EXHIBIT 10
February 22, 2000
Valassis Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: PURCHASE AGREEMENT
Ladies and Gentlemen:
SECTION 1. Definitions.
Capitalized terms used herein and not otherwise defined have the
meanings specified in Appendix A.
SECTION 2. Purchase and Sale.
(a) Settlement Dates. The Company may, at any time following the
Effective Date on at least five Business Days' prior telephonic notice,
confirmed in writing, to the Seller (a "Settlement Notice"), declare any
Exchange Trading Day up to and including the Maturity Date to be a "Settlement
Date". The Settlement Notice shall specify:
(i) the Settlement Date;
(ii) the number of shares (the "Settlement Shares") with respect
to which settlement of this Letter Agreement is to be effected as of
such Settlement Date; and
(iii) the Settlement Method for such Settlement Date, which may,
subject to Sections 2(f) and 3(h) be Physical Settlement or Stock
Settlement.
The Company may withdraw any Settlement Notice upon telephonic notice, confirmed
in writing, to the Seller at least one Exchange Trading Day prior to the
proposed Settlement Date. If a Settlement Notice does not specify a Settlement
Method, the Settlement Method shall be deemed to be Physical Settlement. If, on
the Maturity Date, the number of Underlying Shares is greater than zero, then
the Maturity Date shall be a Settlement Date with respect to a number of
Settlement Shares equal to such number of Underlying Shares and the Settlement
Method shall be Physical Settlement. If any Exchange Trading Day that would, but
for this sentence, be a Settlement Date occurs during an Unwind Period, the
Calculation Agent may, in its discretion, postpone such Settlement Date until
the Exchange Trading Day immediately following the last Exchange Trading Day of
such Unwind Period. Without limiting the rights of the Company hereunder, the
Company does not currently intend to elect Stock Settlement with respect to any
Settlement Date.
(b) Physical Settlement. If Physical Settlement is elected as the
Settlement Method for any Settlement Date, then, on the Exchange Trading Day
immediately following the Settlement Date, (i) the Company shall pay to the
Seller an amount in cash equal to the Settlement Amount and (ii) upon receipt of
such amount in immediately available funds, the Seller shall deliver to the
Company a number of shares of Common Stock equal to the number of Settlement
Shares for such Settlement Date.
(c) Stock Settlement. If Stock Settlement is elected as the Settlement
Method for any Settlement Date, then on each Exchange Trading Day during the
related Unwind Period:
(i) If the Realized Amount is greater than or equal to the
Settlement Amount for the related Settlement Date, then such Exchange
Trading Day shall be the last Exchange Trading Day of such Unwind
Period and the Seller shall deliver to the Company a number of shares
of Common Stock (and cash in lieu of fractional shares valued at the
Daily Average Price on such Exchange Trading Day) equal to
▇▇ - ▇▇
(SS + CS) - (NUS + -------)
DAP
where
SS = the number of Settlement Shares for the related
Settlement Date
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CS = the number of shares of Common Stock previously
delivered to the Seller in respect of such
Settlement Date pursuant to Section 2(c)(ii)
NUS = the Number of Unwound Shares on the Exchange Trading
Day immediately prior to such Exchange Trading Day
SA = the Settlement Amount for such Settlement Date
RA = the Realized Amount on the Exchange Trading Day
immediately prior to such Exchange Trading Day
DAP = the Daily Average Price on such Exchange Trading Day.
(ii) If such Exchange Trading Day is not the last Exchange Trading
Day of such Unwind Period and the Number of Remaining Unwind Days is
less than or equal to five, then the Company shall elect either (A) to
issue and deliver to the Seller a number of shares of Common Stock
(rounded up to the next larger whole number) equal to the quotient of
(x) 120% of the Shortfall Amount divided by (y) the Daily Average
Price on such Exchange Trading Day, where the "SHORTFALL AMOUNT"
equals
MAX [ O, SA - (RA + (NRUD x DAP x DUN))]
where
SA = the Settlement Amount for such Settlement Date
RA = the Realized Amount on such Exchange Trading Day
NRUD = the Number of Remaining Unwind Days on such Exchange
Trading Day
DAP = the Daily Average Price on such Exchange Trading Day
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DUN = the Daily Unwind Number on such Exchange
Trading Day,
in which event such Unwind Period shall continue until the condition set forth
in Section 2(c)(i) or the condition set forth in this Section 2(c)(ii) is true,
or (B) (1) that the Unwind Period shall continue until the first Exchange
Trading Day on which the Number of Unwound Shares equals or exceeds the number
of Settlement Shares for such Settlement Date and (2) to pay, on the Business
Day immediately following the last Exchange Trading Day of such Unwind Period,
to the Seller an amount in cash equal to the Cash Delivery Amount; provided that
if the Cash Delivery Amount is a negative number, the Seller shall, on the
Business Day immediately following the last Exchange Trading Day of such Unwind
Period, pay to the Company an amount of cash equal to the absolute value of the
Cash Delivery Amount.
