information from the Company's newspaper delivered sampling business. On April 5, 2002, after a series of post-trial motions, the Court entered a total judgment of approximately $5.4 million. A reasonable estimation of the Company's ultimate recovery can not be made at this time and the Company has not recorded any amount in its financial statements. 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, results of operations or liquidity. 5. SEGMENT REPORTING The Company's products are broken into three types, as follows: 1. Mass-Distributed Products - products which provide mass reach at low cost, including: . Free-standing inserts (FSI) - four color booklets containing promotions from multiple advertisers distributed through Sunday newspapers . Run-of-press (ROP) - on-page newspaper advertising and promotions 2. Cluster-Targeted Products - products targeted around geographic and demographic clusters, including: . Solo newspaper inserts . Newspaper-delivered product sampling/advertising 3. One-to-One Products - products and services that pinpoint individuals to build loyalty to a brand, including: . Customer Relationship Marketing (which includes PreVision) . Promotion Watch - security consulting . Non-consolidated investments in one-to-one promotion companies The Company has two reportable segments, Free-Standing Inserts (FSIs) and Cluster-Targeted Products and three segments which do not meet the quantitative thresholds for reporting separately -- ROP, Customer Relationship Marketing and Promotion Watch. These segments are strategic business units that offer different products and services. They are managed separately because each business requires different marketing strategies and caters to a different customer base.
(IN MILLIONS) THREE MONTHS ENDED JUNE 30 - ------------- ---------------------------------------------------------------- CLUSTER- FSI TARGETED ALL OTHERS* TOTAL ------------- ------------- ----------- ------------ 2002 Revenues from external customers $ 141.6 $ 45.2 $ 15.8 $ 202.6 Intersegment revenues - - - - Depreciation/amortization 2.0 0.5 - 2.5 Segment profit 45.9 4.2 1.3 51.4 2001 Revenues from external customers $ 147.6 $ 51.7 $ 17.9 $ 217.2 Intersegment revenues - - - - Depreciation/amortization 2.3 0.5 0.5 3.3 Segment profit 46.2 7.4 0.2 53.8
* Segments below the quantitative thresholds are primarily attributable to three segments of the Company. Those include a customer relationship marketing business, a run-of-press business, and a promotion security service. None of these segments has met any of the quantitative thresholds for determining reportable segments. Reconciliations to consolidated financial statement totals are as follows: THREE MONTHS ENDED JUNE 30, --------------------------- 2002 2001 --------- ---------- Profit for reportable segments $ 50.1 $ 53.6 Profit for other segments 1.3 0.2 Unallocated amounts: Interest income 0.2 0.1 Other income 0.8 - --------- ---------- Earnings before taxes $ 52.4 $ 53.9 ========= ========== Domestic and foreign revenues for each of the three-month periods ended June 30 were as follows: 2002 2001 --------- ---------- United States $ 201.7 $ 215.7 Canada 1.6 1.6 --------- ---------- Total $ 203.3 $ 217.3 ========= ==========
(IN MILLIONS) SIX MONTHS ENDED JUNE 30 - ------------ ------------------------------------------------ CLUSTER- FSI TARGETED ALL OTHERS* TOTAL --------- --------- ----------- ------- 2002 Revenues from external customers $ 289.9 $ 83.0 $ 33.4 $ 406.3 Intersegment revenues - - - - Depreciation/amortization 4.0 1.0 0.1 5.1 Segment profit 92.1 8.0 1.7 101.8 2001 Revenues from external customers $ 306.6 $ 106.3 $ 32.1 $ 445.0 Intersegment revenues - - - - Depreciation/amortization 4.6 1.0 1.0 6.6 Segment profit/(loss) 92.4 13.5 (0.1) 105.8
* Segments below the quantitative thresholds are primarily attributable to three segments of the Company. Those include a customer relationship marketing business, a run-of-press business, and a promotion security service. None of these segments has met any of the quantitative thresholds for determining reportable segments. Reconciliations to consolidated financial statement totals are as follows: SIX MONTHS ENDED JUNE 30, -------------------------- 2002 2001 --------- ---------- Profit for reportable segments $ 100.1 $ 105.9 (Loss)/Profit for other segments 1.7 (0.1) Unallocated amounts: Interest income 0.3 0.1 Other income 1.8 - --------- ---------- Earnings before taxes $ 103.9 $ 105.9 ========= ========== Domestic and foreign revenues for each of the six-month periods ended June 30 were as follows: 2002 2001 ---------- ---------- United States $ 405.4 $ 442.3 Canada 2.7 2.8 ---------- ---------- Total $ 408.1 $ 445.1 ========== ========== 6. EARNINGS PER SHARE Earnings per common share ("EPS") data were computed as follows: THREE MONTHS ENDED JUNE 30, ---------------------- 2002 2001 --------- -------- Net Earnings $ 33,782 $ 33,737 ========= ======== Basic EPS: Weighted average common shares outstanding 53,346 53,431 ========= ======== Earnings per common share - basic $ 0.63 $ 0.63 ========= ======== Diluted EPS: Weighted average common shares outstanding 53,346 53,431 Weighted average shares purchased on exercise of dilutive options 4,882 4,602 Shares purchased with proceeds of options (4,224) (3,664) Shares contingently issuable 58 50 --------- -------- Shares applicable to diluted earnings 54,062 54,419 ========= ======== Earnings per common share - diluted $ 0.62 $ 0.62 ========= ========
SIX MONTHS ENDED JUNE 30, ------------------------- 2002 2001 ----------- ---------- Net Earnings $ 66,358 $ 66,195 =========== ========== Basic EPS: Weighted average common shares outstanding 53,607 53,478 =========== ========== Earnings per common share - basic $ 1.24 $ 1.24 =========== ========== Diluted EPS: Weighted average common shares outstanding 53,607 53,478 Weighted average shares purchased on exercise of dilutive options 5,381 4,525 Shares purchased with proceeds of options (4,729) (3,629) Shares contingently issuable 58 50 ----------- ---------- Shares applicable to diluted earnings 54,317 54,424 =========== ========== Earnings per common share - diluted $ 1.22 $ 1.22 =========== ==========
7. SUBSEQUENT EVENTS On July 1, 2002, the Company exercised its option to acquire the remaining shares of Relationship Marketing Group, Inc. ("RMG"). As a result, the Company's interest in Valassis Relationship Marketing Systems, LLC ("VRMS") was increased to 87.9%. Effective July 1, 2002, the Company's consolidated financial statements will include the results of VRMS. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Certain statements under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and to cause future results to differ from our operating results in the past. Such factors include, among others, the following: a new competitor in the Company's core free-standing insert business and consequent price war, which has occurred in the past when a new competitor entered the market; new technology that would make free-standing inserts less attractive; a shift in customer preference for different promotional materials, promotional strategies or coupon delivery methods, including in-store advertising systems and other forms of coupon delivery; an increase in the Company's paper costs, a significant cost component of the Company's business; or economic disruptions caused by terrorist activity, armed conflict or changes in general economic conditions, or economic changes which affect the business of our customers and lead to reduced sales promotion spending. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001 Net sales decreased 6.7% from $217.2 million for the second quarter of 2001 to $202.6 million for the second quarter of 2002. Free-standing insert (FSI) revenues were down from $147.6 million for the quarter ended June 30, 2001 to $141.6 million for the same quarter 2002. The decrease is primarily a result of lower market share and pricing after the Company's earlier attempted price increase did not take hold. However, this percentage decrease is less than that of the first quarter of 2002, and market share improved as well. Revenues for cluster-targeted products decreased 12.6% to $45.2 million for the quarter. The decrease is primarily caused by continued weak demand for sampling/advertising polybag programs. Net sales included a 5.5% increase in ROP (run-of-press) sales. This increase is attributable to enhanced capabilities and expansion in business with both new and existing customers. Gross profit margin increased to 38.7% in the second quarter of 2002, up from 38.4% in the second quarter of 2001. The increase is largely due to a decrease in paper costs for the current quarter. The Company has successfully placed the majority of its paper requirements under multi-year contracts, providing long-term cost stability. Selling, general and administrative expenses decreased 3.6% from $23.1 million in the second quarter of 2001 to $22.3 million in the second quarter of 2002. This decrease is primarily the result of the Company's continued cost containment program implemented in the second half of 2001. Amortization expense of intangible assets and goodwill decreased from $858,000 to $52,000 in the second quarter ended June 30, 2002. The reduction is the result of the Company's adoption of SFAS No. 142 for which the effect on earnings per share was an increase of $0.01 in the three months ended June 30, 2002. Net earnings were $33.8 million for the second quarter of 2002 versus $33.7 million for the same period last year. SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001 For the six months ended June 30, 2002, net sales decreased 8.7% to $406.3 million from $444.9 million for the comparable period in 2001. Free-standing insert (FSI) revenues were down from $306.6 million for the first six months of 2001 to $289.9 million for the first six months of 2002. This decrease is primarily the result of a reduction of market share and price as compared to the first half of 2001. However, market share improved in the second quarter versus the first quarter and is expected to be approximately 50% for the year. Cluster-targeted revenues decreased 21.9% to $83.0 million for the six months ended June 30, 2002. The decrease is driven primarily by decreases in new product introductions in the sampling/advertising polybag programs and continued competition from commercial printers in solo inserts. Net sales included a 36.7% increase in ROP (run-of-press) sales. This increase is attributable to enhanced capabilities and increased demand. Gross margin increased to 38.4% for the first six months of 2002, from 37.3% for the same period in 2001. The increase is largely due to decreases in paper costs for the first half of the year. The Company has successfully placed the majority of its paper requirements under multi-year contracts, providing long-term cost stability. Selling, general and administrative expenses decreased 4.8% from $46.7 million in 2001 to $44.5 million for the six months ended June 30, 2002. This decrease is primarily the result of the Company's cost containment program implemented in the second half of 2001. Amortization expense of intangible assets and goodwill decreased from $1.7 million to $105,000 in the six months ended June 30, 2002. The reduction is the result of the Company's adoption of SFAS No. 142 for which the effect on earnings per share was an increase of $0.02 in the six months ended June 30, 2002. Net earnings were $66.4 million for the six months ended June 30, 2002 versus $66.2 million for the same period last year. FINANCIAL CONDITION, LIQUIDITY AND SOURCES OF CAPITAL The Company's liquidity requirements arise mainly from its working capital needs, primarily accounts receivable, inventory and debt service requirements. The Company does not offer financing to its customers. FSI customers are billed for 75% of each order eight weeks in advance of the publication date and are billed for the balance immediately prior to the publication date. The Company inventories its work in progress at cost while it accrues progress billings as a current liability at full sales value. Although the Company receives considerable payments from its customers prior to publication of promotions, revenue is recognized only upon publication dates. Therefore, the progress billings on the balance sheet include any profits in the related receivables and accordingly, the Company can operate with low, or even negative, working capital. Cash and cash equivalents totaled $51.5 million at June 30, 2002 versus $10.6 million at December 31, 2001. This was the result of cash provided by operating activities of $100.5 million, and cash used in investing activities and financing activities of $27.7 million and $32.0 million, respectively, during the first six months of 2002. Cash flow from operating activities increased from $56.1 million at June 30, 2001 to $100.5 million at June 30, 2002, primarily due to a $27.5 million decrease in accounts receivable and a $6.5 million decrease in inventories. The decrease in accounts receivable represents a return to a normalized receivable balance as of June 30, 2002, as compared to a relatively higher balance as of December 31, 2001. Inventories decreased as of June 30, 2002, primarily due to a decrease in the cost of paper. Net cash used in investing activities was $27.7 million up from $23.8 million in 2001. Capital expenditures increased $3.0 million due to timing of payments on the addition of a new printing press. Additionally, the Company paid $8.0 million in a contingent purchase price payment for PreVision in the first quarter of 2002. The Company made advances to and investments in VRMS of $9.6 million during the first half of 2002. On July 1, 2002, the Company exercised its option to acquire the remaining shares of RMG for $4.5 million which will be reflected in the next quarter's cash flows from investing activities. As of June 30, 2002, the Company's debt has been reduced to $254.7, which consists of $100.0 million of its 6-5/8% Senior Notes due 2009 and $154.7 million of Zero Coupon Convertible Notes due 2021. The Company has $125.0 million available under its revolving credit facility which expires in October 2002. The Company is currently in discussions to replace the facility. The Company intends to use cash generated by operations to meet interest and principal repayment obligations, for general corporate purposes, to reduce its indebtedness, make acquisitions and from time to time to repurchase stock through the Company's stock repurchase program. As of June 30, 2002, the Company had authorization to repurchase an additional 4.1 million shares of its common stock under its existing share repurchase program. Management believes that the Company will generate sufficient funds from operations and will have sufficient lines of credit available to meet currently anticipated liquidity needs, including interest and required payments of indebtedness. CAPITAL EXPENDITURES - The Company operates three printing facilities. Capital expenditures were $11.1 million for the six month period ended June 30, 2002, largely representing the addition of a new printing press. Management expects future capital expenditure requirements of approximately $15 million over each of the next three to five years to meet increased capacity needs and to replace or rebuild equipment as required. It is expected that equipment will be purchased using funds provided by operations. