<PAGE> 1
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO
Commission File No. 0-21768
D.I.Y. HOME WAREHOUSE, INC.
(Exact name of registrant as specified in its charter)
STATE OF OHIO 38-2560752
(State of Incorporation) (I.R.S. Employer I.D. No.)
5811 CANAL ROAD
VALLEY VIEW, OHIO 44125
(216) 328-5100
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
--- ---
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 and 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 March 3, 2000, the aggregate market value of the Registrant's
voting stock held by non-affiliates of the Registrant was $1,298,521 determined
in accordance with the highest price at which the stock was sold on such date as
reported by the OTC Bulletin Board.
As of March 3, 2000, there were 7,276,059 outstanding shares of the
Registrant's common stock.
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for its Annual Meeting of Shareholders
which will be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days of the close of the Registrant's fiscal year, is
incorporated by reference in answer to Part III of this Annual Report on Form
10-K to the extent noted herein. In addition, pages 2 through 12 of D.I.Y. Home
Warehouse, Inc.'s 1999 Annual Report to Shareholders are incorporated by
reference in answer to Items 6, 7 and 8 of Part II and Item 14(a)(1) of Part IV
of this report.
PART I
ITEM 1. BUSINESS
GENERAL
D.I.Y. Home Warehouse, Inc. ("DIY" or the "Company") operates eleven
retail warehouse-format home improvement centers that sell products primarily to
do-it-yourself home repair and remodeling customers. The Company's "DIY Home
Warehouse" stores are located in Northeast Ohio and range in size from 66,000 to
109,000 square feet of enclosed selling space with an additional 12,000 to
20,000 square feet of outside selling space. Six of these retail centers are
located in the Cleveland metropolitan area, three stores are in the Akron area
and one store each is located in Warren and Ashtabula. DIY offers a high level
of customer service, making shopping at its stores easy and convenient and,
through its displays and trained staff, enabling do-it-yourself shoppers to
conceptualize, design and complete their own home repair, maintenance and
improvement projects. The Company also offers kitchen, bath and other product
installation for its customers.
MERCHANDISING
DIY offers a wide selection of home improvement products at everyday
low prices. Each store carries approximately 30,000 SKUs, including variations
in color and size. Brand name products are carried throughout each store. In
addition, the Company carries several private label products, including paints
and doors.
The Company seeks to carry a broad and deep product selection in its
core product areas. Core product areas are characterized by a high need for
specialized customer service. The Company's two core product areas consist of
(a) Paint, Home Decorating, Floorcoverings and Ready To Assemble Furniture, and
(b) Lawn and Garden. In its non-core product areas, DIY seeks to carry as deep a
selection as its competitors, but does not seek to carry a broad selection of
products within the same category. Non-core product areas are characterized by
products which do not require a high level of specialized service, but which are
better stocked and sold in traditional warehouse-format for customer
convenience. The Company's non-core product areas are Electrical, Lighting and
Fans, Hardware, Plumbing and Building Materials.
The following table depicts the percentage of total net sales data for
the periods indicated, by product area.
2
<PAGE> 3
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------------
PRODUCT AREA JANUARY 1, 2000 JANUARY 2, 1999 JANUARY 3, 1998
- ------------ --------------- --------------- ---------------
<S> <C> <C> <C>
A. Kitchen, Plumbing and Bath 18.4% 20.2% 21.2%
B. Paint, Home Decorating,
Floorcoverings and Furniture 19.0 17.0 17.0
C. Lawn and Garden 18.9 18.0 15.0
D. Lumber, Building Materials and
Doors and Windows 26.9 28.0 29.2
E. Electrical, Lighting and Fans 8.9 9.0 9.6
F. Hardware and Tools 7.9 7.8 8.0
------- ------- -------
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Kitchen, Plumbing, and Bath. The Company carries a wide selection of
kitchen cabinets, sinks, toilets, bathtubs, faucets, bathroom vanities and tops,
shower surrounds and related products utilized in kitchen and bath remodeling
projects. DIY offers two complete lines of ready to assemble cabinets and two
lines of assembled cabinets which are stocked for customer carryout. The Company
offers products over a broad price range but focuses its presentation on the
more popular price product group in this category. Sales associates are
available to assist customers in planning and designing remodeling projects as
well as assisting in product selection.
Paint, Home Decorating, Floorcoverings, and Furniture. The Company
offers a wide assortment of interior and exterior paints, stains, varnishes and
other surface applications, as well as sundry related supplies such as paint
brushes, sand paper, paint thinner, glues and other similar items. Blinds and
window treatments, closet and storage materials, wall coverings, floorcoverings
(rugs, tiles and similar items) and other home decorating items are also
featured in this product area. In addition to budget priced DIY "house label"
products, DIY offers products from manufacturers such as Dutch Boy, Enterprise,
Behr, Levolor and Cuprinol. Salespeople are available to computer custom match
and mix paint colors and otherwise assist customers in planning and selecting
products for their home decorating projects.
Lawn and Garden. The Company carries a wide selection of seasonal items
relating to landscaping and yard beautification and maintenance, such as annual
flowers and other nursery stock, fertilizers, lawn mowers and garden tractors,
barbecues and grills, soils and mulches, lawn and garden maintenance tools and
similar items. DIY has enhanced its selection of patio furniture to fill a void
in its market area with regard to the mid range price points in this category.
DIY seeks to provide a large selection of lawn and garden goods, at high quality
and low prices. This department provides both significant sales primarily in the
second and third quarters of the year and substantial traffic of potential
customers for other departments.
Lumber, Building Materials, and Doors and Windows. The Company carries
a wide selection of exterior and interior doors, storm windows and doors, steel
entry doors, pre-hung doors, window units, skylights, moldings and other related
products. This product area also offers treated and dimensional lumber, plywood,
pine boards and other wood products.
Electrical, Lighting and Fans, and Hardware and Tools. The Company
offers a selection of heaters and fans, lights, lighting fixtures, switch
plates, light bulbs, outlets, switches, electrical wire and conduit, fuses and
circuit breakers, related electrical products, hand and power tools and
accessories, fasteners, chains and other related tools and items. The Company
features a large, attractive lighting display area with working samples. The
Company's Hardware and Tools product area provides all necessary equipment to
complete a do-it-yourself customer project.