(d) Accretion Fee. If any Settlement Date occurs with respect to which
the Settlement Method is Stock Settlement, the Company shall pay to the Seller
on the Business Day immediately following the last Exchange Trading Day of the
related Unwind Period an accretion fee (the "ACCRETION FEE") in cash in an
amount equal to
LIBOR + SPREAD
((--------------) x (SA - RAi))
where
n = the number of calendar days in the Unwind Period
LIBOR = 3-Month LIBOR (determined as of the first day of the
Compounding Period that includes such Settlement Date)
Spread = the Spread
SA = the Settlement Amount for such Settlement Date
RAi the Realized Amount on the i th calendar day of such
Unwind Period (or, if such day is not an Exchange Trading
Day, on the Exchange Trading Day immediately prior to such
day).
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(e) Mandatory Early Settlement. If at any time prior to the Maturity
Date any of the following shall occur:
(i) the Daily Average Price on any Exchange Trading Day is less
than $12.00;
(ii) there shall exist any default or there shall happen any event
that would, with the passing of time or the giving of notice, become a
default under the financial covenants or payment covenants of the
Credit Agreement, regardless of whether any such defaults have been or
are waived by any party to the Credit Agreement;
(iii) any Event of Default (as defined in the Credit Agreement)
occurs and is continuing under the Credit Agreement;
(iv) any representation or warranty of the Company made or
repeated or deemed to be made or repeated under this Letter Agreement
or any certificate delivered by the Company hereunder would be
incorrect or misleading in any material respect if made or repeated as
of such time;
(v) the Company fails to fulfill or discharge when due any of its
obligations, covenants or agreements under or relating to this Letter
Agreement and such failure continues unremedied for one Business Day;
(vi) a Minimum Amortization Date shall occur and the number of
Underlying Shares on that Minimum Amortization Date shall be greater
than the Minimum Amortization Level for that Minimum Amortization
Date; or
(vii) the Closing Price of the Common Stock on any Exchange
Trading Day is less than or equal to the Draw-Down Reference Price;
then the Seller shall have the right, upon written notice to the Company, to
declare any Exchange Trading Day to be a Settlement Date with respect to a
number of Settlement Shares less than or equal to (A) in the case of clause
2(e)(vi) above, the excess of (1) the Underlying Shares on that Minimum
Amortization Date over (2) the Minimum Amortization Level for that Minimum
Amortization Date, (B) in the case of clause 2(e)(vii) above, the Draw-Down
Number with respect to such Settlement Date, or (C) otherwise, the number of
Underlying Shares on such Exchange Trading Day. The settlement effected on such
Settlement Date shall be effected pursuant to this Section 2; provided that the
Settlement Method shall be
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elected by the Seller; provided further that, in the case of any settlement
pursuant to clause 2(e)(vii) above the settlement shall be effected pursuant to
Section 2(m).
(f) Conditions Precedent to the Election of Certain Settlement Methods
and Deliveries of Common Stock. Notwithstanding any other provision of this
Letter Agreement, the Company shall not be permitted to elect Stock Settlement
with respect to any Settlement Date or to deliver shares of Common Stock unless
the following conditions have been satisfied with respect to both (1) all shares
of Common Stock delivered to the Seller pursuant to this Section 2 and (2) all
shares of Common Stock acquired by the Seller in open market transactions in
connection with the Seller's hedging activities in relation to this Letter
Agreement (the "HEDGE SHARES"):
(i) a registration statement covering public resale by the Seller
(or any other affiliate of the Seller designated by the Seller) of
such shares (a "REGISTRATION STATEMENT") shall have been filed with,
and declared effective by, the Commission under the Securities Act on
or prior to the date of delivery, and no stop order shall be in effect
with respect to such Registration Statement; a printed prospectus
relating to all such shares (including any prospectus supplement
thereto, a "PROSPECTUS") shall have been delivered to the Seller, in
such quantities as the Seller shall reasonably have requested, on or
prior to the date of delivery;
(ii) the form and content of such Registration Statement and such
Prospectus (including, without limitation, any sections describing the
plan of distribution) shall be satisfactory to the Seller;
(iii) BAS and the Seller shall have been afforded a reasonable
opportunity to conduct a due diligence investigation with respect to
the Company customary in scope for underwritten offerings of equity
securities and the results of such investigation shall be satisfactory
to BAS and the Seller, in their discretion;
(iv) an agreement (a "TRANSFER AGREEMENT") shall have been entered
into between the Company and the Seller in connection with the public
resale of such shares by the Seller substantially similar to
underwriting agreements customary for underwritten offerings of equity
securities, in form and substance satisfactory to the Seller, which
Transfer Agreement shall include, without limitation, provisions
substantially similar to those contained in such underwriting
agreements relating to the indemnification of, and contribution in
connection with the liability of, the Seller and its affiliates, and
shall provide for the payment by the Company
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of all expenses in connection with such resale, including all
registration costs and all fees and expenses of counsel for the
Seller; and
(v) the representations and warranties of the Company set forth in
this Letter Agreement and the relevant Transfer Agreement shall be
true and correct and the Company shall have performed its obligations
set forth in this Letter Agreement.