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that in certain circumstances affect amounts reported in the accompanying consolidated financial statements. The U.S. Securities and Exchange Commission ("SEC") has defined a company's most critical accounting policies as the ones that are most important to the portrayal of the Company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and estimates addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions. For additional information see Note 2, "Significant Accounting Policies", of our Annual Report on Form 10-K for the year ended December 31, 2001. The Company does not believe there is a great likelihood that materially different amounts would be reported under different conditions or using different assumptions related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets historically have been reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net cash flows estimated to be generated by such assets. If such assets are considered to be impaired, the impairment to be recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets. There are no events or changes in circumstances of which management is aware indicating that the carrying value of the Company's long-lived assets may not be recoverable. As described in Note 3, "Adoption of SFAS No. 141 and 142" of this Form 10-Q, the accounting treatment for goodwill and other intangible assets changed effective January 1, 2002. OTHER MATTERS - The Company does not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities." PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders a. The Company voted on the following proposals described in (b), (c) and (d) below at its Annual Meeting of Stockholders on May 14, 2002. b. 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 were: Patrick F. Brennan, Kenneth V. Darish, Seth Goldstein, Barry P. Hoffman, Brian J. Husselbee, Robert L. Recchia, Marcella A. Sampson, Alan F. Schultz and Faith Whittlesey. Votes were cast for election of directors as follows: Director For Withheld Broker Non-Votes -------- ---------- --------- ----------------- Patrick F. Brennan 46,669,822 233,193 0 Kenneth V. Darish 46,669,822 233,193 0 Seth Goldstein 46,669,822 233,193 0 Barry P. Hoffman 40,899,114 6,003,901 0 Brian J. Husselbee 46,669,822 233,193 0 Robert L. Recchia 40,899,114 6,003,901 0 Marcella A. Sampson 46,669,822 233,193 0 Alan F. Schultz 40,899,114 6,003,901 0 Faith Whittlesey 46,669,822 233,193 0 c. The proposal to approve the Company's 2002 Long-Term Incentive Plan was approved as follows: For Against Abstain Broker Non-Votes ---------- ---------- ------- ---------------- 31,919,837 11,869,189 16,351 0 d. The proposal to ratify the selection of Deloitte & Touche LLP, as independent auditors of the Company for the 2002 fiscal year was approved as follows: For Against Abstain Broker Non-Votes ---------- ---------- ------- ---------------- 44,422,019 2,462,904 18,092 0 Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10.3(g) Amendment to Employment Agreement of Robert L. Recchia dated July 8, 2002 10.4(g) Amendment to Employment Agreement of Barry P. Hoffman dated June 26, 2002 10.5(i) Amendment to Employment Agreement of Richard P. Herpich dated May 13, 2002 10.5(j) Amendment to Employment Agreement of Richard P. Herpich dated July 8, 2002 10.11(g) Amendment to Employment Agreement of Alan F. Schultz dated June 26, 2002 10.23 Employment Agreement dated March 18, 1992, between William F. Hogg, Jr. and Valassis Communications, Inc. 10.23(a) Amendment to Employment Agreement of William F. Hogg, Jr. dated December 22, 1995 10.23(b) Amendment to Employment Agreement of William F. Hogg, Jr. dated January 20, 1997 10.23(c) Amendment to Employment Agreement of William F. Hogg, Jr. dated December 23, 1998 10.23(d) Amendment to Employment Agreement of William F. Hogg, Jr. dated January 5, 2001 10.23(e) Amendment to Employment Agreement of William F. Hogg, Jr. dated January 11, 2002 10.23(f) Amendment to Employment Agreement of William F. Hogg, Jr. dated July 8, 2002 10.24 Valassis Communications, Inc. Supplemental Benefit Plan dated September 15, 1998 10.24(a) First Amendment to Valassis Communications, Inc. Supplemental Benefit Plan dated June 25, 2002 b. Form 8-K The Company filed a report on Form 8-K, dated May 14, 2002, announcing that the Board of Directors had agreed to increase its share repurchase allocation to a target of 75% of free cash flow for the balance of 2002. 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, 2002 Valassis Communications, Inc. (Registrant) By: /s/Robert L. Recchia ---------------------------------------- Robert L. Recchia Executive Vice President and Chief Financial Officer Signing on behalf of the Registrant and as principal financial and accounting officer. EX-10.3(G) 3 dex103g.txt AMENDMENT EMPLOYMENT AGREEMENT R. L. RECCHIA EXHIBIT 10.3(g) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made July 8, 2002 by and between Valassis Communications, Inc. (the "Corporation") and Robert L. Recchia (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on January 2, 1996, January 3, 1997, December 9, 1998, December 23, 1999, June 8, 2000, March 14, 2001 and December 21, 2001 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to, among other things, extend the term of employment and provide for the grant of stock options to the Executive. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on December 31, 2008." 2. The last sentence of Section 2.(a) shall be amended to read as follows: "The Executive's services shall be performed at the Corporation's headquarters which shall not be more than twenty-five miles from where the Executive is currently employed unless such requirement is waived by the Executive." 3. The following sentence shall be added to Section 3.(a) of the Employment Agreement: "The Executive's Annual Base Salary, payable on a biweekly basis, shall be at the annual rate of not less than $375,000 effective January 1, 2003." 4. Section 3.(c) of the Employment Agreement shall be amended to read in its entirety as follows: "Stock Options. The Executive shall be eligible to receive non-qualified options to purchase an aggregate of 450,000 shares of Common Stock of the Corporation pursuant to the Corporation's 2002 Long-Term Incentive Plan (or such other plan applicable to executives of the Corporation in effect from time to time) (each, an "Option" and collectively, the "Options"). The Options shall be granted by the Corporation in eight (8) semi-annual installments consisting of 56,250 Options each on April 1 and October 1 (each April 1 and October 1 shall be referred to herein as a "Date of Grant") commencing on October 1, 2002 through April 1, 2006. Each Option shall have a strike price equal to the Fair Market Value (as defined in the Corporation's applicable stock option plan) of the Corporation's Common Stock on the Date of Grant and shall become fully vested five (5) years from such Date of Grant and exercisable for two (2) years thereafter, with the same terms and conditions as the Corporation's then current standard non-qualified stock option agreement for executives, except as provided below. The Options shall also vest in accordance with the following stock performance targets for the Corporation's Common Stock: One third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of five dollars ($5.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; One-third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of ten dollars ($10.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; and the remaining one third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of fifteen dollars ($15.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; provided, however, that in no event shall an Option be exercised for the first six (6) months following a Date of Grant. Notwithstanding the foregoing, (A) upon a Change of Control (as defined in the Corporation's applicable stock option plan), (x) all shares with respect to which any Option granted prior to the Change of Control shall become fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become vested and fully exercisable with a strike price equal to the Fair Market Value of the Corporation's Common Stock on the day that is ninety (90) days prior to the public announcement of the Change of Control; and (B) upon termination of Executive's employment by the Corporation other than for Cause or by the Executive for Good Reason, (x) all shares with respect to which any Option granted shall become vested and fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become fully exercisable with a strike price equal to the Fair Market Value on the applicable Date of Termination." 5. Section 3.(f)(B) shall be amended to read in its entirety as follows: "The Corporation shall furnish to the Executive financial planning, tax and estate preparation services." 6. Section 5.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Termination by the Corporation for Cause or by the Executive other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under Section 3 of this Agreement other than the obligation to pay the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid and the timely payment or provision of Other Benefits. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, the Corporation shall have no further obligations under Section 3 of this Agreement to the Executive, other than for Accrued Obligations (except for the amount described in clause (2) of Section 5(a)(i)) and the timely payment or provision of Other Benefits and the Executive shall have no liability to the Corporation solely on account of such termination. In such case, all such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination." 7. The Employment Agreement shall be amended to add a new Section 7 to read in its entirety as follows, and the subsequent Sections of the Agreement shall be renumbered accordingly: "7. Excise Taxes. (a) In the event it shall be determined that any payment or benefit provided under this Agreement, together with any other payments or benefits Executive is entitled to receive by reason of a Change in Control of the Company or a termination of his employment with the Company (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or any successor provision, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall pay Executive, at least 10 days prior to the time payment of any such Excise Tax is due, an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax and any federal, state and local taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payments. (b) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company and acceptable to Executive the Payments (in whole or in part) do not constitute parachute payments or excess parachute payments or are otherwise not subject to the Excise Tax, (2) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) (after applying clause (1) above), and (3) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate in the state and locality of Executive's residence on the date of payment, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of employment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. Executive shall notify the Company of any audit by the Internal Revenue Service of Executive's federal income tax return for the year in which a payment under this Agreement is made within ten (10) days of Executive's receipt of notification of such audit. In addition, Executive shall also notify the Company of the final resolution of such audit within ten (10) days of such resolution." 8. The first sentence of renumbered Section 12.(a) shall be amended to read as follows: "This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws." 9. All other terms of the Employment Agreement shall remain in full force and effect. 10. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. -------------------------------------- /s/ Robert L. Recchia -------------------------------------- EX-10.4(G) 4 dex104g.txt AMENDMENT EMPLOYMENT AGREEMENT B. P. HOFFMAN EXHIBIT 10.4(g) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made June 26, 2002 by and between Valassis Communications, Inc. (the "Corporation") and Barry P. Hoffman (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on December 19, 1995, December 12, 1997, December 9, 1998, December 16, 1999, June 5, 2000, March 14, 2001 and December 20, 2001 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to, among other things, extend the term of employment and provide for the grant of stock options to the Executive. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on December 31, 2008." 2. The last sentence of Section 2.(a) shall be amended to read as follows: "The Executive's services shall be performed at the Corporation's headquarters which shall not be more than twenty-five miles from where the Executive is currently employed unless such requirement is waived by the Executive." 3. The following sentence shall be added to Section 3.(a) of the Employment Agreement: "The Executive's Annual Base Salary, payable on a biweekly basis, shall be at the annual rate of not less than $375,000 effective January 1, 2003." 4. Section 3.(c) of the Employment Agreement shall be amended to read in its entirety as follows: "Stock Options. The Executive shall be eligible to receive non-qualified options to purchase an aggregate of 450,000 shares of Common Stock of the Corporation pursuant to the Corporation's 2002 Long-Term Incentive Plan (or such other plan applicable to executives of the Corporation in effect from time to time) (each, an "Option" and collectively, the "Options"). The Options shall be granted by the Corporation in eight (8) semi-annual installments consisting of 56,250 Options each on April 1 and October 1 (each April 1 and October 1 shall be referred to herein as a "Date of Grant") commencing on October 1, 2002 through April 1, 2006. Each Option shall have a strike price equal to the Fair Market Value (as defined in the Corporation's applicable stock option plan) of the Corporation's Common Stock on the Date of Grant and shall become fully vested five (5) years from such Date of Grant and exercisable for two (2) years thereafter, with the same terms and conditions as the Corporation's then current standard non-qualified stock option agreement for executives, except as provided below. The Options shall also vest in accordance with the following stock performance targets for the Corporation's Common Stock: One third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of five dollars ($5.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; One-third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of ten dollars ($10.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; and the remaining one third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of fifteen dollars ($15.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; provided, however, that in no event shall an Option be exercised for the first six (6) months following a Date of Grant. Notwithstanding the foregoing, (A) upon a Change of Control (as defined in the Corporation's applicable stock option plan), (x) all shares with respect to which any Option granted prior to the Change of Control shall become fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become vested and fully exercisable with a strike price equal to the Fair Market Value of the Corporation's Common Stock on the day that is ninety (90) days prior to the public announcement of the Change of Control; and (B) upon termination of Executive's employment by the Corporation other than for Cause or by the Executive for Good Reason, (x) all shares with respect to which any Option granted shall become vested and fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become fully exercisable with a strike price equal to the Fair Market Value on the applicable Date of Termination." 5. Section 3.(f)(A) shall be amended to read in its entirety as follows: "The Corporation shall furnish to the Executive financial planning, tax and estate preparation services." 6. Section 5.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Termination by the Corporation for Cause or by the Executive other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under Section 3 of this Agreement other than the obligation to pay the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid and the timely payment or provision of Other Benefits. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, the Corporation shall have no further obligations under Section 3 of this Agreement to the Executive, other than for Accrued Obligations (except for the amount described in clause (2) of Section 5(a)(i)) and the timely payment or provision of Other Benefits and the Executive shall have no liability to the Corporation solely on account of such termination. In such case, all such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination." 7. The Employment Agreement shall be amended to add a new Section 7 to read in its entirety as follows, and the subsequent Sections of the Agreement shall be renumbered accordingly: "7. Excise Taxes. (a) In the event it shall be determined that any payment or benefit provided under this Agreement, together with any other payments or benefits Executive is entitled to receive by reason of a Change in Control of the Company or a termination of his employment with the Company (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or any successor provision, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall pay Executive, at least 10 days prior to the time payment of any such Excise Tax is due, an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax and any federal, state and local taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payments. (b) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company and acceptable to Executive the Payments (in whole or in part) do not constitute parachute payments or excess parachute payments or are otherwise not subject to the Excise Tax, (2) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) (after applying clause (1) above), and (3) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate in the state and locality of Executive's residence on the date of payment, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of employment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. Executive shall notify the Company of any audit by the Internal Revenue Service of Executive's federal income tax return for the year in which a payment under this Agreement is made within ten (10) days of Executive's receipt of notification of such audit. In addition, Executive shall also notify the Company of the final resolution of such audit within ten (10) days of such resolution." 8. The first sentence of renumbered Section 12.(a) shall be amended to read as follows: "This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws." 9. All other terms of the Employment Agreement shall remain in full force and effect. 10. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. --------------------------------------- /s/ Barry P. Hoffman --------------------------------------- EX-10.5(I) 5 dex105i.txt AMENDMENT EMPLOYMENT AGREEMENT R. P. HERPICH EXHIBIT 10.5(i) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made May 13, 2002 by and between Valassis Communications, Inc. (the "Corporation") and Richard P. Herpich (the "Executive"). 1. Section 3(b) of the Employment Agreement shall be amended to read in its entirety as follows: "(b) Semi-Annual Cash Bonus. Commencing on January 1, 2003, with respect to each six-month period ending on June 30 and December 31 thereafter, the Executive shall be paid by the Corporation a semi-annual cash bonus of up to 50% of the Annual Base Salary on the following basis: (i) 25% in accordance with the targets set by the Board and the Compensation/ Stock Option Committee of the Corporation (the "Committee"); and (ii) 25% in accordance with performance targets set by the President and Chief Executive Officer of the Corporation. Each such semi-annual bonus (the "Semi-Annual Cash Bonus") shall be paid promptly after the end of the applicable six-month period when the Committee (in the case of 3(b)(i) herein) and the President and Chief Executive Officer of the Corporation (in the case of 3(b)(ii) herein) has determined that applicable targets have been met but in no event later than 60 days after each June 30 and December 31. Such performance targets set by the President and Chief Executive Officer of the Corporation shall be set forth on an Exhibit A hereto. Such performance targets will contain an opportunity for the Executive to reach targets of 115%, provided, however, that the Executive's total Semi-Annual Cash Bonus payments cannot exceed 50% of the Annual Base Salary (or exceed 100% of the Annual Base Salary for the applicable year). The Executive shall also be entitled to participate in any programs of the Corporation enabling employees to apply all or part of any bonus to the purchase of the Corporation's stock and receive matching grants." 2. All other terms of the Employment Agreement shall remain in full force and effect. 3. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ----------------------------------- /s/ Valassis Sales & Marketing Services, Inc. --------------------------------------------- /s/ Richard P. Herpich --------------------------------------------- EX-10.5(J) 6 dex105j.txt AMENDMENT EMPLOYMENT AGREEMENT R. P. HERPICH EXHIBIT 10.5(j) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made July 8, 2002 by and between Valassis Communications, Inc. (the "Corporation") and Richard P. Herpich (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of January 17, 1994, as amended on June 30, 1994, December 19, 1995, February 18, 1997, December 30, 1997, December 15, 1998, January 4, 2000, December 21, 2000, December 20, 2001 and May 13, 2002 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to, among other things, extend the term of employment and provide for the grant of stock options to the Executive. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of January 17, 1994 (the "Effective Date") and shall continue until the close of business on December 31, 2005." 2. The following sentence shall be added to Section 3.(a) of the Employment Agreement: "The Executive's Annual Base Salary, payable on a biweekly basis, shall be at the annual rate of not less than $325,000 effective January 1, 2003." 3. The following sentence shall be added to Section 3.(d) of the Employment Agreement: "The Corporation shall furnish to the Executive financial planning, tax and estate preparation services." 4. Section 3 of the Employment Agreement shall be amended to insert a new subsection (g) to read in its entirety as follows: "Stock Options. The Executive shall be eligible to receive non-qualified options to purchase an aggregate of 393,000 shares of Common Stock of the Corporation pursuant to the Corporation's 2002 Long-Term Incentive Plan (or such other plan applicable to executives of the Corporation in effect from time to time) (each, an "Option" and collectively, the "Options"). The Options shall be granted by the Corporation in seven (7) semi-annual installments consisting of 56,143 Options each on April 1 and October 1 (each April 1 and October 1 shall be referred to herein as a "Date of Grant") commencing on October 1, 2002 through October 1, 2005. Each Option shall have a strike price equal to the Fair Market Value (as defined in the Corporation's applicable stock option plan) of the Corporation's Common Stock on the Date of Grant and shall become fully vested five (5) years from such Date of Grant and exercisable for two (2) years thereafter, with the same terms and conditions as the Corporation's then current standard non-qualified stock option agreement for executives, except as provided below. The Options shall also vest in accordance with the following stock performance targets for the Corporation's Common Stock: One third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of five dollars ($5.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; One-third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of ten dollars ($10.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; and the remaining one third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of fifteen dollars ($15.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; provided, however, that in no event shall an Option be exercised for the first six (6) months following a Date of Grant. Notwithstanding the foregoing, (A) upon a Change of Control (as defined in the Corporation's applicable stock option plan), (x) all shares with respect to which any Option granted prior to the Change of Control shall become fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become vested and fully exercisable with a strike price equal to the Fair Market Value of the Corporation's Common Stock on the day that is ninety (90) days prior to the public announcement of the Change of Control; and (B) upon termination of Executive's employment by the Corporation other than for Cause, (x) all shares with respect to which any Option granted shall become vested and fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become fully exercisable with a strike price equal to the Fair Market Value on the applicable Date of Termination." 5. Section 5.