3
<PAGE> 4
CUSTOMER SERVICE
DIY seeks to provide superior service for every customer by hiring
experienced personnel, including people with experience in the building trades
such as plumbers and electricians, and by providing these employees with
in-store and vendor-supported product training. Specially trained personnel are
available in every product area (or "department"), particularly in the core
departments, to help customers conceptualize and plan virtually any home
improvement project.
Customer questions, problems, returns and exchanges are handled at a
convenient service desk near the main entrance to the store. Virtually all items
offered by the Company carry the manufacturers' full product warranties. The
Company has a "no-hassle" return policy for all of its products. If a customer
is not satisfied, the Company will have the product repaired, exchange the
product or refund the product purchase price. The Company does not operate a
repair department.
The Company accepts cash, check, Visa, MasterCard, American Express and
Discover. DIY home centers are open seven days a week, from 7:30 a.m. to 9:00
p.m. on weekdays and Saturdays and from 9:00 a.m. to 6:00 p.m. on Sundays.
PURCHASING AND DISTRIBUTION
The Company purchases over 85% of its merchandise directly from
manufacturers. The balance, which are generally high turnover but long lead time
items, are purchased through and stocked by distributors. Product re-orders are
initiated at the store department level, after review of available stock and
applying local knowledge as to sales patterns for particular items. Merchandise
selection is centrally handled by buyers at the headquarters level to attain the
most attractive volume discounts and programs available. DIY has a staff of five
merchandisers, who report to the Company's President and Chief Executive
Officer. Each merchandiser has responsibility for specified product categories.
During fiscal 1999, the Company's top 10 vendors accounted for
approximately 26% of its purchases, with no single supplier accounting for more
than 8% of Company purchases. The number of active vendors is approximately 620.
The Company is not dependent on any one vendor for any significant product. The
Company does not license or contract the operating of departments within its
stores to outside providers.
The majority of the merchandise purchased by the Company is shipped by
the vendors directly to its stores. The Company thereby largely avoids the costs
associated with maintaining a distribution center or warehouse, and does not
incur costs of moving inventory from storage sites to the stores. However, a
warehouse is used for situations involving import and/or seasonal product
categories, for cross docking and/or temporary storage where a cost-benefit
advantage exists. All merchandise is displayed on the sales floor in the lower
levels of warehouse type racks, with stock stored in the upper racks. In this
way, on-site storeroom space requirements are minimized, and utilization of
available store space for sales is maximized.
4
<PAGE> 5
The Company stocks inventory at levels appropriate to support its
warehouse home center format and its wide product selection consisting of
approximately 30,000 SKUs. The Company generally experiences its highest working
capital requirements with respect to inventory during March and April when
inventory quantities are increased in anticipation of higher spring and summer
sales.
MANAGEMENT INFORMATION SYSTEMS
The Company's information system strategy is to provide excellent
customer service and reliable, timely information to manage DIY. The
infrastructure for the Company's Local Area Network (LAN) and Wide Area Networks
(WAN) consists of the IBM AS/400 processor for its mission critical
applications, Microsoft NT and Novell for its networked servers and personal
computers. Margin, sales and inventory information is delivered through the DIY
Network and processed at headquarters daily. The Company's strategic IT
architecture is flexible enough to accommodate a mix of systems while retaining
the ability to centralize or delegate management and control of these systems.
MARKETING
The Company's marketing program is designed to create an awareness of
DIY's comprehensive selection of brand name merchandise, superior customer
service and everyday low prices. The Company's primary advertising vehicle is
local newspaper advertising, which currently consists of circulars, tablets or
flyers included with the Sunday newspaper in its markets. The Company also
engages in electronic advertising--both television and radio--in order to
enhance consumer recognition of the DIY Home Warehouse name and product
assortment or to promote a sense of urgency regarding the purchase of a
particular product or group of products.
COMPETITION
The home improvement, hardware and garden businesses are all highly
competitive. The Company competes against traditional hardware, plumbing,
electrical and home supply retailers, as well as warehouse-format and discount
retail stores and many of the Company's competitors have substantially greater
resources than DIY. Builders Square and Lowe's Company have had stores in the
Company's markets since 1985 and 1994, respectively. However, Builders Square
filed for Chapter 7 bankruptcy protection and exited the Northeastern Ohio
marketplace during fiscal 1999. Lowe's has continued to expand with additional
locations in 1996, 1997 and 1998. Beginning in the fourth quarter of 1997 and
continuing through 1999, Home Depot began operations in several of the Company's
markets. Both Home Depot and Lowe's have announced further expansion plans in
2000. In addition, there has been increasing consolidation within the home
improvement industry, which may provide certain entities increased competitive
advantages. Specifically, increased competition including, but not limited to,
additional competitors' store locations, price reductions, and advertising and
marketing campaigns could have a material adverse effect on the Company's
business, recoverability of asset values, financial condition and operating
results.
EMPLOYEES
Each DIY home center employs approximately 50 to 80 employees,
supervised by a store manager, three assistant managers and 4 to 8 department
heads. As of January 1, 2000, the Company employed approximately 702 persons,
approximately 471 of whom were full-time employees. DIY is not a party to any
collective bargaining agreements. The Company considers its relations with its
employees to be excellent.
5
<PAGE> 6
ITEM 2. PROPERTIES
Each DIY home center is individually designed based on the particular
characteristics of the property, with the overall goal of achieving a relatively
uniform "look" among all the stores, including the same product areas. All
stores are conveniently located near major roads and each provides parking for
customers. The following table sets forth the location, opening date and
approximate size of each of the Company's home centers.
<TABLE>
<CAPTION>
Leased Area in Square Feet
Store Location Opening Date or Owned Interior Selling Garden
- -------------- ------------ -------- ---------------- ------
Greenhouse
- ----------
<S> <C> <C> <C> <C> <C>
Cleveland, Ohio........... March 1985.................. Leased........... 109,000 12,000 --
North Randall, Ohio....... October 1985............... Leased........... 83,000 17,000 --
Eastlake, Ohio............ August 1990................. Leased........... 66,000 17,000 --
Elyria, Ohio.............. February 1992.............. Leased........... 72,000 16,200 --
Brook Park, Ohio.......... March 1993.................. Leased........... 93,000 18,000 --
Warren, Ohio.............. January 1994................ Owned, Land Lease 79,000 18,000 --
Akron, Ohio (Northeast).. September 1994........... Owned............ 89,800 18,000 --
Medina, Ohio.............. March 1995.................. Owned............ 83,200 20,000 3,200
Mentor, Ohio.............. April 1995..................... Leased........... 86,100 15,000 --
Akron, Ohio (Southeast)... June 1995.................... Owned............ 85,400 15,000 3,200
Ashtabula, Ohio........... November 1995............ Owned, Land Lease 84,200 15,750 3,200
</TABLE>
The Company's headquarters consist of approximately 12,100 square feet
of leased space in Valley View, Ohio, near Cleveland. The Company also leases
38,500 square feet of warehouse space near the Company's headquarters.