(g) Registration Failure. If, on any Exchange Trading Day during an
Unwind Period relating to a Settlement Date for which Stock Settlement is
elected as the Settlement Method, any of the conditions set forth in Section
2(f) is not satisfied (any such date, the "REGISTRATION FAILURE DATE"), then the
Company shall (i) pay to the Seller the Registration Failure Amount in cash,
upon receipt of which the Seller shall deliver to the Company the Remaining
Shares and (ii) pay the Accretion Fee as provided in Section 2(d), which
payments shall be in satisfaction of the Company's obligations under this
Section 2 in respect of the related Settlement Date. If a Registration Failure
Date occurs during an Unwind Period, then such Unwind Period shall end on the
Registration Failure Date.
(h) Delay of Settlement Date by the Seller. If in connection with any
proposed Settlement Date, in the Seller's reasonable judgment, the delivery of
shares of Common Stock to or by the Seller or the sale of shares of Common Stock
by the Seller or any of its affiliates in connection with the settlement of this
Letter Agreement on such Settlement Date would potentially violate or contravene
any legal or regulatory prohibition or requirement applicable to the Seller or
its affiliates or cause the Seller or its affiliates to contravene any
established corporate policy or compliance policy of the Seller or its
affiliates, then the Seller may, by telephonic notice to the Company, confirmed
in writing, at least three Business Days prior to the proposed Settlement Date,
delay such Settlement Date until a date on which the Seller notifies the Company
that the Seller and its affiliates are able to effect the proposed settlement.
(i) Unwind Blackout Periods. Prior to the opening of trading on the
Relevant Exchange on any Exchange Trading Day during any Unwind Period, the
Company may, by telephonic notice, confirmed in writing, to the Seller, direct
the Seller not to sell Common Stock in connection with the transactions
contemplated hereby for a period of consecutive Exchange Trading Days (an
"UNWIND BLACKOUT PERIOD") not to exceed 20 consecutive Exchange Trading Days.
Such notice shall not specify, and the Company shall not otherwise communicate
to the Seller, the reason for the Company's declaration of an Unwind Blackout
Period. Such Unwind Period shall be suspended during the Unwind Blackout Period.
The Company may declare only one Unwind Blackout Period during any Unwind
Period. Any Exchange Trading Day occurring during an Unwind Blackout Period
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shall not be considered one of the Exchange Trading Days in the relevant Unwind
Period.
(j) Adjustment of Terms. In the event of any corporate event involving
the Company or the Common Stock that has an effect on the nature or the
theoretical value of the Common Stock (including, without limitation, a stock
split, stock dividend, bankruptcy, insolvency, reorganization, merger, tender or
exchange offer, rights offering, recapitalization or spin-off), the terms of the
transaction (including, without limitation, the Initial Price, the Forward
Price, the number of Underlying Shares and the number of Exchange Trading Days
in any Unwind Period) described herein shall be subject to adjustment by the
Calculation Agent as in the exercise of its good faith judgment it deems
appropriate under the circumstances to preserve the economic terms of the
transaction described herein.
(k) Dividend Refund Amount. On the Business Day immediately following
each payment of the related dividend or dividends in connection with any
Settlement Date, the Seller shall pay to the Company the Dividend Refund Amount,
if any, for such Settlement Date.
(l) Security Entitlements. Any references in this Letter Agreement to
shares of Common Stock or other securities to be delivered or transferred
hereunder shall be deemed to include security entitlements in respect thereof.
(m) Draw-Down Settlement. If the Seller declares any Exchange Trading
Day to be a Settlement Date pursuant to clause 2(e)(vii), then on the third
Business Day immediately following such Settlement Date, the Company shall pay
to Seller an amount of cash (in immediately available funds) equal to the
Draw-Down Amount with respect to such Settlement Date.
SECTION 3. Representations, Warranties and Agreements.
(a) Basic Representations. Each party hereto represents and warrants
to and agrees with the other party as follows:
(i) Such party is duly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation.
(ii) Such party has all corporate power and authority to enter
into this Letter Agreement and to consummate the transactions
contemplated hereby.
(iii) This Letter Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, such party,
8
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable
principles.
(iv) The execution and delivery by such party of, and the
compliance by such party with all of the provisions of, this Letter
Agreement and the consummation of the transactions herein contemplated
are within such party's corporate powers and will not conflict with or
result in a breach of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or any other agreement or instrument to which such party or
any of its subsidiaries is a party or by which such party or any of
its subsidiaries is bound or to which any of the property or assets of
such party or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws or other constitutive documents of such party
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such party or any
of its subsidiaries or any of their respective properties.
(v) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or governmental agency or
body having jurisdiction over such party or any of its subsidiaries or
any of their respective properties is required for the execution and
delivery by such party of, and the compliance by such party with all
the terms of, this Letter Agreement or the consummation by such party
of the transactions contemplated hereby.