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Termination by the Corporation for Cause or by the Executive. If the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under Section 3 of this Agreement other than the obligation to pay the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid and the timely payment or provision of Other Benefits. If the Executive terminates employment during the Employment Period, the Corporation shall have no further obligations under Section 3 of this Agreement to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits and the Executive shall have no liability to the Corporation solely on account of such termination. In such case, all such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination." 6. The Employment Agreement shall be amended to add a new Section 7 to read in its entirety as follows, and the subsequent Sections of the Agreement shall be renumbered accordingly: "7. Excise Taxes. (a) In the event it shall be determined that any payment or benefit provided under this Agreement, together with any other payments or benefits Executive is entitled to receive by reason of a Change in Control of the Company or a termination of his employment with the Company (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or any successor provision, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall pay Executive, at least 10 days prior to the time payment of any such Excise Tax is due, an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax and any federal, state and local taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payments. (b) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company and acceptable to Executive the Payments (in whole or in part) do not constitute parachute payments or excess parachute payments or are otherwise not subject to the Excise Tax, (2) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) (after applying clause (1) above), and (3) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate in the state and locality of Executive's residence on the date of payment, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of employment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. Executive shall notify the Company of any audit by the Internal Revenue Service of Executive's federal income tax return for the year in which a payment under this Agreement is made within ten (10) days of Executive's receipt of notification of such audit. In addition, Executive shall also notify the Company of the final resolution of such audit within ten (10) days of such resolution." 7. An additional sentence to renumbered Section 10.(a) shall be added to read as follows: "This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws." 8. The Agreement shall be amended to insert a new Section 11. to read in its entirety as follows: "11. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, plan, program, policy or practice provided by the Corporation and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement entered into after January 1, 1992 with the Corporation (collectively, the "Other Benefits"). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any benefit, plan, policy, practice or program of, or any contract or agreement entered into after the date hereof with, the Corporation at or subsequent to the Date of Termination, shall be payable in accordance with such benefit, plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement." 9. All other terms of the Employment Agreement shall remain in full force and effect. 10. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. --------------------------------------------- /s/ Valassis Sales & Marketing Services, Inc. --------------------------------------------- /s/ Richard P. Herpich --------------------------------------------- EX-10.11(G) 7 dex1011g.txt AMENDMENT EMPLOYMENT AGREEMENT A. F. SCHULTZ EXHIBIT 10.11(g) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made June 26, 2002 by and between Valassis Communications, Inc. (the "Corporation") and Alan F. Schultz (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on January 3, 1995, December 19, 1995, September 15, 1998, December 16, 1999, March 14, 2001 and December 20, 2001 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to, among other things, extend the term of employment and provide for the grant of stock options to the Executive. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on December 31, 2008." 2. The last sentence of Section 2.(a) shall be amended to read as follows: "The Executive's services shall be performed at the Corporation's headquarters which shall not be more than twenty-five miles from where the Executive is currently employed unless such requirement is waived by the Executive." 3. The following sentence shall be added to Section 3.(a) of the Employment Agreement: "The Executive's Annual Base Salary, payable on a biweekly basis, shall be at the annual rate of not less than $750,000 effective January 1, 2003." 4. Section 3.(c) of the Employment Agreement shall be amended to read in its entirety as follows: "Stock Options. The Executive shall be eligible to receive non-qualified options to purchase an aggregate of 1,080,000 shares of Common Stock of the Corporation pursuant to the Corporation's 2002 Long-Term Incentive Plan (or such other plan applicable to executives of the Corporation in effect from time to time) (each, an "Option" and collectively, the "Options"). The Options shall be granted by the Corporation in eight (8) semi-annual installments consisting of 135,000 Options each on April 1 and October 1 (each April 1 and October 1 shall be referred to herein as a "Date of Grant") commencing on October 1, 2002 through April 1, 2006. Each Option shall have a strike price equal to the Fair Market Value (as defined in the Corporation's applicable stock option plan) of the Corporation's Common Stock on the Date of Grant and shall become fully vested five (5) years from such Date of Grant and exercisable for two (2) years thereafter, with the same terms and conditions as the Corporation's then current standard non-qualified stock option agreement for executives, except as provided below. The Options shall also vest in accordance with the following stock performance targets for the Corporation's Common Stock: One third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of five dollars ($5.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; One-third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of ten dollars ($10.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; and the remaining one third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of fifteen dollars ($15.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; provided, however, that in no event shall an Option be exercised for the first six (6) months following a Date of Grant. Notwithstanding the foregoing, (A) upon a Change of Control (as defined in the Corporation's applicable stock option plan), (x) all shares with respect to which any Option granted prior to the Change of Control shall become fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become vested and fully exercisable with a strike price equal to the Fair Market Value of the Corporation's Common Stock on the day that is ninety (90) days prior to the public announcement of the Change of Control; and (B) upon termination of Executive's employment by the Corporation other than for Cause or by the Executive for Good Reason, (x) all shares with respect to which any Option granted shall become vested and fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become fully exercisable with a strike price equal to the Fair Market Value on the applicable Date of Termination." 5. Section 3.(f)(B) shall be amended to read in its entirety as follows: "The Corporation shall furnish to the Executive financial planning, tax and estate preparation services." 6. Section 5.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Termination by the Corporation for Cause or by the Executive other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, the Corporation shall have no further obligations to the Executive under Section 3 of this Agreement other than the obligation to pay the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid and the timely payment or provision of Other Benefits. If the Executive terminates employment during the Employment Period, excluding a termination for Good Reason, the Corporation shall have no further obligations under Section 3 of this Agreement to the Executive, other than for Accrued Obligations (except for the amount described in clause (2) of Section 5(a)(i)) and the timely payment or provision of Other Benefits and the Executive shall have no liability to the Corporation solely on account of such termination. In such case, all such Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination." 7. The Employment Agreement shall be amended to add a new Section 7 to read in its entirety as follows, and the subsequent Sections of the Agreement shall be renumbered accordingly: "7. Excise Taxes. (a) In the event it shall be determined that any payment or benefit provided under this Agreement, together with any other payments or benefits Executive is entitled to receive by reason of a Change in Control of the Company or a termination of his employment with the Company (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or any successor provision, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall pay Executive, at least 10 days prior to the time payment of any such Excise Tax is due, an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax and any federal, state and local taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payments. (b) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company and acceptable to Executive the Payments (in whole or in part) do not constitute parachute payments or excess parachute payments or are otherwise not subject to the Excise Tax, (2) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) (after applying clause (1) above), and (3) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate in the state and locality of Executive's residence on the date of payment, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of employment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. Executive shall notify the Company of any audit by the Internal Revenue Service of Executive's federal income tax return for the year in which a payment under this Agreement is made within ten (10) days of Executive's receipt of notification of such audit. In addition, Executive shall also notify the Company of the final resolution of such audit within ten (10) days of such resolution." 8. The first sentence of renumbered Section 12.(a) shall be amended to read as follows: "This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws." 9. All other terms of the Employment Agreement shall remain in full force and effect. 10. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ---------------------------------- /s/ Alan F. Schultz ---------------------------------- EX-10.23 8 dex1023.txt EMPLOYMENT AGREEMENT WILLIAM F. HOGG Exhibit 10.23 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made and entered into as of the Effective Date as hereinafter defined, by and among VALASSIS COMMUNICATIONS, INC. ("VCI"), VALASSIS INSERTS, INC., a Delaware corporation whose principal place of business is located at 36111 Schoolcraft Road, Livonia, Michigan 48150 ("Valassis") (VCI and Valassis sometimes collectively referred to as the "Corporations"), and William F. Hogg (the "Executive"). IN CONSIDERATION of the mutual promises, covenants and agreements set forth below, it is hereby agreed as follows: Employment and Term. ------------------- (a) The Corporations agree to employ the Executive, and the Executive agrees to remain in the employ of the Corporations, in accordance with the terms and provisions of this Agreement for the period set forth below (the "Employment Period"). (b) The Employment Period shall commence as of the consummation date (the "Effective Date") of the initial public offering of the common stock of VCI (the "IPO") and shall continue until the close of business on March 31, 1996; provided, however, that if the IPO has not been consummated prior to July 1, 1992, then this Agreement shall be deemed cancelled and of no force or effect. Duties and Powers of Executive. ------------------------------ (c) Position. During the Employment Period, the Executive shall serve as a Vice President of the Corporations. (d) Duties. During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially his full business time and attention during normal business hours to the business and affairs of the Corporations and to the discharge of his duties hereunder. The Executive shall perform his duties hereunder subject to the customary oversight by the Chief Executive Officer and the Boards of Directors of the Corporations (sometimes individually referred to as the "Board" and collectively referred to as the "Boards"). Compensation. ------------ The Executive shall receive the following compensation for his services hereunder to both Corporations: (e) Salary. The Executive's annual base salary ("Annual Base Salary"), payable not less often than biweekly, shall be at the annual rate of not less than $171,990 commencing on the Effective Date. Subject, to customary oversight by the Boards, and consistent with the authorities, duties and responsibilities of the Chief Executive Officer of the Corporations as of January 1, 1992, the Chief Executive Officer of the Corporations may from time to time direct such upward adjustments in Annual Base Salary as the Chief Executive Officer of the Corporations deems to be necessary or desirable as a result of the Executive's performance, including without limitation adjustments in order to reflect increases in the cost of living. (f) Annual