The Company leases or subleases six of its retail properties. In
addition, two of the Company's retail stores are subject to land leases. The
various lease terms expire between 1 and 8 years, and have renewal options
ranging from 2 to 45 years. The leases generally provide for additional rental
payments based upon a percentage of gross or net store sales above various
levels. The Company subleases portions of premises not being used by the Company
to various third parties.
The Company owns most of the equipment and trade fixtures throughout
its stores and headquarters and has made leasehold improvements at most
locations. Management believes all of the Company's facilities are in excellent
condition.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this Annual Report on
Form 10-K.
6
<PAGE> 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
From 1985 to May 18, 1993, the Company's stock was privately held. From
May 25, 1993, to December 2, 1998, the Company's Common Stock was traded on the
National Market of Nasdaq. From December 3, 1998 to present the Company Stock
has been traded on the OTC Bulletin Board under its symbol "DIYH."
As of March 3, 2000, the closing price for the Company's Common Stock
on the OTC Bulletin Board was $0.56 and there were approximately 189 holders of
record of Common Stock. Based on information provided to the Company by certain
holders of record, the Company estimates there are in excess of 1,000 beneficial
shareholders. The Company has not paid any cash dividends on its Common Stock in
the past four fiscal years. Management intends to follow a policy of retaining
earnings in the foreseeable future in order to finance the development and
operations of its business. The declaration and payment of dividends will be
within the discretion of the Company's Board of Directors and would depend,
among other factors, on the Company's earnings, financial condition, capital
requirements, level of indebtedness and contractual restrictions with respect to
payment of dividends.
The following table sets forth a quarterly summary, for the years ended
January 1, 2000, January 2, 1999, and January 3, 1998, of the high and low
closing sales prices as reported by Nasdaq NNM or, after December 2, 1998, the
OTC Bulletin Board.
1999 1998 1997
-------------------------------------------------
Fiscal Quarter High Low High Low High Low
- -------------- ---- --- ---- --- ---- ---
1st $0.75 $0.19 $3.25 $2.69 $4.63 $3.50
2nd 0.84 0.56 3.13 2.00 4.63 3.25
3rd 0.97 0.63 2.06 1.06 4.06 2.38
4th 0.75 0.53 1.25 0.25 4.56 2.50
ITEM 6. SELECTED FINANCIAL DATA
The information for the fiscal years 1995-1999 under the heading
"Selected Financial Data and Operating Highlights" contained in the Company's
Annual Report to Shareholders for the fiscal year ended January 1, 2000, on page
12 of Exhibit 13.1 hereto, is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contained in the Company's
Annual Report to Shareholders for the fiscal year ended January 1, 2000, on
pages 2 through 4 of Exhibit 13.1 hereto, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information under the headings "Statement of Operations, Statement
of Shareholders' Equity, Balance Sheet, Statement of Cash Flows, Notes to
Financial Statements and Report of Independent Accountants" contained in the
Company's Annual Report to Shareholders for the fiscal year ended January 1,
2000, on pages 5 through 11 of Exhibit 13.1 hereto, is incorporated herein by
reference.
7
<PAGE> 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
To be provided by subsequent filing.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) Financial Statements:
The following financial statements of D.I.Y. Home
Warehouse, Inc. are filed herewith by incorporation
by reference from pages 5 through 11 of the
Registrant's Annual Report to Shareholders for the
fiscal year ended January 1, 2000, as provided in
Item 8 hereof:
Statement of Operations for the Years Ended January
1, 2000, January 2, 1999 and January 3, 1998;
Statement of Stockholders' Equity for the Years Ended
January 1, 2000, January 2, 1999 and January 3, 1998;
Balance Sheet as of January 1, 2000 and January 2,
1999;
Statement of Cash Flows for the Years Ended January
1, 2000, January 2, 1999 and January 3, 1998;
Notes to Financial Statements;
Report of Independent Accountants.
(2) Financial Statement Schedules:
Financial Statement Schedules have been omitted
because they are not required, are not applicable, or
the required information is included in the financial
statements or the notes thereto.
(3) Exhibits required by Item 601 of Regulation S-K:
3.1 Articles of Incorporation of D.I.Y. Home Warehouse, Inc., as
amended, incorporated herein by reference to Exhibit 3.1 to
Registrant's Registration Statement No. 33-60012 on Form S-1
filed May 18, 1993.
3.2 Amended and Restated Code of Regulations of D.I.Y. Home
Warehouse, Inc., incorporated herein by reference to Exhibit
3.2 to Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.1 Compensation and Employee Benefit Plans of the Registrant
8
<PAGE> 9
10.1.1 D.I.Y. Home Warehouse, Inc. 1993 Long Term Incentive
Plan as Amended February 23, 1994 and Approved by
Stockholders May 25, 1994, incorporated herein by
reference to Exhibit 10.18 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.2 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Clifford L. Reynolds,
incorporated herein by reference to Exhibit 10.22 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.1.3 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and R. Scott Eynon, incorporated
herein by reference to Exhibit 10.23 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.4 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Dennis C. Hoff, incorporated
herein by reference to Exhibit 10.24 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.5 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and John M. Erb, incorporated herein
by reference to Exhibit 10.25 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.6 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Fred A. Erb, incorporated herein
by reference to Exhibit 10.26 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.7 Tax Indemnification Agreement among D.I.Y. Home
Warehouse, Inc. and Fred A. Erb, Clifford L.
Reynolds, R. Scott Eynon, Dennis C. Hoff and John M.
Erb, incorporated herein by reference to Exhibit
10.27 to Registrant's Registration Statement No.
33-60012 on Form S-1 filed May 18, 1993.