(vi) Such party is an "eligible swap participant" as defined in
Commodity Futures Trading Commission Rule 35.1(b)(2) (17 CFR
35.1(b)(2)) and it has entered into this Letter Agreement in
connection with its business or a line of business (including
financial intermediation). The parties acknowledge and agree that this
Letter Agreement is intended to constitute a "swap agreement" within
the meaning of the Policy Statement Concerning Swap Transactions, 54
Fed. Reg. 30694 (July 21, 1989). This Letter Agreement is not one of a
fungible class of agreements that are standardized as to their
material economic and credit terms, within the meaning of CFTC
Regulation Section 35.2(b); and the creditworthiness of the other
party was or will be a material consideration in entering into or
determining the terms of this Letter Agreement,
9
including pricing, cost or credit enhancement terms of this Letter
Agreement, within the meaning of CFTC Regulation Section 35.2(c).
(vii) The parties acknowledge and agree that the Seller is a
"financial institution" within the meaning of Section 101(22) of the
Bankruptcy Code, that this Letter Agreement is a "securities contract"
within the meaning of Section 741(7) of the Bankruptcy Code entitled
to the protection of Section 555 of the Bankruptcy Code and a "swap
agreement" within the meaning of Section 101(53B) of the Bankruptcy
Code entitled to the protection of Section 560 of the Bankruptcy Code
and that each delivery of Common Stock or Settlement Amounts under
this Letter Agreement is a "settlement payment" within the meaning of
Section 741(8) of the Bankruptcy Code.
(b) Relationship Between the Parties. The Company acknowledges and
agrees that it is not relying, and has not relied, upon the Seller or
any affiliate of the Seller with respect to the legal, accounting, tax
or other implications of this Letter Agreement and that it has
conducted its own analyses of the legal, accounting, tax and other
implications hereof. The Company further acknowledges and agrees that
neither the Seller nor any affiliate of the Seller has acted as its
advisor in any capacity in connection with this Letter Agreement or
the transactions contemplated hereby. The Company is entering into
this Letter Agreement with a full understanding of all of the terms
and risks hereof (economic and otherwise), has adequate expertise in
financial matters to evaluate those terms and risks and is capable of
assuming (financially and otherwise) those risks.
(c) Limitation on Stock Repurchases. The Company shall not
repurchase any shares of Common Stock if, as a result of such
purchase, the number of Underlying Shares would be equal to or greater
than 4.7% of the number of outstanding shares of Common Stock.
(d) Solvency. The Company is, as of the date of this Letter
Agreement, and shall be, as of the date of any payment or delivery by
the Company hereunder, solvent and able to pay its debts as they come
due, with assets having a fair value greater than the amount of the
Company's liabilities and with capital sufficient to carry on the
businesses in which it engages.
(e) Payments and Share Deliveries. All payments hereunder will be
made by wire transfer of immediately available funds to the following
accounts:
For payments to the Company: Comerica Bank
Detroit MI
10
ABA# 0720000960
Credit to: Valassis Communications,
Inc.
Acct# 1076122348
For delivery of shares of
Common Stock to the Company: shares should be delivered to
American Stock Transfer & Trust
Company through the DWAC system
For payments to the Seller: NationsBank NA
Charlotte, NC
Equity Derivatives - Bank
DDA# 000659795652
ABA# ▇▇▇▇▇▇▇▇▇
For delivery of shares of
Common Stock to the Seller: To be provided upon request.
(f) Set-off. In addition to any rights of set-off a party hereto
may have as a matter of law or otherwise, upon the occurrence of any default
with respect to a party ("X") hereto, the other party ("Y") shall have the right
(but shall not be obliged) without prior notice to X or any other person to set
off any obligation of X or any affiliate of X owing to of Y or any affiliate of
Y (whether or not arising under this Letter Agreement, whether or not matured,
whether or not contingent and regardless of the currency, place of payment or
booking office of the obligation) against any obligations of Y or any affiliate
of Y owing to X or any affiliate of X (whether or not arising under this Letter
Agreement, whether or not matured, whether or not contingent and regardless of
the currency, place of payment or booking office of the obligation). For the
purpose of cross-currency set-off, Y may convert any obligation to another
currency at a market rate determined by Y. Nothing in this Section 3(f) will
have the effect of creating a charge or other security interest. This Section
3(f) shall be without prejudice and in addition to any right of set-off,
combination of accounts, lien or other right to which any party is at any time
otherwise entitled (whether by operation of law, contract or otherwise).
(g) Consent to Recording. Each party hereto (i) consents to the
recording of telephone conversations of trading and marketing personnel of the
parties and their affiliates in connection with this Letter Agreement and (ii)
agrees to obtain any necessary consent of, and give notice of such recording to,
such personnel of it and its affiliates.