Cash Bonus. With respect to each of Valassis' 1992, 1993, 1994, 1995 and 1996 fiscal years, the Executive shall be paid by the Corporations a cash bonus of up to 100% of Annual Base Salary in accordance with Schedule 1 hereto and the targets set forth therein or in the case of fiscal years 1995 and 1996 as set by the Board provided, however, that for fiscal year 1996 the Executive shall receive only 75% of the full bonus that is earned for such year; further provided, however, that 50% of any bonus payable hereunder, to the extent to be paid for each fiscal year, shall be paid automatically and without additional approval and the remaining 50% thereof shall be paid only if, and to the extent, recommended and approved by the Chief Executive Officer of the Corporations. (g) Retirement, Incentive and Welfare Benefit Plans. During the Employment Period and so long as the Executive is employed by the Corporations, he shall be eligible to participate in all incentive, savings, retirement and welfare plans, practices, policies and programs including, without limitation, Valassis Employees' Profit Sharing Plan, its 401(k) Retirement Savings Plan, its Flex Plan and the 1992 Long-Term Incentive Plan of VCI (the "Incentive Plan"), Valassis' death benefit plans, its disability benefit plans, and its medical, dental and health and welfare plans (the "Plans") applicable generally to employees and/or other executives of the Corporations. (h) Expenses. The Corporations agree to reimburse the Executive for all expenses, including those for travel and entertainment, properly incurred by him in the performance of his duties hereunder in accordance with policies established from time to time by each Board and the Executive shall account to the Corporations for such expenses. (i) Fringe Benefits. During the Employment Period and so long as the Executive is employed by the Corporations, the Corporations shall furnish an automobile to the Executive and pay all of the related expenses for gasoline, insurance, maintenance and repairs, in each case on a basis substantially equivalent to such fringe benefit provided to the Executive in the past. (j) Vacation and Other Absences. During the Employment Period and so long as the Executive is employed by the Corporations, he shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Corporations in effect from time to time. Termination of Employment. ------------------------- (k) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Corporations determine in good faith that Disability (as defined below) of the Executive has occurred during the Employment Period, they may give to the Executive written notice in accordance with Section 1(w) of this Agreement of their intention to terminate the Executive's employment. In such event, the Executive's employment with the Corporations shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided, that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Corporations for a period of at least 180 days during any 12 month period as a result of incapacity due to mental or physical illness. (l) By the Corporations for Cause. The Corporations may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) the conviction of the Executive for the commission of a felony, (ii) action by the Executive involving willful malfeasance or gross negligence or failure to act by the Executive involving material nonfeasance, which, at the time of such willful malfeasance or gross negligence or material nonfeasance, has a materially adverse effect on the Corporations or (iii) the failure by the Executive to follow directives of the Boards (to the extent permitted by applicable law) or the Chief Executive Officer of the Corporations or the failure to meet reasonable performance standards established by the Chief Executive Officer of the Corporations. (m) Notice of Termination. Any, termination by the Corporations for Cause shall be communicated by Notice of Termination to the Executive in accordance with Section 1(w) of this Agreement. For purposes of this Agreement, a "Notice of Termination," means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined in Section 1(n)) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Corporations to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause shall not waive any right of the Corporations hereunder or preclude the Corporations from asserting such fact or circumstance in enforcing the Corporations' rights hereunder. (n) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Corporations for Cause, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Corporations other than for Cause or Disability, the Date of Termination shall be the date on which the Corporations notify the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. Obligations of the Corporations upon Termination. ------------------------------------------------ (o) Termination Other Than for Cause. During the Employment Period, if the Corporation shall terminate the Executive's employment (other than in the case of a termination for Cause) or the Executive's employment shall terminate by reason of death or Disability (termination in any such case referred to as "Termination"): (i) the Corporations shall pay to the Executive in a lump sum in cash the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "Accrued Obligations"). The amounts specified in this Section 1(o)(i) shall be paid within 30 days after the Date of Termination; and (ii) in the event of Termination other than by reason of the Executive's death or Disability, then beginning on the biweekly payment date next following the Termination and on each biweekly payment date thereafter until the end of the Employment Period (the period from such Date of Termination until the end of the Employment Period herein called the "Severance Period"), the Corporations shall pay to the Executive an amount equal to the biweekly installment of the Executive's rate of Annual Base Salary in effect as of such Date of Termination; and (iii) in the event of Termination other than by reason of the Executive's death or Disability, the Corporations shall pay to the Executive in a lump sum in cash within 30 days after the date of Termination a bonus in an amount equal to 100% of the maximum Annual Cash Bonus for the fiscal year in which the event of Termination occurred, whether or not earned; and (iv) in the event of Termination other than by reason of the Executive's death or Disability, then, during the Severance Period, the Corporations shall continue medical and welfare benefits to the Executive and/or the Executive's family at least equal to those which would have been provided if the Executive's employment had not been terminated, such benefits to be in accordance with the most favorable medical and welfare benefit plans, practices, programs or policies (the "M&W Plans") of the Corporations as in effect and applicable generally to other senior executives of the Corporations and their families during the 90-day period immediately preceding the Date of Termination or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other senior executives of the Corporations (but on a prospective basis only unless, and then only to the extent, such more favorable M&W Plans are by their terms retroactive), provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the benefits under the M&W Plans shall be reduced as provided in Section 0 of this Agreement. For purposes of determining eligibility of the Executive for benefits under the M&W Plans, the Executive shall be considered to have remained employed until the end of the Severance Period. (p) Termination by the Corporations for Cause. Subject to the provisions of Section 0 of this Agreement, if the Executive's employment shall be terminated for Cause during the Employment Period, the Corporations shall have no further obligations to the Executive under this Agreement other than the obligation to pay to the Executive Annual Base Salary through the Date of Termination plus the amount of any compensation previously deferred by the Executive, in each case to the extent theretofore unpaid. Full Settlement; Mitigation. --------------------------- The Executive shall make reasonable efforts to mitigate damages by seeking other comparable employment. To the extent that the Executive shall receive compensation or benefits from such other employment, the payments to be made and the benefits to be provided by the Corporations as provided in this Agreement shall be correspondingly reduced. If the Executive shall fail to make reasonable efforts to mitigate damages by seeking other comparable employment, the Corporations' obligations under this Agreement shall cease until such time as the Executive commences to make such efforts. If the Executive finally prevails with respect to any dispute among the Corporations, the Executive or others as to the interpretation, terms, validity or enforceability of (including any dispute about the amount of any payment pursuant to) this Agreement, the Corporations agree to pay all legal fees and expenses which the Executive may reasonably incur as a result of any such dispute; provided, however, that if the Executive is not entitled to recover such legal fees and expenses pursuant to the foregoing provisions of this Section 0, the Executive shall not be entitled to recover any such legal fees or expenses, and he hereby waives any rights to such recovery, under any provision of the By-laws (now or hereafter in effect) of either of the Corporations which provide for indemnification of or payment to the Executive of legal fees and expenses. Confidential Information and Competitive Conduct. ------------------------------------------------ (q) Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Corporations all secret, confidential information, knowledge or data relating to the Corporations or any of their affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporations or any of their affiliated companies and which shall not have been or now or hereafter have become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). During the Employment Period and for a period of 5 years thereafter, the Executive shall not, without the prior written consent of the Corporations or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Corporations and those designated by them. (r) Covenant Not to Compete or Solicit. During the Employment Period, the Executive shall not offer or sell any products or services, including without limitation a free standing insert business, directly competitive in any market with the business of the Corporations, nor shall he render services to any firm, person or corporation so competing with the Corporations, nor shall he have any interest, direct or indirect, in any business that is so competing with the business of the Corporations; provided however, that ownership of 5% or less of any class of debt or equity securities which are publicly-traded securities shall not be a violation of this covenant. The foregoing provisions of this Section 1(r) shall be extended for a period of one year after the end of the Employment Period. So long as the Executive is employed hereunder, and for any additional period of time described in the preceding sentence, the Executive shall not, directly or indirectly, (i) solicit any employee of either of the Corporations with a view to inducing or encouraging such employee to leave the employ of either of the Corporations for the purpose of being hired by the Executive or any employer affiliated with the Executive or (ii) solicit, take away, attempt to take away, or otherwise interfere with the Corporations' business relationship with any of their respective customers. (s) In the event of a breach or threatened breach of this Section 0, the Executive agrees that the Corporations shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Executive acknowledging that damages would be inadequate and insufficient. Successors. ---------- (t) This Agreement is personal to the Executive and without the prior written consent of the Corporations shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (u) This Agreement shall inure to the benefit of and be binding upon the Corporations and their successors and assigns. Miscellaneous. ------------- (v) This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought. No person, other than pursuant to a resolution of the Boards or a committee thereof, shall have authority on behalf of the Corporations to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto. (w) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------------- William F. Hogg c/o Valassis Inserts, Inc. 36111 Schoolcraft Road Livonia, MI 48150 if to the Corporations: ---------------------- c/o Valassis Inserts, Inc. 36111 Schoolcraft Road Livonia, MI 48150 Attention: Barry P. Hoffman, Esq. (x) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (y) The Corporations may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (z) This instrument contains the entire agreement of the Executive and the Corporations with respect to the subject matter hereof and all promises, representations, understandings, arrangements and prior agreements are merged herein and superseded hereby. IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from their respective Boards of Directors, each of the Corporations has caused this Agreement to be executed as of the day and year first above written. VALASSIS COMMUNICATIONS, INC. By: /s/ David A. Brandon -------------------------- Name: David A. Brandon Title: President & CEO VALASSIS INSERTS, INC. By: /s/ Barry P. Hoffman ------------------------- Name: Barry P. Hoffman Title: Secretary /s/ ------------------------- William F. Hogg EX-10.23(A) 9 dex1023a.