10.1.8 D.I.Y. Home Warehouse, Inc.'s 401K Plan, incorporated
herein by reference to Exhibit 10.28 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.1.9 1994 D.I.Y. Home Warehouse, Inc. Employee Bonus Plan
dated May 25, 1994, incorporated herein by reference
to Exhibit 10.48 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
10.1.10 Amended and Restated Employment Agreement between
Clifford L. Reynolds and D.I.Y. Home Warehouse, Inc.
dated January 1, 1995, incorporated herein by
reference to Exhibit 10.1 to the Registrant's Report
on Form 10-Q for the quarter ended July 1, 1995.
10.1.10.a Amended and Restated Employment Agreement
between Clifford L. Reynolds and D.I.Y.
Home Warehouse, Inc. dated November 21,
1996, incorporated herein by reference to
Exhibit 10.51 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
10.1.10.b Amended and Restated Employment Agreement
between Clifford L. Reynolds and D.I.Y.
Home Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.4 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
10.1.10.c Amendment No. 3 to Amended and Restated
Employment Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc.
dated March 11, 1999, incorporated herein
by reference to Exhibit 10.69 to the
Registrant's Report on Form 10-K for the
fiscal year ended January 2, 1999.
9
<PAGE> 10
10.1.10.d Amendment No. 4 to Amended and Restated
Employment Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc.
dated November 30, 1999, filed herewith.
10.1.11 Amended and Restated Employment Agreement between R.
Scott Eynon and D.I.Y. Home Warehouse, Inc. dated
January 1, 1995, incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on Form 10-Q
for the quarter ended July 1, 1995.
10.1.11.a Amended and Restated Employment Agreement
between R. Scott Eynon and D.I.Y. Home
Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.5 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
10.1.11.b Amendment No. 2 to Amended and Restated
Employment Agreement between R. Scott
Eynon and D.I.Y. Home Warehouse, Inc.
dated March 11, 1999, incorporated herein
by reference to Exhibit 10.70 to the
Registrant's Report on Form 10-K for the
fiscal year ended January 2, 1999.
10.1.11.c Amendment No. 3 to Amended and Restated
Employment Agreement between R. Scott
Eynon and D.I.Y. Home Warehouse, Inc.
dated November 30, 1999, filed herewith.
10.1.12 Amended and Restated Employment Agreement between
Dennis C. Hoff and D.I.Y. Home Warehouse, Inc. dated
January 1, 1995, incorporated herein by reference to
Exhibit 10.3 to the Registrant's Report on Form 10-Q
for the quarter ended July 1, 1995.
10.1.12.a Amended and Restated Employment Agreement
between Dennis C. Hoff and D.I.Y. Home
Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.6 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
10.1.13 Form of Non-Qualified Stock Option Agreement under
the D.I.Y. Home Warehouse, Inc. 1993 Long Term
Incentive Plan as Amended, incorporated herein by
reference to Exhibit 10.14 to Registrant's Report on
Form 10-K for the fiscal year ended December 30,
1995.
10.1.14 1995 D.I.Y. Home Warehouse, Inc. Employee Bonus Plan
dated May 24, 1995, incorporated herein by reference
to Exhibit 10.44 to the Registrant's Report on Form
10-K for the fiscal year ended December 30, 1995.
10.1.15 D.I.Y. Home Warehouse, Inc. 1996 Retainer Stock Plan
for Non-Employee Directors, incorporated herein by
reference to Exhibit 10.49 to the Registrant's Report
on Form 10-K for the fiscal year ended December 30,
1995.
10.1.16 Employment Agreement between Eric I. Glassman and
D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.7 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
10.1.17 Transaction Bonus Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc. dated July
1, 1998, incorporated herein by reference to Exhibit
10.8 to the Registrant's Report on Form 10-Q for the
quarter ended July 4, 1998.
10.1.18 Transaction Bonus Agreement between R. Scott Eynon
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.9 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
10
<PAGE> 11
10.1.19 Transaction Bonus Agreement between Dennis C. Hoff
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.10 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
10.1.20 Transaction Bonus Agreement between Eric I. Glassman
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.11 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
10.1.21 Amendment No. 1 to Amended and Restated Employment
Agreement between Eric I. Glassman and D.I.Y. Home
Warehouse, Inc. dated March 11, 1999, incorporated
herein by reference to Exhibit 10.71 to the
Registrant's Report on Form 10-K for the fiscal year
ended January 2, 1999.
10.1.22 DIY Home Warehouse, Inc. 1993 Long Term Incentive
Plan as Amended March 17, 1999 and Approved by the
Board of Directors March 17, 1999, incorporated
herein by reference to Exhibit 10.13 to the
Registrant's Report on Form 10-Q for the quarter
ended July 3, 1999.
10.2 Material Leases of the Registrant
10.2.1 Sublease between D.I.Y. Ohio Real Estate Associates
Limited Partnership and D.I.Y. Home Warehouse, Inc.,
dated August 1, 1992, incorporated herein by
reference to Exhibit 10.1 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.2.2 Indenture of Lease between Smith - D.I.Y. Center
Limited Partnership and D.I.Y. Home Warehouse, Inc.,
dated December 27, 1985, incorporated herein by
reference to Exhibit 10.2 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.2.3 Amendment to Lease between D.I.Y. Center Associates
(successor in interest to Smith - D.I.Y. Center
Limited Partnership) and D.I.Y. Home Warehouse, Inc.,
dated July 2, 1991, incorporated herein by reference
to Exhibit 10.3 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed May 18,
1993.
10.2.3.a Amendment to Lease between D.I.Y. Center
Associates, L.P. and D.I.Y. Home
Warehouse, Inc. dated March 21, 1995,
incorporated herein by reference to
Exhibit 10.51 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 31, 1994.
10.2.4 Lease between Fred A. Erb and D.I.Y. Home Warehouse,
Inc., dated March 1, 1993, incorporated herein by
reference to Exhibit 10.4 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.2.5 Lease Agreement between West Park Limited, Inc. and
D.I.Y. Home Warehouse, Inc. dated August 2, 1991,
incorporated herein by reference to Exhibit 10.5 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.2.5.a Addendum #1 to Lease Agreement between
West Park Limited, Inc. and D.I.Y. Home
Warehouse, Inc., dated September 2, 1991,
incorporated herein by reference to
Exhibit 10.6 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.2.5.b Addendum #2 to Lease Agreement between
West Park Limited, Inc. and D.I.Y. Home
Warehouse, Inc., dated September 16, 1991,
11
<PAGE> 12
incorporated herein by reference to
Exhibit 10.7 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.2.6 Sublease between The Wholesale Club, Inc. and D.I.Y.