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(h) Material Nonpublic Information. The Company is not, on the
date hereof, and has not been, on any date from and including February 15, 2000
to but excluding the date hereof, in possession of any material nonpublic
information regarding the Company. Notwithstanding any other provision of this
Letter Agreement, the Company shall not elect Stock Settlement with respect to
any Settlement Date if the Company is, on such Settlement Date, in possession of
any material nonpublic information regarding the Company.
(i) Regulation M. The Company is not, on the date hereof, and has
not been, on any date from and including February 15, 2000 to but excluding the
date hereof, engaged in a distribution, as such term is used in Regulation M
under the Securities Act, of any securities of the Company. The Company shall
not, until the fifth Exchange Trading Day immediately following the Effective
Date, engage in any such distribution.
(j) Shares Duly Authorized. If shares of Common Stock are
delivered to the Seller pursuant hereto, such shares, when delivered, shall have
been duly authorized and shall be duly and validly issued, fully paid and
nonassessable and free of preemptive or similar rights, and such delivery shall
pass title thereto free and clear of any liens or encumbrances.
(k) No Distribution. The Company is not entering into this Letter
Agreement to facilitate a distribution of the Common Stock (or any security
convertible into or exchangeable for Common Stock) or in connection with a
future issuance of securities.
(l) No Manipulation. The Company is not entering into this Letter
Agreement to create actual or apparent trading activity in the Common Stock (or
any security convertible into or exchangeable for Common Stock) or to raise or
depress or otherwise manipulate the price of the Common Stock (or any security
convertible into or exchangeable for Common Stock).
SECTION 4. Indemnification and Contribution.
In the event that the Seller or any of its affiliates becomes
involved in any capacity in any action, proceeding or investigation brought by
or against any person in connection with any matter referred to in this Letter
Agreement, the Company shall reimburse the Seller or such affiliate for its
reasonable legal and other out-of-pocket expenses (including the cost of any
investigation and preparation) incurred in connection therewith within 30 days
of receipt of notice of such expenses, and shall indemnify and hold the Seller
or such affiliate harmless on an after-tax basis against any losses, claims,
damages or liabilities to which the Seller or such affiliate may become subject
in connection with any such action, proceeding or investigation. If for any
reason the foregoing
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indemnification is unavailable to the Seller or such affiliate or insufficient
to hold it harmless, then the Company shall contribute to the amount paid or
payable by the Seller or such affiliate as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Seller or such
affiliate on the other hand in the matters contemplated by this Letter Agreement
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and the Seller or such
affiliate on the other hand in the matters contemplated by this Letter Agreement
but also the relative fault of the Company and the Seller or such affiliate with
respect to such losses, claims, damages or liabilities and any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Seller, the Calculation Agent or such affiliate, on the other
hand, shall be in the same proportion as the product of the Starting Initial
Price and the number of Underlying Shares on the date hereof bears to the market
value of this Letter Agreement to the Seller on the date hereof (as determined
by the Calculation Agent). The reimbursement, indemnity and contribution
obligations of the Company under this Section 4 shall be in addition to any
liability that the Company may otherwise have, shall extend upon the same terms
and conditions to the partners, directors, officers, agents, employees and
controlling persons (if any), as the case may be, of the Seller and its
affiliates and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Seller, any such
affiliate and any such person. The Company also agrees that neither the Seller
nor any of such affiliates, partners, directors, officers, agents, employees or
controlling persons shall have any liability to the Company for or in connection
with any matter referred to in this Letter Agreement except to the extent that
any losses, claims, damages, liabilities or expenses incurred by the Company
result from the gross negligence or bad faith of the Seller or a breach by the
Seller of any of its covenants or obligations hereunder. The foregoing
provisions shall survive any termination or completion of this Letter Agreement.
SECTION 5. Governing Law.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CHOICE OF LAW RULES THEREOF.
SECTION 6. Assignment and Transfer.
The rights and duties under this Letter Agreement may not be assigned
or transferred by either party hereto without the prior written consent of the
other
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party hereto; provided that the Seller may assign any of its rights or duties
hereunder to any of its affiliates without the prior written consent of the
Company.
SECTION 7. Confidentiality.
Except as required by law or judicial or administrative process, or as
requested by a regulatory authority or self-regulatory organization, each party
hereto agrees to keep this Letter Agreement and the transactions contemplated
hereby confidential. In the event disclosure is permitted pursuant to the
immediately preceding sentence, the disclosing party shall (i) provide prior
notice of such disclosure to the other party, (ii) use its best efforts to
minimize the extent of such disclosure and (iii) comply with all reasonable
requests of the other party to minimize the extent of such disclosure. This
Section 7 shall not prevent either party from disclosing information as
necessary to third-party advisors in connection with the transactions
contemplated hereby; provided that such advisors shall be bound by this Section
7 as if a party hereto.
SECTION 8. Calculations.
The Calculation Agent shall make all calculations in respect of this
Letter Agreement, which calculations shall be made in a commercially reasonable
manner and shall be binding on the parties absent manifest error.