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR, 12/95 EXHIBIT 10.23(a) AMENDMENT TO EMPLOYMENT AGREEMENT AND NON-QUALIFIED STOCK OPTION AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment"), is made December 22, 1995 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg, Jr. (the "Executive). WHEREAS, the Corporation, Valassis Inserts, Inc. ("VII"), and the Executive entered into that certain Employment Agreement effective March 18, 1992 (the "Employment Agreement"); and WHEREAS, VII merged into the Corporation; and WHEREAS, the Corporation entered into a NON-QUALIFIED STOCK OPTION AGREEMENT with the Executive effective as of June 17, 1993 (the "Option Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement and the Option Agreement to reflect the merger of VII into the Corporation, extend the term of employment under the Employment Agreement, and conform the Employment Agreement to the Corporation's new policy of semi-annual bonuses instead of annual bonuses. NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. In order to reflect the merger of VII into the Corporation, all references in the Employment Agreement to (a) "Valassis" shall be deemed to be references to "VCI"; (b) "the Corporations" shall be deemed to be references to "the Corporation"; and (c) "Boards" shall be deemed to be references to the "Board of VCI." 2. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of the consummation date (the "Effective Date") of the initial public offering of the common stock of VCI (the "IPO") and shall continue until the close of business on September 30, 1997." 3. The Employment Agreement shall be amended so that all references to "Annual Cash Bonus" in the Employment Agreement shall be deemed to be references to "Semi-Annual Cash Bonus." 4. Section 3.(a) of the Employment Agreement shall be amended to read in its entirety as follows: (a) Salary. The Executive's annual base salary ("Annual Base Salary"), payable not less often than biweekly, shall be at the annual rate of not less than $190,000 from and after July 1, 1994. The Board may from time to time direct such upward adjustments in Annual Base Salary and other compensation and benefits as the Board deems to be necessary or desirable, including, without limitation, adjustments in order to reflect increases in the cost of living. Annual Base Salary shall not be reduced after any increase thereof. Any increase in Annual Base Salary and/or other compensation and benefits shall not serve to limit or reduce any other obligation of the Corporation under this Agreement. 5. Section 3.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Commencing on January 1, 1996, with respect to each six month period ending on June 30 and December 31 thereafter, the Executive shall be paid by the Corporation a semi-annual cash bonus of up to 50% of the Annual Base Salary in accordance with the targets set by the Board or the Compensation/Stock Option Committee of the Corporation (the "Committee"). Each such semi-annual bonus (the "Semi-Annual Cash Bonus") shall be paid promptly after the end of the applicable six month period when either the Board or the Committee has determined that applicable targets have been met but in no event later than 60 days after each June 30 and December 31. The Executive shall also be entitled to participate in any programs of the Corporation enabling employees to apply all or part of any bonus to the purchase of the Corporation's stock and receive matching grants." 6. Section 5.(a)(iii) of the Employment Agreement shall be amended by deleting the phrase "100% of the maximum Annual Cash Bonus for the fiscal year" and inserting the phrase "two times the maximum Semi-Annual Cash Bonus for the current six month period." 7. Section 7.(b) shall be amended to read as follows: (b) Covenant Not to Compete or Solicit. During the Employment Period, the Executive shall not offer or sell any products or services that compete for sales promotion dollars in any market with the business of VCI, nor shall he render services to any firm, person or corporation so competing with VCI, nor shall he have any interest, direct or indirect, in any business that is so competing with the business of VCI, provided, however, that ownership of 5 per cent or less of any class of debt or equity securities which are publicly traded securities shall not be a violation of this covenant. The foregoing provisions of this Section 7.(b) shall be extended at the option of VCI for up to two additional years after the end of the Employment Period so long as VCI shall pay to the Executive with respect to each year as to which it has exercised its option an amount equal to Annual Base Salary in biweekly installments during such year. The first year of such extension shall be exercised at the option of VCI upon written notice to the Executive not later than 60 days prior to the end of the Employment Period. The second year of such extension shall be exercised at the option of VCI upon written notice to the Executive no later than 60 days prior to the end of the exercised first year of such extension. So long as the Executive as employed hereunder, and for any additional period of time described in the preceding sentences, the Executive shall not, directly or indirectly, (i) solicit any employee of VCI with a view to inducing or encouraging such employee to leave the employ of VCI for the purpose of being hired by the Executive or any employer affiliated with the Executive; or (ii) solicit, take away, attempt to take away, or otherwise interfere with VCI's business relationship with any of its respective customers. 8. All other terms of the Employment Agreement and the Option Agreement shall remain in full force and effect. 9. This instrument, together with the Employment Agreement and the Option Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. The amendments to the Employment Agreement and the Option Agreement contained in this Amendment shall be effective from and after January 1, 1996. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ------------------------------------ /s/ William F. Hogg, Jr. ------------------------------------ EX-10.23(B) 10 dex1023b.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR. 1/97 EXHIBIT 10.23(b) AMENDMENT TO EMPLOYMENT AGREEMENT AND NON-QUALIFIED STOCK OPTION AGREEMENT This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made January 20, 1997 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg (the "Executive). WHEREAS, the Corporation and the Executive entered into that certain employment agreement effective as of March 18, 1992, as amended December 22, 1995 (the "Employment Agreement"); WHEREAS, the Corporation entered into a NON-QUALIFIED STOCK OPTION AGREEMENT with the Executive effective on June 17, 1993 (the "Option Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement and the Option Agreement to extend the term of employment under the Employment Agreement. NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. Section 1(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of the consummation date (the "Effective Date") of the initial public offering of the common stock of VCI (the "IPO") and shall continue until the close of business on September 30, 1999." 2. All other terms of the Employment Agreement and the Option Agreement shall remain in full force and effect. 3. This instrument, together with the Employment Agreement and the Option Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. The amendments to the Employment Agreement and the Option Agreement contained in this Amendment shall be effective from and after January 1, 1997. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ------------------------------------ /s/ William F. Hogg, Jr. ------------------------------------ EX-10.23(C) 11 dex1023c.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR. 12/98 EXHIBIT 10.23(c) AMENDMENT TO EMPLOYMENT AGREEMENT AND NON-QUALIFIED STOCK OPTION AGREEMENTS This AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), is made December 23, 1998 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on December 22, 1995 and January 20, 1997 (the "Employment Agreement"); WHEREAS, the Corporation entered into a NON-QUALIFIED STOCK OPTION AGREEMENTS with the Executive effective as of June 17, 1993, December 8, 1997 and September 15, 1998 (the "Option Agreements"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement and the Option Agreements to extend the term of employment under the Employment Agreement and conform the Employment Agreement to certain revised terms as specifically amended herein. NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on September 30, 2001." 2. Effective January 1, 2000, Section 3.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "Commencing on January 1, 2000, with respect to each six-month period ending on June 30 and December 31 thereafter, the Executive shall be paid by the Corporation a semi-annual cash bonus of up to 50% of the Annual Base Salary on the following basis: (i) 25% in accordance with the targets set by the Board and the Compensation/ Stock Option Committee of the Corporation (the "Committee"); and (ii) 25% in accordance with performance targets set by the Executive Vice President of Manufacturing and Media. Each such semi-annual bonus (the "Semi-Annual Cash Bonus") shall be paid promptly after the end of the applicable six-month period when the Committee (in the case of 3.(b)(i) herein) and the Executive Vice President of Manufacturing and Media (in the case of 3.(b)(ii) herein) has determined that applicable targets have been met but in no event later than 60 days after each June 30 and December 31. The Executive shall also be entitled to participate in any programs of the Corporation enabling employees to apply all or part of any bonus to the purchase of the Corporation's stock and receive matching grants." 3. All other terms of the Employment Agreement and the Option Agreements shall remain in full force and effect. 4. This instrument, together with the Employment Agreement and the Option Agreements, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ------------------------------------ /s/ William F. Hogg, Jr. ------------------------------------ EX-10.23(D) 12 dex1023d.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR. 1/01 EXHIBIT 10.23(d) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made January 5, 2001 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on December 22, 1995, January 20, 1997 and December 23, 1998 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to extend the term of employment under the Employment Agreement. NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. Section 1(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on September 30, 2003." 2. All other terms of the Employment Agreement shall remain in full force and effect. 3. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ------------------------------------ /s/ William F. Hogg, Jr. ------------------------------------ EX-10.23(E) 13 dex1023e.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR. 1/02 EXHIBIT 10.23(e) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made January 11, 2002 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg, Jr. (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on December 22, 1995, January 20, 1997, December 23, 1998 and January 5, 2001 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to extend the term of employment under the Employment Agreement. NOW THEREFORE, in consideration of the above recitals, the parties hereto agree as set forth below. 1. Section 1(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on September 30, 2004." 2. Section 2(a) of the Employment Agreement shall be amended to read in its entirety as follows: "(a) Position. During the Employment Period, the Executive shall serve as Executive Vice President, Manufacturing." 3. The first sentence of Section 3(a) of the Employment Agreement shall be amended to read as follows: "The Executive's Annual Base Salary ("Annual Base Salary"), payable on a biweekly basis, shall be at the annual rate of not less than $225,000 effective July 1, 2001." 4. Valassis Manufacturing Company ("VMC") is hereby added as a party to the Employment Agreement. 5. All other terms of the Employment Agreement shall remain in full force and effect. 6. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. --------------------------------------- /s/ Valassis Manufacturing Company --------------------------------------- /s/ William F. Hogg, Jr. --------------------------------------- EX-10.23(F) 14 dex1023f.txt AMENDMENT EMPLOYMENT AGREE W. F. HOGG, JR. EXHIBIT 10.23(f) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made July 8, 2002 by and between Valassis Communications, Inc. (the "Corporation") and William F. Hogg, Jr. (the "Executive"). WHEREAS, the Corporation and the Executive entered into that certain Employment Agreement effective as of March 18, 1992, as amended on December 22, 1995, January 20, 1997, December 23, 1998, January 5, 2001 and January 11, 2002 (the "Employment Agreement"); and WHEREAS, the Corporation and the Executive desire to amend the Employment Agreement to, among other things, extend the term of employment and provide for the grant of stock options to the Executive. NOW, THEREFORE, in consideration of the mutual covenants and promises herein contained, the parties hereto agree as follows: 1. Section 1.(b) of the Employment Agreement shall be amended to read in its entirety as follows: "The Employment Period shall commence as of March 18, 1992 (the "Effective Date") and shall continue until the close of business on September 30, 2006." 