Home Warehouse, Inc., dated May 14, 1992,
incorporated herein by reference to Exhibit 10.8 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.2.7 Sublease between The Wholesale Club, Inc. and D.I.Y.
Home Warehouse, Inc., dated November 25, 1992,
incorporated herein by reference to Exhibit 10.9 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.2.8 Lease between Myron S. Viny, dba Central Valley
Properties, and D.I.Y. Home Warehouse, Inc., dated
February 26, 1993, but effective beginning May 1,
1993, incorporated herein by reference to Exhibit
10.12 to Registrant's Registration Statement No.
33-60012 on Form S-1 filed May 18, 1993.
10.2.8.a Modification and Supplement to lease
between the Estate of Myron S. Viny
(formerly DBA Central Valley Properties)
and D.I.Y. Home Warehouse, Inc. dated
November 27, 1995, incorporated herein by
reference to Exhibit 10.12 to Registrant's
Report on Form 10-K for the fiscal year
ended December 30, 1995.
10.2.9 Agreement of Lease (Boardman Facility) between DIY
Ohio Real Estate Associates Limited Partnership and
D.I.Y. Home Warehouse, Inc. dated as of October 1,
1993, incorporated herein by reference to Exhibit
10.38 to Registrant's Report on Form 10-K for the
fiscal year ended January 1, 1994.
10.2.9.a Second Amendment to Agreement Lease
(Boardman facility) between D.I.Y. Home
Warehouse, Inc. and D.I.Y. Ohio Real
Estate Associated Limited Partnership (the
Landlord) and assignment of the lease to
V&V 224, Limited by the Landlord dated
October 22, 1998, incorporated herein by
reference to Exhibit 10.9 to Registrant's
Report on Form 10-Q for the quarter ended
October 3, 1998.
10.2.10 Lease between Elmhurst Properties, Inc. and D.I.Y.
Home Warehouse, Inc., dated May 26, 1993,
incorporated herein by reference to Exhibit 10.39 to
Registrant's Report on Form 10-K for the fiscal year
ended January 1, 1994.
10.2.11 Assignment and Assumption of Lease and Sublease
between Kmart Corporation and D.I.Y. Home Warehouse,
Inc. dated December 22, 1994, incorporated herein by
reference to Exhibit 10.49 to the Registrant's Report
on Form 10-K for the fiscal year ended December 31,
1994.
10.2.12 Shopping Center Lease between KCHGC, Inc. and D.I.Y.
Home Warehouse, Inc. dated January 12, 1995,
incorporated herein by reference to Exhibit 10.50 to
the Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1994.
10.3 Credit Agreements of the Registrant
10.3.1 $1,250,000 Promissory Note from D.I.Y. Home
Warehouse, Inc. to Edgemere, Inc. f/k/a Erb Lumber
Co., dated July 1, 1991, incorporated herein by
reference to Exhibit 10.29 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
12
<PAGE> 13
10.3.2 Security Agreement between D.I.Y. Home Warehouse and
Erb Lumber Co., dated November 14, 1985, incorporated
herein by reference to Exhibit 10.30 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
10.3.3 Revolving Credit Agreement and Security Agreement
dated December 7, 1994 between D.I.Y. Home Warehouse,
Inc. and National City Bank, Columbus, and Old Kent
Bank and Trust Company, incorporated herein by
reference to Exhibit 10.40 to the Registrant's Report
on Form 10-K for the fiscal year ended December 31,
1994.
10.3.4 Loan and Co-lender Agreement and Open-End Mortgage,
Assignment of Rents and Security Agreement dated
December 23, 1994 between D.I.Y. Home Warehouse, Inc.
and National City Bank, Columbus, and Old Kent Bank
and Trust Company, incorporated herein by reference
to Exhibit 10.41 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
10.3.4.a First Amendment to Loan and Co-Lender
Agreement dated December 22, 1995 between
D.I.Y. Home Warehouse, National City Bank,
Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.41 to
the Registrant's Report on Form 10-K for
the fiscal year ended December 30, 1995
10.3.4.b Second Amendment to Loan and Co-Lender
Agreement dated December 23, 1996 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.52 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
10.3.4.c Third Amendment to Loan and Co-Lender
Agreement dated October 24, 1997 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on
Form 10-Q for the quarter ended September
27, 1997.
10.3.4.d Fourth Amendment to Loan and Co-Lender
Agreement dated April 4, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
10.3.4.e Fifth Amendment to Loan and Co-Lender
Agreement dated October 28, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.4 to the Registrant's Report on
Form 10-Q for the quarter ended October 3,
1998.
10.3.5 Line of Credit Agreement for Real Estate Loans,
Open-end Mortgage, Assignment of Rents and Security
Agreement, and Mortgage Notes between D.I.Y. Home
Warehouse, Inc. and National City Bank, Columbus and
Old Kent Bank dated April 28, 1995, incorporated
herein by reference to Exhibit 10.1 to the
Registrant's Report on Form 10-Q for the quarter
ended April 1, 1995.
10.3.5.a First Amendment to Line of Credit
Agreement; Open-end Mortgage, Assignment
of Rents and Security Agreement
(Leasehold) for Trumbull County; Open-end
Mortgage, Assignment of Rents and Security
Agreement for Summit County; Mortgage Note
to National City Bank, Columbus dated
September 15, 1995; Mortgage Note to Old
Kent Bank
13
<PAGE> 14
dated September 15, 1995, incorporated
herein by reference to Exhibit 10.1 to
Registrant's Report on Form 10-Q for the
quarter ended September 30, 1995.
10.3.5.b Second Amendment to Line of Credit
Agreement dated December 22, 1995 between
D.I.Y. Home Warehouse, National City Bank,
Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.39 to
the Registrant's Report on Form 10-K for
the fiscal year ended December 30, 1995.
10.3.5.c Third Amendment to Line of Credit
Agreement Dated December 23, 1996 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.53 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
10.3.5.d Fourth Amendment to Line of Credit
Agreement dated October 24, 1997 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.3 to the Registrant's Report on
Form 10-Q for the quarter ended September
27, 1997.
10.3.5.e Fifth Amendment to Line of Credit
Agreement dated April 4, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.1 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
10.3.5.f Sixth Amendment to Line of Credit
Agreement dated October 28, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.5 to the Registrant's Report on
Form 10-Q for the quarter ended October 3,
1998.