SECTION 9. Notices.
Unless otherwise specified, notices under this contract may be made by
telephone, to be confirmed in writing to the address below. Changes to the
information below must be made in writing.
(a) If to the Company:
Valassis Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(b) If to the Seller:
Bank of America, N.A.
c/o Banc of America Securities LLC
▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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Please confirm your agreement to the foregoing by signing and
returning to us the enclosed duplicate of this Letter Agreement.
Very truly yours,
BANK OF AMERICA, N.A.
By:
-----------------------------
Name:
Title:
Acknowledged and agreed to as of
the date first above written,
VALASSIS COMMUNICATIONS, INC.
By:
-----------------------------
Name:
Title:
APPENDIX A
DEFINITIONS
As used in this Letter Agreement, the following terms shall have the
following meanings:
"3-MONTH LIBOR" means USD-LIBOR-BBA for a Designated Maturity of three
months, as such terms are defined in the 1991 ISDA Definitions published by the
International Swaps and Derivatives Association, Inc., provided, however, that
3-month LIBOR as of the Effective Date shall be 6.11%.
"ACCRETION FEE" has the meaning specified in Section 2(d).
"BANKRUPTCY CODE" means Title 11 of the United States Code.
"BAS" means Banc of America Securities LLC.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day
on which banking institutions or trust companies in The City of New York are
authorized or obligated by law or executive order to close.
"CALCULATION AGENT" means BAS.
"CASH DELIVERY AMOUNT" means, with respect to any Settlement Date,
SA - (RA + (DAP x (SS - NUS))
where
SA = the Settlement Amount with respect to such Settlement Date
RA = the Realized Amount on the Exchange Trading Day
immediately prior to the last Exchange Trading Day of the
relevant Unwind Period
DAP = the Daily Average Price on the last Exchange Trading Day of
the relevant Unwind Period
SS = the number of Settlement Shares for such Settlement Date
NUS = the Number of Unwound Shares on the Exchange Trading Day
immediately prior to the last Exchange Trading Day of the
relevant Unwind Period.
"CLOSING PRICE" of any security means, on any Exchange Trading Day,
the closing sale price (or, if no closing sale price is reported, the last sale
price) of such security for the regular trading session on the Relevant Exchange
for such security on such Exchange Trading Day or, if no closing sale price or
last sale price is reported, the closing market price of such security for the
regular trading session on the Relevant Exchange for such security on such
Exchange Trading Day as determined by the Calculation Agent in a commercially
reasonable manner.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company.
"COMPANY" means Valassis Communications, Inc., a Delaware corporation.
"COMPOUNDING PERIOD" means, with respect to the first Compounding
Period, the period beginning on the Effective Date and ending on the day
immediately prior to the first Reset Date and, with respect to each following
Compounding Period, the period beginning on a Reset Date and ending on the day
immediately prior to the next following Reset Date or, if there is no following
Reset Date, the Maturity Date.
"CREDIT AGREEMENT" means the Credit Agreement by and among Comerica
Bank, ▇▇▇▇▇▇ Trust and Savings Bank, Keybank National Association, Michigan
National Bank, Bank One, Michigan (f/k/a NBD Bank) (the "Revolving Credit
Banks") and Comerica Bank, in its capacity as lender of the Swing Line Credit
and together with the Revolving Credit Banks (collectively referred to as the
"Banks"), Comerica Bank as agent for the Banks, and Valassis Communications,
Inc. dated as of November 16, 1998 as amended as of November 25, 1998 and August
19, 1999 and as amended from time to time or, if at any time such agreement is
no longer the principal bank credit agreement of the Company, the principal bank
credit agreement of the Company then in effect.
"DAILY AVERAGE PRICE" means, on any Exchange Trading Day, an amount
equal to 98% of the volume weighted average sale price per share for sales on
the Exchange Trading Day by the Seller of Hedge Shares or shares of Common Stock
delivered to the Seller pursuant to Section 2.
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"DAILY MAXIMUM NUMBER" means, on any Exchange Trading Day, 25% of the
average daily trading volume in the Common Stock for the 20 Exchange Trading
Days immediately prior to such Exchange Trading Day.
"DAILY UNWIND NUMBER" means, initially, 100,000, which amount may be
changed on any day by the Calculation Agent; provided that in no event (except
as provided in the further proviso to this sentence) shall the Daily Unwind
Number on any day be less than 75,000 or greater than the Daily Maximum Number;
and provided further that, notwithstanding the foregoing, in the event a
Settlement Date occurs as a result of Section 2(e), the Daily Unwind Number may
be increased at the option of the Seller.
"DIVIDEND AMOUNT" means, for any day (the "Calculation Day"), an
amount equal to the sum of the per share amounts of all cash dividends paid on
the Common Stock during the period beginning on the first day of the Compounding
Period that includes the Calculation Day (unless the Calculation Day is the
first day of such Compounding Period, in which case such period shall begin on
the first day of the immediately prior Compounding Period) and ending on the day
immediately prior to the Calculation Day.