2. The following sentence shall be added to Section 3.(a) of the Employment Agreement: "The Executive's Annual Base Salary, payable on a biweekly basis, shall be at the annual rate of not less than $250,000 effective January 1, 2003." 3. Section 3. of the Employment Agreement shall be amended to add a new subsection 3.(g) to read in its entirety as follows: "(g). Stock Options. The Executive shall be eligible to receive non-qualified options to purchase an aggregate of 350,000 shares of Common Stock of the Corporation pursuant to the Corporation's 2002 Long-Term Incentive Plan (or such other plan applicable to executives of the Corporation in effect from time to time) (each, an "Option" and collectively, the "Options"). The Options shall be granted by the Corporation in eight (8) semi-annual installments consisting of 43,750 Options each on April 1 and October 1 (each April 1 and October 1 shall be referred to herein as a "Date of Grant") commencing on October 1, 2002 through April 1, 2006. Each Option shall have a strike price equal to the Fair Market Value (as defined in the Corporation's applicable stock option plan) of the Corporation's Common Stock on the Date of Grant and shall become fully vested five (5) years from such Date of Grant and exercisable for two (2) years thereafter, with the same terms and conditions as the Corporation's then current standard non-qualified stock option agreement for executives, except as provided below. The Options shall also vest in accordance with the following stock performance targets for the Corporation's Common Stock: One third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of five dollars ($5.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; One-third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of ten dollars ($10.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; and the remaining one third of each Option grant shall vest upon the Corporation's Common Stock achieving a market price of fifteen dollars ($15.00) per share greater than the Fair Market Value of the Corporation's Common Stock on the Date of Grant; provided, however, that in no event shall an Option be exercised for the first six (6) months following a Date of Grant. Notwithstanding the foregoing, (A) upon a Change of Control (as defined in the Corporation's applicable stock option plan), (x) all shares with respect to which any Option granted prior to the Change of Control shall become fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become vested and fully exercisable with a strike price equal to the Fair Market Value of the Corporation's Common Stock on the day that is ninety (90) days prior to the public announcement of the Change of Control; and (B) upon termination of Executive's employment by the Corporation other than for Cause, (x) all shares with respect to which any Option granted shall become vested and fully exercisable and (y) any remaining Options not previously granted shall be immediately granted and become fully exercisable with a strike price equal to the Fair Market Value on the applicable Date of Termination." 4. An additional sentence to Section 3.(e) shall be added to read as follows: "The Corporation shall furnish to the Executive financial planning, tax and estate preparation services." 5. The Employment Agreement shall be amended to add a new Section 7 to read in its entirety as follows, and the subsequent Sections of the Agreement shall be renumbered accordingly: "7. Excise Taxes. (a) In the event it shall be determined that any payment or benefit provided under this Agreement, together with any other payments or benefits Executive is entitled to receive by reason of a Change in Control of the Company or a termination of his employment with the Company (collectively, the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 ("Code") or any successor provision, or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), the Company shall pay Executive, at least 10 days prior to the time payment of any such Excise Tax is due, an additional amount (the "Gross-Up Payment") such that the net amount retained by Executive, after deduction of any Excise Tax and any federal, state and local taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed on the Payments. (b) For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company and acceptable to Executive the Payments (in whole or in part) do not constitute parachute payments or excess parachute payments or are otherwise not subject to the Excise Tax, (2) the amount of the Payments which shall be treated as subject to the Excise Tax shall be equal to the amount of "excess parachute payments" within the meaning of Section 280G(b)(1) (after applying clause (1) above), and (3) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate in the state and locality of Executive's residence on the date of payment, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (c) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of employment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. Executive shall notify the Company of any audit by the Internal Revenue Service of Executive's federal income tax return for the year in which a payment under this Agreement is made within ten (10) days of Executive's receipt of notification of such audit. In addition, Executive shall also notify the Company of the final resolution of such audit within ten (10) days of such resolution." 6. An additional sentence to renumbered Section 10.(a) shall be added to read as follows: "This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws." 7. All other terms of the Employment Agreement shall remain in full force and effect. 8. This instrument, together with the Employment Agreement, contains the entire agreement of the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive and the Corporation have caused this Agreement to be executed as of the day and year first above written. /s/ Valassis Communications, Inc. ------------------------------------ /s/ Valassis Manufacturing Company ------------------------------------ /s/ William F. Hogg, Jr. ------------------------------------ EX-10.24 15 dex1024.txt VALASSIS SUPPLEMENTAL BENEFIT PLAN EXHIBIT 10.24 DOCUMENT CONTAINS GENERATED TABLE OF CONTENTS VALASSIS COMMUNICATIONS, INC. SUPPLEMENTAL BENEFIT PLAN CERTIFICATE I, Barry P. Hoffman, Secretary of Valassis Communications, Inc., hereby certify that the attached document is a correct copy of Valassis Communications, Inc. Supplemental Benefit Plan, effective September 15, 1998. Dated this 15th day of December 1998. /s/ Barry P. Hoffman ---------------------------------- Barry P. Hoffman as Aforesaid (Corporate Seal) TABLE OF CONTENTS SECTION 1 1 Introduction 1 The Plan, Effective Date 1 Purpose 1 Plan Year 1 Plan Administration 1 Unfunded Nature of the Plan 1 Gender and Number 1 SECTION 2 2 Eligibility and Participation 2 Eligibility 2 Participation 2 SECTION 3 3 Retirement Dates 3 Normal Retirement Date 3 Disability Retirement Date 3 Employment Termination Date 3 SECTION 4 4 Bases of Benefits 4 General 4 Credited Service 4 Earnings 4 Final Average Earnings 4 SECTION 5 5 Supplemental Benefits 5 Amount of Supplemental Benefits 5 Accrual of Supplemental Benefits 5 SECTION 6 6 Termination Before Retirement 6 No Benefits Payable 6 Pre-Retirement Benefit 6 SECTION 7 8 Payment of Supplemental Benefits 8 Retirement 8 Termination Before Retirement 8 Payments After Death 8 Beneficiary 8 SECTION 8 9 General Provisions 9 Interests Not Transferable 9 Controlling Law 9
-i- Reemployment 9 Facility of Payment 9 Employment Rights 9 Action by the Company 9 Review of Benefit Determinations 9 Decision of Plan Administrator Final 10 Other Benefits 10 Covenant Not to Compete or Solicit 10 SECTION 9 11 Amendment and Termination 11
-ii- VALASSIS COMMUNICATIONS, INC. SUPPLEMENTAL BENEFIT PLAN SECTION 1 Introduction 1.1. The Plan, Effective Date. Valassis Communications, Inc. Supplemental Benefit Plan (the "plan") was established by Valassis Communications, Inc. (the "company") effective September 15, 1998 (the "effective date"). 1.2. Purpose. The purpose of the plan is to provide supplemental benefits for eligible corporate officers and other employees of the company. 1.3. Plan Year. The plan is administered on the basis of a plan year (the "plan year") beginning each January 1 and ending on the next following December 31. 1.4. Plan Administration. The plan is administered by one or more employees appointed by the company (the "plan administrator"). The plan administrator may adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the plan and as are consistent with the provisions of the plan. The plan administrator also may allocate or delegate to any person such of the powers, rights and duties reserved to the plan administrator as it may consider necessary or desirable to properly carry out plan administration. 1.5. Unfunded Nature of the Plan. The plan is intended to constitute an unfunded plan within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with benefits paid from the general assets of the company. The plan constitutes only a promise by the company to pay benefits in the future. 1.6. Gender and Number. Where the context admits, words in the masculine gender will include the feminine and neuter genders, the plural will include the singular and the singular will include the plural. 3 SECTION 2 Eligibility and Participation 2.1. Eligibility. An employee of the company will become a participant in the plan if he meets both of the following requirements: (a) He is a member of a select group of management or highly compensated employees; (b) He is designated as a participant in the plan by the Compensation/Stock Option Committee of the company. 2.2. Participation. A participant in the plan will continue as such until the later to occur of his termination of employment with the company and all corporations, partnerships, trades or businesses treated as a part of a "controlled group" of which the company is a member, under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended ("the Code") (each an "affiliate"), or the distribution of all benefits, if any, to which he is entitled under the plan. However, a participant's right to accrue benefits under the plan is subject to the terms of the plan, including Section 9. 4 SECTION 3 Retirement Dates 3.1. Normal Retirement Date. A participant's "normal retirement date" will be the date on which the participant retires or is retired from the employ of the company and all affiliates. A participant leaving the employ of the company and all affiliates after attaining age 65 years and for reasons other than disability or termination for cause will be presumed to have retired. 3.2. Disability Retirement Date. A participant's "disability retirement date" will be the date on which the participant is retired from the employ of the company and all affiliates because of disability. A participant will be considered to have incurred a "disability" for purposes of the plan if the disability qualifies him for long-term disability benefits under the company's long-term disability plan (or would qualify the participant for such benefits if the participant had enrolled in that plan). 3.3. Employment Termination Date. A participant's "employment termination date" means one of the following dates that applies in the participant's case: (a) the participant's normal retirement date or disability retirement date if he retires under the plan on either such date; (b) the date of the participant's termination of employment with the company and all affiliates, if such termination occurs other than by retirement under the plan and for a reason other than the participant's death; or (c) the date the participant's employment with the company and all affiliates terminates because of the participant's death. 5 SECTION 4 Bases of Benefits 4.1. General. Supplemental benefits payable under the plan with respect to a participant will be based on the participant's credited service and final average earnings, both as defined below. 4.2. Credited Service. For purposes of the plan, a participant's "credited service" means the sum of the following: (a) the participant's last continuous period of employment with the company and any of its affiliates; (b) the period during which the participant is deemed to have continued employment with the company and any of its affiliates beyond his actual employment termination date pursuant to an employment agreement in effect with respect to the participant; and (c) such other period or periods of employment with the company and its affiliates (and any predecessor thereto) as are designated as "credited service" by the company in writing. A participant's credited service will include all completed years and months of credited service, any additional service in excess of a completed month will be counted as a full month of credited service, and if the participant's number of months of credited service (in excess of full years of credited service) is more than six, that number of whole months will be rounded to one full year. 4.3. Earnings. A participant's "earnings" means, during any period of credited service, his base pay, exclusive of any bonuses, commissions or other compensation of any kind. For any year, if a participant makes a deferral election relating to his base pay under a plan of the company, the amount deferred pursuant to the election will be counted as base pay for that year under this plan. 4.4. Final Average Earnings. A participant's "final average earnings" means the annual average of his earnings for the 36-month period ending on the participant's employment termination date (as defined in Subsection 3.3). Such average is computed by dividing the total of the participant's earnings for the applicable 36-month period by three (3). If a participant's total period of employment is less than 36 months, the participant's earnings during his period of employment will be divided by the number of years (and any fraction of a year) for which he had earnings. 