10.3.6 First Amendment to Security Agreement dated December
22, 1995 between D.I.Y. Home Warehouse, National City
Bank, Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.38 to the
Registrant's Report on Form 10-K for the fiscal year
ended December 30, 1995.
10.3.7 First Amendment to Subordination Agreement dated
December 22, 1995 between D.I.Y. Home Warehouse,
National City Bank, Columbus, and Old Kent Bank, and
Edgemere Enterprises, Inc., incorporated herein by
reference to Exhibit 10.39 to the Registrant's Report
on Form 10-K for the fiscal year ended December 30,
1995.
10.3.8 Partial Release of Mortgage to Open-End Mortgage
Assignment of Rents and Security Agreement for
Richland County, Stark County, Summit County,
Trumball County and Medina County by Old Kent Bank
dated October 28, 1998, incorporated herein by
reference to Exhibit 10.6 to the Registrant's Report
on Form 10-Q for the quarter ended October 3, 1998.
10.3.9 Modification to Revolving Credit Agreement, Line of
Credit Agreement, and Loan and Co-lender Agreement
between D.I.Y. Home Warehouse, Inc., National City
Bank, Columbus, and Old Kent Bank dated February 20,
1996, incorporated herein by reference to Exhibit
10.42 to the Registrant's Report on Form 10-K for the
fiscal year ended December 30, 1995.
14
<PAGE> 15
10.3.10 General Business Lease Agreement with IBM Credit
Corporation dated May 30, 1996, incorporated herein
by reference to Exhibit 10.1 to the Registrant's
Report on Form 10-Q for the quarter ended June 29,
1996.
10.3.11 Amendment No. 1 to Open-End Mortgage, Assignment of
Rents and Security Agreement for Richland County,
Stark County, Summit County, Trumball County and
Medina County between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank dated October
28, 1998, incorporated herein by reference to Exhibit
10.7 to the Registrant's Report on Form 10-Q for the
quarter ended October 3, 1998.
10.3.12 First Amendment to Mortgage Note between D.I.Y. Home
Warehouse, Inc. and National City Bank dated October
28, 1998, incorporated herein by reference to Exhibit
10.8 to the Registrant's Report on Form 10-Q for the
quarter ended October 3, 1998.
10.3.13 Second Amendment to Security Agreement dated October
28, 1998 between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank, incorporated
herein by reference to Exhibit 10.9 to the
Registrant's Report on Form 10-Q for the quarter
ended October 3, 1998.
10.3.14 Second Amendment to Subordination Agreement dated
October 28, 1998 between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank, incorporated
herein by reference to Exhibit 10.3 to the
Registrant's Report on Form 10-Q for the quarter
ended October 3, 1998.
10.3.15 Credit and Security Agreement dated October 27, 1998
among D.I.Y. Home Warehouse, Inc. and the Lenders
which are signatures hereto and National City
Commercial Finance, Inc, as agent and National City
Bank as Letter of Credit Bank, incorporated herein by
reference to Exhibit 10.1 to the Registrant's Report
on Form 10-Q for the quarter ended October 3, 1998.
10.4 Real Estate Purchase Agreement (Mansfield) between DIY Ohio
Real Estate Associates Limited Partnership and D.I.Y. Home
Warehouse, Inc. dated as of March 1, 1994, incorporated herein
by reference to Exhibit 10.40 to the Registrant's Report on
Form 10-K for the fiscal year ended January 1, 1994.
10.5 Real Estate Purchase Agreement (Mansfield and Canton) between
D.I.Y. Home Warehouse, Inc. and Gabriel Brothers, Inc. dated
March 3, 1999, filed herewith.
10.6 Sale of Merchandise Agreement (Mansfield and West Market)
between D.I.Y Home Warehouse, Inc. and Schottenstein Bernstein
Capital Group, LLC, dated June 3 1999, filed herewith.
10.7 Sale of Merchandise Agreement (Boardman) between D.I.Y Home
Warehouse, Inc. and Schottenstein Bernstein Capital Group,
LLC, dated June 11, 1999, filed herewith.
13.1 Annual Report to the Shareholders of D.I.Y. Home Warehouse,
Inc. for the fiscal year ended January 1, 2000, certain
portions of which are incorporated by reference herein.
23.1 Consent of PricewaterhouseCoopers LLP, filed herewith.
27.1 Financial Data Schedule for the fiscal year ended January 1,
2000, filed herewith.
(b) Reports on Form 8-K:
None.
15
<PAGE> 16
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 29, 2000 D.I.Y. HOME WAREHOUSE, INC.
By: /s/ FRED A. ERB
-------------------------------
Fred A. Erb,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
/s/ FRED A. ERB /s/ GREGORY K. JONES
- ----------------------------------- --------------------------
Fred A. Erb Gregory K. Jones
Chairman of the Board of Directors Director
Dated: March 29, 2000 Dated: March 29, 2000
/s/ CLIFFORD L. REYNOLDS /s/ JOHN A. SHIELDS
- ----------------------------------- --------------------------
Clifford L. Reynolds John A. Shields
Director and President Director
(principal executive officer) Dated: March 29, 2000
Dated: March 29, 2000
/s/ R. SCOTT EYNON /s/ MARK A. TIMMERMAN
- ----------------------------------- --------------------------
R. Scott Eynon Mark A. Timmerman
Vice President-Operations and Director Director
Dated: March 29, 2000 Dated: March 29, 2000
/s/ JOHN M. ERB /s/ TODD R. AYERS
- ------------------------------------ --------------------------
John M. Erb Todd R. Ayers
Secretary and Director Controller
Dated: March 29, 2000 Dated: March 29, 2000
16
<PAGE> 17
D.I.Y. Home Warehouse, Inc.
Exhibits to Form 10-K for the Fiscal Year Ended January 1, 2000
Index to Exhibits
Where
Filed
- -----
* 3.1 Articles of Incorporation of D.I.Y. Home Warehouse, Inc., as
amended, incorporated herein by reference to Exhibit 3.1 to
Registrant's Registration Statement No. 33-60012 on Form S-1
filed May 18, 1993.