"DIVIDEND REFUND AMOUNT" means, with respect to any Settlement Date,
the product of (i) the per share amount of any cash dividend on the Common Stock
for which the record date for determining shareholders entitled to receive such
dividend is prior to such Settlement Date but the payment date for such dividend
is on or after such Settlement Date times (ii) the number of Settlement Shares
for such Settlement Date.
"DRAW-DOWN AMOUNT" means, with respect to any Settlement Date,
(DDRP-CP) x US
where
DDRP = with respect to any Settlement Date, (i) if such
Settlement Date is a Reset Date or the Maturity Date, the
Draw-Down Reference Price immediately prior to the Seller's
declaration of such Settlement Date pursuant to clause
2(e)(vii), or (ii) if such Settlement Date is any other
day, the Draw-Down Reference Price immediately prior to the
Seller's declaration of
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such Settlement Date pursuant to clause 2(e)(vii) adjusted
for any LIBOR breakage adjustments (determined by the
Calculation Agent in accordance with normal industry
standards) for the period from such Settlement Date to the
next following Reset Date or, if there is no following
Reset Date, the Maturity Date
CP = the Closing Price on such Settlement Date
US = the Underlying Shares on such Settlement Date.
"DRAW-DOWN NUMBER" means, with respect to any Settlement Date, the
Draw-Down Amount with respect to such Settlement Date divided by the Closing
Price of the Common Stock on such Settlement Date.
"DRAW-DOWN REFERENCE PRICE" means initially $18.00 per share of Common
Stock and following the declaration of any Settlement Date pursuant to clause
2(e)(vii) the Closing Price on such Settlement Date for all times prior to the
declaration of a subsequent Settlement Date pursuant to such clause.
"DRAW-DOWN SETTLEMENT" means any settlement pursuant to Section 2(m).
"EARLY TERMINATION FEE" means, with respect to any Settlement Date,
the greater of (x) zero and (y) the difference of $75,000.00 minus the Early
Termination Accrual Amount as of such Settlement Date.
"EARLY TERMINATION ACCRUAL AMOUNT" means, for any day (the
"Calculation Day"), the amount equal to
1
US X IP X SPREAD X -----
360
where
US = the Underlying Shares on the day immediately preceding the
i th day after the Effective Date
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IP = the Initial Price for the Compounding Period that includes
the calendar day immediately preceding the i th day after
the Effective Date or, if such calendar day is the first
day of such Compounding Period, the Initial Price for the
immediately preceding Compounding Period
Spread = the Spread
n = the number of calendar days in the period beginning on the
Effective Date and ending on the day immediately prior to
the Calculation Day.
"EFFECTIVE DATE" means February 22, 2000.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE TRADING DAY" means any day other than (i) a Saturday, a
Sunday or a day on which the Relevant Exchange is not open for business, (ii) a
day during which trading of any securities of the Company on any national
securities exchange has been suspended or (iii) a day during which there has
been, in the Calculation Agent's judgment, a material limitation in the trading
of Common Stock.
"FORWARD PRICE" means, for any day (the "Calculation Day"), the amount
equal to
n
(IP X (1 + (LIBOR + SPREAD) x ---)) - DA
360
where
IP = the Initial Price for the Compounding Period that includes
the Calculation Day or, if the Calculation Day is the first
day of such Compounding Period, the Initial Price for the
immediately preceding Compounding Period
LIBOR = 3-Month LIBOR (determined as of the first day of such
Compounding Period)
Spread = the Spread
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n = the number of calendar days in the period beginning on the
first day of such Compounding Period and ending on the day
immediately prior to the Calculation Day
DA = the Dividend Amount on the Calculation Day.
"HEDGE SHARES" has the meaning specified in Section 2(f).
"INITIAL PRICE" means, for the first Compounding Period, the Starting
Initial Price, and, for each following Compounding Period, the Forward Price
calculated on the first day of such Compounding Period; provided, however, that
if the Company makes any Draw-Down Settlement payment pursuant to Section 2(m)
hereof with respect to a Settlement Date occurring in any Compounding Period,
then for each calendar day from and including the Settlement Date (X) the
Initial Price for such Compounding Period shall be reduced by the excess, if
any, of (i) the Draw-Down Reference Price immediately prior to the Seller's
declaration of such Settlement Date pursuant to clause 2(e)(vii) over (ii) the
Closing Price on such Settlement Date and (Y) for purposes of determining (i) IP
and n for such Compounding Period in the calculation of the Forward Price and
(ii) IP for such Compounding Period in the calculation of the Early Termination
Accrual Amount on any such calendar day, such Compounding Period shall be deemed
to have commenced on such Settlement Date.
"MATURITY DATE" means October 2, 2000.
"MINIMUM AMORTIZATION DATE" means each of the dates appearing under
the heading "Minimum Amortization Date" on Schedule I hereto.