6 SECTION 5 Supplemental Benefits 5.1. Amount of Supplemental Benefits. Subject to the conditions and limitations of the plan, if a participant retires or is retired on his normal retirement date, or is retired on a disability retirement date, the participant will be entitled to a supplemental benefit payable for a period of ten years, in an annual amount equal to one and one-half percent of the participant's final average earnings multiplied by the participant's number of years of credited service. Supplemental benefits are payable in accordance with Section 7. 5.2. Accrual of Supplemental Benefits. The amount of any increase in a participant's supplemental benefits attributable to a particular plan year will accrue entirely on the last day of that plan year, or such earlier date during that plan year in which his employment with the company and all affiliates terminates. 7 SECTION 6 Termination Before Retirement 6.1. No Benefits Payable. If a participant's employment with the company and all affiliates is terminated for cause, no benefits will be payable under the plan to, or with respect to, such participant. A participant's employment with the company and all affiliates will be considered to have been terminated "for cause" if such employment is terminated for such reasons as defined in the participant's employment contract with the company. 6.2. Pre-Retirement Benefit. A participant will be entitled to a vested benefit if the participant meets any one of the following requirements: (a) prior to retirement, the participant's employment with the company and all affiliates is voluntarily or involuntarily terminated for a reason other than for cause, provided that the participant had completed at least twelve months of employment with the company. (b) if a participant is involuntarily terminated within one year of a "Change of Control," as defined below. A participant described above will be entitled to a supplemental benefit (commencing as soon as practicable after employment terminates) in an amount determined in accordance with Section 5 as if the participant's employment termination date or the date of the Change of Control, if applicable, were his normal retirement date, but based on the participant's final average earnings and credited service as at his employment termination date or the date of the Change of Control, if applicable. A "Change of Control" shall mean the occurrence of any of the following events, as a result of one transaction or a series of transactions: (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding Valassis Communications, Inc. ("Parent") and any qualified or non-qualified plan maintained by Parent) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act), directly or indirectly, of securities of Parent representing more than 20% of the combined voting power of Parent's then outstanding securities; (ii) individuals who constitute a majority of the Board of Directors of Parent immediately prior to a contested election for positions on the Board cease to constitute a majority as a result of such contested election; (iii) Parent is combined (by merger, share exchange, consolidation, or otherwise) with another corporation and as a result of such combination, less than 75% of the outstanding securities of the surviving or resulting corporation are owned in the aggregate by the former shareholders of Parent; or (iv) Parent sells, leases, or otherwise transfers all or substantially all of its properties or assets to another person or entity. 8 SECTION 7 Payment of Supplemental Benefits 7.1. Retirement. If a participant retires or is retired on a retirement date, the participant's supplemental benefits will be paid to him for a period of ten years, on a semi-annual basis, with the first payment due on the last day of the calendar month next following the calendar month in which the participant's retirement date occurs, and with the final payment to be the twentieth such semi-annual payment. Each semi-annual payment will be in an amount equal to one-half of the annual amount determined under subsection 5.1. 7.2. Termination Before Retirement. If a participant's employment termination occurs other than by retirement under the plan, but he qualifies for a supplemental benefit under subsection 6.2, the participant's supplemental benefit will be paid to him on the same basis described in subsection 7.1, with payments commencing on the last day of the calendar month following the calendar month in which the participant's termination date occurs. 7.3. Payments After Death. If a participant dies while employed, the amount of supplemental benefits that would have been payable to him shall be paid to his beneficiary (as defined in subsection 7.4) or, if none, to his estate. If a participant dies after retirement or other termination of employment entitling him to supplemental benefits, those benefits shall continue to be paid to the participant's beneficiary until a total of 20 semi-annual payments have been made to the participant and his beneficiary (or the participant's estate, if there is no beneficiary). Payments made to a participant's beneficiary shall be payable on the same basis as payments would have been made to the participant; payments to a participant's estate may, in the company's discretion, be accelerated and paid in a present value lump sum to the estate. 7.4. Beneficiary. A participant's "beneficiary" under this plan means: (a) his spouse and/or children, if any, on the date of the participant's death, or (b) his estate and/or trust. 9 SECTION 8 General Provisions 8.1. Interests Not Transferable. Except as may be required by the tax withholding provisions of the laws of the United States or any state, the interests of participants and the beneficiaries of deceased participants are not subject to the claims of their creditors and may not be voluntarily or involuntarily transferred, assigned, alienated or encumbered. 8.2. Controlling Law. To the extent not superseded by federal law, the laws of Michigan will be controlling in all matters relating to the plan. 8.3. Successor to the Company. The term "company" as used in the plan will include any successor to the company by reason of merger, consolidation, the purchase of all or substantially all of the company's assets or otherwise. 8.4. Reemployment. If a participant or former participant is reemployed by the company after his employment termination date (or actual employment termination date, if applicable) then, unless and to the extent specified otherwise by the Board of Directors of the company, the participant will be treated as a new employee for all purposes of the plan. 8.5. Facility of Payment. Any amounts payable hereunder to any person under legal disability or who, in the judgment of the plan administrator, is unable to properly manage his affairs may be paid to the legal representative of such person or may be applied for the benefit of such person in any manner which the plan administrator may select. 8.6. Employment Rights. Establishment of the plan will not be construed to give any participant the right to be retained in the service of the company or of any affiliate, or to any benefits or payments not specifically provided by this plan. 8.7. Action by the Company. Any action required of or permitted by the company under the plan will be by resolution of its Board of Directors or any person or persons, or a committee, authorized by resolution of its Board of Directors. 8.8. Review of Benefit Determinations. The plan administrator will provide notice in writing to any participant, beneficiary or other person whose claim for benefits under the plan is denied and the plan administrator shall afford such participant, beneficiary or other person a full and fair review of the plan administrator's decision, if so requested. 8.9. Decision of Plan Administrator Final. Subject to applicable law, any interpretation of the provisions of the plan and any decision on any matter within the discretion of the plan administrator made by the plan administrator in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known and the plan administrator shall make such adjustment on account thereof as the plan administrator considers equitable and practicable. 8.10. Other Benefits. A participant entitled to benefits under this plan will also be entitled, for the same period benefits are payable under the plan, to continued medical, prescription and dental benefits on terms similar to those provided under company-sponsored plans. 8.11. Covenant Not to Compete or Solicit. A participant receiving benefits under this plan shall not offer or sell any products or services, including without limitation, a free-standing insert business, directly competitive in any market with the businesses of the company, nor shall he render services to any firm, person or corporation so competing with the company, nor shall he have any interest, direct or indirect, in any business that is so competing with the 10 businesses of the company; provided, however, that ownership of five percent (5%) or less of any class of debt or equity securities which are publicly traded shall not be a violation of this covenant. Such participant shall not, directly or indirectly, (i) solicit any employee of the company with a view to inducing or encouraging such employee to leave the employ of the company for the purpose of being hired by the participant or any employer affiliated with the participant or (ii) solicit, take away, attempt to take away, or otherwise interfere with the company's business relationships with any of its respective customers. A participant so competing or soliciting, as defined in this Section 8.11, shall forfeit participation in this plan and shall receive no further benefits thereunder. 11 SECTION 9 Amendment and Termination While the company expects to continue the plan, it must necessarily reserve the right to amend the plan from time to time or to terminate the plan at any time, in accordance with the procedures set forth in subsection 8.7 and subject to the following: (a) no amendment may reduce the supplemental benefits a participant has accrued under the plan up to the date the amendment is made by the Board of Directors of the company but which had not become payable prior to that date, and no amendment may reduce any benefits which became payable under the plan to a participant or beneficiary prior to that date (whether or not payment of such benefits had commenced); (b) if the plan is terminated by the Board of Directors of the company: (i) the supplemental benefits which became payable to any participant or beneficiary prior to the date of termination of the plan (whether or not payment of such benefits had commenced) will continue to be paid by the company as if the plan as in effect immediately prior to the date of the termination of the plan had continued in effect thereafter; and (ii) the supplemental benefits a participant has accrued under the plan up to the date of termination of the plan but which had not become payable prior to that date will be paid by the company only if such participant subsequently qualifies for such benefits, assuming the plan as in effect immediately prior to the date of its termination had continued in effect thereafter, and any benefits which would have been payable to the beneficiary of a participant if the plan had not been terminated (but only with respect to the supplemental benefits the participant had accrued up to the date of the termination of the plan) will be paid by the company as if the plan had continued in effect thereafter. Reference above to supplemental benefits a participant has accrued under the plan up to the date of an amendment to the plan or the termination of the plan, but which had not become payable prior to that date, means the supplemental benefits, if any, such participant would be entitled to receive under the plan after his employment termination date, assuming that the plan as in effect immediately prior to the date of such amendment or termination of the plan had continued in effect, that the participant's years of credited service up to the date of such amendment or termination of the plan will not increase and, consequently, that the participant's final average earnings at his employment termination date will equal his final average earnings as of the date of such amendment or termination of the plan. 12 EX-10.24(A) 16 dex1024a.txt 1ST AMENDMENT VALASSIS SUPPLEMENTAL BENEFIT PLAN EXHIBIT 10.24(a) FIRST AMENDMENT TO THE VALASSIS COMMUNICATIONS, INC. SUPPLEMENTAL BENEFIT PLAN WHEREAS, Valassis Communications, Inc. (the "Company") has adopted the Valassis Communications, Inc. Supplemental Benefit Plan (the "Plan") in 1998; WHEREAS, pursuant to Section 8.7 and Section 9 the Board of Directors may amend the Plan; WHEREAS, the Company's Board of Directors deems it in the best interests of the Company to increase the amount of supplemental benefit payable to its participants by one-half percent. NOW, THEREFORE, by resolution of the Company's Board of Directors, the Plan is hereby amended as follows: 1. The reference to "one and one-half percent" in Section 5.1 of the Plan is hereby amended to "two percent." 2. Such amendment shall become effective January 1, 2003. 3. All other terms of the Plan shall remain in full force and effect. -----END PRIVACY-ENHANCED MESSAGE-----