* 3.2 Amended and Restated Code of Regulations of D.I.Y. Home
Warehouse, Inc., incorporated herein by reference to Exhibit
3.2 to Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
10.1 Compensation and Employee Benefit Plans of the Registrant
* 10.1.1 D.I.Y. Home Warehouse, Inc. 1993 Long Term Incentive
Plan as Amended February 23, 1994 and Approved by
Stockholders May 25, 1994, incorporated herein by
reference to Exhibit 10.18 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.2 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Clifford L. Reynolds,
incorporated herein by reference to Exhibit 10.22 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
* 10.1.3 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and R. Scott Eynon, incorporated
herein by reference to Exhibit 10.23 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.4 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Dennis C. Hoff, incorporated
herein by reference to Exhibit 10.24 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.5 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and John M. Erb, incorporated herein
by reference to Exhibit 10.25 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.6 Indemnification Agreement between D.I.Y. Home
Warehouse, Inc. and Fred A. Erb, incorporated herein
by reference to Exhibit 10.26 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.7 Tax Indemnification Agreement among D.I.Y. Home
Warehouse, Inc. and Fred A. Erb, Clifford L.
Reynolds, R. Scott Eynon, Dennis C. Hoff and John M.
Erb, incorporated herein by reference to Exhibit
10.27 to Registrant's Registration Statement No.
33-60012 on Form S-1 filed May 18, 1993.
* 10.1.8 D.I.Y. Home Warehouse, Inc.'s 401K Plan, incorporated
herein by reference to Exhibit 10.28 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.1.9 1994 D.I.Y. Home Warehouse, Inc. Employee Bonus Plan
dated May 25, 1994, incorporated herein by reference
to Exhibit 10.48 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
* 10.1.10 Amended and Restated Employment Agreement between
Clifford L. Reynolds and D.I.Y. Home Warehouse, Inc.
dated January 1, 1995, incorporated herein by
17
<PAGE> 18
reference to Exhibit 10.1 to the Registrant's Report
on Form 10-Q for the quarter ended July 1, 1995.
* 10.1.10.a Amended and Restated Employment Agreement
between Clifford L. Reynolds and D.I.Y.
Home Warehouse, Inc. dated November 21,
1996, incorporated herein by reference to
Exhibit 10.51 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
* 10.1.10.b Amended and Restated Employment Agreement
between Clifford L. Reynolds and D.I.Y.
Home Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.4 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
* 10.1.10.c Amendment No. 3 to Amended and Restated
Employment Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc.
dated March 11, 1999, incorporated herein
by reference to Exhibit 10.69 to the
Registrant's Report on Form 10-K for the
fiscal year ended January 2, 1999.
** 10.1.10.d Amendment No. 4 to Amended and Restated
Employment Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc.
dated November 30, 1999, filed herewith.
* 10.1.11 Amended and Restated Employment Agreement between R.
Scott Eynon and D.I.Y. Home Warehouse, Inc. dated
January 1, 1995, incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on Form 10-Q
for the quarter ended July 1, 1995.
* 10.1.11.a Amended and Restated Employment Agreement
between R. Scott Eynon and D.I.Y. Home
Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.5 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
* 10.1.11.b Amendment No. 2 to Amended and Restated
Employment Agreement between R. Scott
Eynon and D.I.Y. Home Warehouse, Inc.
dated March 11, 1999, incorporated herein
by reference to Exhibit 10.70 to the
Registrant's Report on Form 10-K for the
fiscal year ended January 2, 1999.
** 10.1.11.c Amendment No. 3 to Amended and Restated
Employment Agreement between R. Scott
Eynon and D.I.Y. Home Warehouse, Inc.
dated November 30, 1999, filed herewith.
* 10.1.12 Amended and Restated Employment Agreement between
Dennis C. Hoff and D.I.Y. Home Warehouse, Inc. dated
January 1, 1995, incorporated herein by reference to
Exhibit 10.3 to the Registrant's Report on Form 10-Q
for the quarter ended July 1, 1995.
* 10.1.12.a Amended and Restated Employment Agreement
between Dennis C. Hoff and D.I.Y. Home
Warehouse, Inc. dated May 28, 1998,
incorporated herein by reference to
Exhibit 10.6 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
* 10.1.13 Form of Non-Qualified Stock Option Agreement under
the D.I.Y. Home Warehouse, Inc. 1993 Long Term
Incentive Plan as Amended, incorporated herein by
reference to Exhibit 10.14 to Registrant's Report on
Form 10-K for the fiscal year ended December 30,
1995.
18
<PAGE> 19
* 10.1.14 1995 D.I.Y. Home Warehouse, Inc. Employee Bonus Plan
dated May 24, 1995, incorporated herein by reference
to Exhibit 10.44 to the Registrant's Report on Form
10-K for the fiscal year ended December 30, 1995.
* 10.1.15 D.I.Y. Home Warehouse, Inc. 1996 Retainer Stock Plan
for Non-Employee Directors, incorporated herein by
reference to Exhibit 10.49 to the Registrant's Report
on Form 10-K for the fiscal year ended December 30,
1995.
* 10.1.16 Employment Agreement between Eric I. Glassman and
D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.7 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
* 10.1.17 Transaction Bonus Agreement between Clifford L.
Reynolds and D.I.Y. Home Warehouse, Inc. dated July
1, 1998, incorporated herein by reference to Exhibit
10.8 to the Registrant's Report on Form 10-Q for the
quarter ended July 4, 1998.
* 10.1.18 Transaction Bonus Agreement between R. Scott Eynon
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.9 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
* 10.1.19 Transaction Bonus Agreement between Dennis C. Hoff
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.10 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
* 10.1.20 Transaction Bonus Agreement between Eric I. Glassman
and D.I.Y. Home Warehouse, Inc. dated July 1, 1998,
incorporated herein by reference to Exhibit 10.11 to
the Registrant's Report on Form 10-Q for the quarter
ended July 4, 1998.
* 10.1.21 Amendment No. 1 to Amended and Restated Employment
Agreement between Eric I. Glassman and D.I.Y. Home
Warehouse, Inc. dated March 11, 1999, incorporated
herein by reference to Exhibit 10.71 to the
Registrant's Report on Form 10-K for the fiscal year
ended January 2, 1999.
* 10.1.22 DIY Home Warehouse, Inc. 1993 Long Term Incentive
Plan as Amended March 17, 1999 and Approved by the
Board of Directors March 17, 1999, incorporated
herein by reference to Exhibit 10.13 to the
Registrant's Report on Form 10-Q for the quarter
ended July 3, 1999.