"MINIMUM AMORTIZATION LEVEL" means, with respect to any Minimum
Amortization Date, that number indicated by the entry appearing under the
heading "Minimum Amortization Level" opposite such Minimum Amortization Date
on Schedule I hereto.
"NUMBER OF REMAINING UNWIND DAYS" means, on any Exchange Trading Day
during an Unwind Period,
(SS + CS) - NUS
MAX [ O, ---------------]
DUN
where
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SS = the number of Settlement Shares for the related Settlement
Date
CS = the number of shares of Common Stock previously delivered
to the Seller in respect of such Settlement Date pursuant
to Section 2(c)(ii)
NUS = the Number of Unwound Shares on such Exchange Trading Day
DUN = the Daily Unwind Number on such Exchange Trading Day.
"NUMBER OF UNWOUND SHARES" means, on any Exchange Trading Day during
an Unwind Period (the "CALCULATION DAY"),
DUNi
where
n = the number of Exchange Trading Days in such Unwind Period
up to and including the Calculation Date
DUNi = the Daily Unwind Number on the i th Exchange Trading Day in
such Unwind Period.
"PHYSICAL SETTLEMENT" means the Settlement Method described in Section
2(b).
"PROSPECTUS" has the meaning specified in Section 2(g)(i).
"REALIZED AMOUNT" means, on any Exchange Trading Day during an Unwind
Period (the "CALCULATION DAY"),
(DAPi x DUNi)
where
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n = the number of Exchange Trading Days in such Unwind Period
up to and including the Calculation Date
DAPi = the Daily Average Price on the i th Exchange Trading Day in
such Unwind Period
DUNi = the Daily Unwind Number on the i th Exchange Trading Day in
such Unwind Period.
"REGISTRATION FAILURE AMOUNT" means, for any Registration Failure
Date, the excess of the Settlement Amount for the relevant Settlement Date over
the Realized Amount on the Exchange Trading Day immediately prior to the
Registration Failure Date.
"REGISTRATION FAILURE DATE" has the meaning specified in Section 2(h).
"REGISTRATION STATEMENT" has the meaning specified in Section 2(g)(i).
"RELEVANT EXCHANGE" means the principal national securities exchange
or automated quotation system on which the Common Stock is listed or quoted.
"REMAINING SHARES" means, with respect to any Registration Failure
Date, a number of shares of Common Stock equal to (i) the number of Settlement
Shares for the related Settlement Date plus (ii) the number of shares of Common
Stock delivered to the Seller pursuant to Section 2(c)(ii) in respect of such
Settlement Date minus (iii) the Number of Unwound Shares on the Exchange Trading
Day immediately prior to the Registration Failure Date.
"RESET DATE" means April 3, 2000 and July 3, 2000.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"Seller" means Bank of America, N.A.
"SETTLEMENT AMOUNT" means, with respect to any Settlement Date, the
product of (i) the Settlement Price times (ii) the number of Settlement Shares;
provided that with respect to any Settlement Date immediately following which
the number of Underlying Shares is equal to zero, the Settlement Amount shall be
deemed to be equal to the sum of (x) the product of (i) the Settlement Price
times (ii) the number of Underlying Shares as of such Exchange Trading Day and
(y) any Early Termination Fee.
"SETTLEMENT DATE" has the meaning specified in Section 2(a).
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"SETTLEMENT METHOD" means Physical Settlement or Stock Settlement.
"SETTLEMENT NOTICE" has the meaning specified in Section 2(a).
"SETTLEMENT PRICE" means, with respect to any Settlement Date, (i) if
such Settlement Date is a Reset Date or the Maturity Date, the Forward Price, or
(ii) if such Settlement Date is any other day, the Forward Price adjusted for
any LIBOR breakage adjustments (determined by the Calculation Agent in
accordance with normal industry standards) for the period from such Settlement
Date to the next following Reset Date or, if there is no following Reset Date,
the Maturity Date.
"SETTLEMENT SHARES" has the meaning specified in Section 2(a).
"SHORTFALL AMOUNT" has the meaning specified in Section 2(c).
"SPREAD" means 0.90%.
"STARTING INITIAL PRICE" means $29.7208.
"STOCK SETTLEMENT" means the Settlement Method described in Section
2(c).
"UNDERLYING SHARES" means, initially, a number of shares of Common
Stock equal to 1,684,400, reduced as of each Settlement Date by the number of
Settlement Shares with respect to such Settlement Date, except that no reduction
shall be made for any settlement effected pursuant to Section 2(m) hereof.
"UNWIND BLACKOUT PERIOD" has the meaning specified in Section 2(n).
"UNWIND PERIOD" means, with respect to any Settlement Date for which
Stock Settlement is elected as the Settlement Method, a period of consecutive
Exchange Trading Days beginning on such Settlement Date and ending on a date
determined as set forth in Section 2(c).
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SCHEDULE I
MINIMUM AMORTIZATION DATE MINIMUM AMORTIZATION LEVEL
April 3, 2000 .............. 673,800
July 3, 2000 ............... 505,300
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