10.2 Material Leases of the Registrant
* 10.2.1 Sublease between D.I.Y. Ohio Real Estate Associates
Limited Partnership and D.I.Y. Home Warehouse, Inc.,
dated August 1, 1992, incorporated herein by
reference to Exhibit 10.1 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.2.2 Indenture of Lease between Smith - D.I.Y. Center
Limited Partnership and D.I.Y. Home Warehouse, Inc.,
dated December 27, 1985, incorporated herein by
reference to Exhibit 10.2 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.2.3 Amendment to Lease between D.I.Y. Center Associates
(successor in interest to Smith - D.I.Y. Center
Limited Partnership) and D.I.Y. Home Warehouse, Inc.,
dated July 2, 1991, incorporated herein by reference
to Exhibit 10.3 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed May 18,
1993.
* 10.2.3.a Amendment to Lease between D.I.Y. Center
Associates, L.P. and D.I.Y. Home
Warehouse, Inc. dated March 21, 1995,
incorporated
19
<PAGE> 20
herein by reference to Exhibit 10.51 to
the Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1994.
* 10.2.4 Lease between Fred A. Erb and D.I.Y. Home Warehouse,
Inc., dated March 1, 1993, incorporated herein by
reference to Exhibit 10.4 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.2.5 Lease Agreement between West Park Limited, Inc. and
D.I.Y. Home Warehouse, Inc. dated August 2, 1991,
incorporated herein by reference to Exhibit 10.5 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
* 10.2.5.a Addendum #1 to Lease Agreement between
West Park Limited, Inc. and D.I.Y. Home
Warehouse, Inc., dated September 2, 1991,
incorporated herein by reference to
Exhibit 10.6 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.2.5.b Addendum #2 to Lease Agreement between
West Park Limited, Inc. and D.I.Y. Home
Warehouse, Inc., dated September 16, 1991,
incorporated herein by reference to
Exhibit 10.7 to Registrant's Registration
Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.2.6 Sublease between The Wholesale Club, Inc. and D.I.Y.
Home Warehouse, Inc., dated May 14, 1992,
incorporated herein by reference to Exhibit 10.8 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
* 10.2.7 Sublease between The Wholesale Club, Inc. and D.I.Y.
Home Warehouse, Inc., dated November 25, 1992,
incorporated herein by reference to Exhibit 10.9 to
Registrant's Registration Statement No. 33-60012 on
Form S-1 filed May 18, 1993.
* 10.2.8 Lease between Myron S. Viny, dba Central Valley
Properties, and D.I.Y. Home Warehouse, Inc., dated
February 26, 1993, but effective beginning May 1,
1993, incorporated herein by reference to Exhibit
10.12 to Registrant's Registration Statement No.
33-60012 on Form S-1 filed May 18, 1993.
* 10.2.8.a Modification and Supplement to lease
between the Estate of Myron S. Viny
(formerly DBA Central Valley Properties)
and D.I.Y. Home Warehouse, Inc. dated
November 27, 1995, incorporated herein by
reference to Exhibit 10.12 to Registrant's
Report on Form 10-K for the fiscal year
ended December 30, 1995.
* 10.2.9 Agreement of Lease (Boardman Facility) between DIY
Ohio Real Estate Associates Limited Partnership and
D.I.Y. Home Warehouse, Inc. dated as of October 1,
1993, incorporated herein by reference to Exhibit
10.38 to Registrant's Report on Form 10-K for the
fiscal year ended January 1, 1994.
* 10.2.9.a Second Amendment to Agreement Lease
(Boardman facility) between D.I.Y. Home
Warehouse, Inc. and D.I.Y. Ohio Real
Estate Associated Limited Partnership (the
Landlord) and assignment of the lease to
V&V 224, Limited by the Landlord dated
October 22, 1998, incorporated herein by
reference to Exhibit 10.9 to Registrant's
Report on Form 10-Q for the quarter ended
October 3, 1998.
* 10.2.10 Lease between Elmhurst Properties, Inc. and D.I.Y.
Home Warehouse, Inc., dated May 26, 1993,
incorporated herein by reference to Exhibit 10.39 to
Registrant's Report on Form 10-K for the fiscal year
ended January 1, 1994.
20
<PAGE> 21
* 10.2.11 Assignment and Assumption of Lease and Sublease
between Kmart Corporation and D.I.Y. Home Warehouse,
Inc. dated December 22, 1994, incorporated herein by
reference to Exhibit 10.49 to the Registrant's Report
on Form 10-K for the fiscal year ended December 31,
1994.
* 10.2.12 Shopping Center Lease between KCHGC, Inc. and D.I.Y.
Home Warehouse, Inc. dated January 12, 1995,
incorporated herein by reference to Exhibit 10.50 to
the Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1994.
10.3 Credit Agreements of the Registrant
* 10.3.1 $1,250,000 Promissory Note from D.I.Y. Home
Warehouse, Inc. to Edgemere, Inc. f/k/a Erb Lumber
Co., dated July 1, 1991, incorporated herein by
reference to Exhibit 10.29 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.3.2 Security Agreement between D.I.Y. Home Warehouse and
Erb Lumber Co., dated November 14, 1985, incorporated
herein by reference to Exhibit 10.30 to Registrant's
Registration Statement No. 33-60012 on Form S-1 filed
May 18, 1993.
* 10.3.3 Revolving Credit Agreement and Security Agreement
dated December 7, 1994 between D.I.Y. Home Warehouse,
Inc. and National City Bank, Columbus, and Old Kent
Bank and Trust Company, incorporated herein by
reference to Exhibit 10.40 to the Registrant's Report
on Form 10-K for the fiscal year ended December 31,
1994.
* 10.3.4 Loan and Co-lender Agreement and Open-End Mortgage,
Assignment of Rents and Security Agreement dated
December 23, 1994 between D.I.Y. Home Warehouse, Inc.
and National City Bank, Columbus, and Old Kent Bank
and Trust Company, incorporated herein by reference
to Exhibit 10.41 to the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
* 10.3.4.a First Amendment to Loan and Co-Lender
Agreement dated December 22, 1995 between
D.I.Y. Home Warehouse, National City Bank,
Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.41 to
the Registrant's Report on Form 10-K for
the fiscal year ended December 30, 1995
* 10.3.4.b Second Amendment to Loan and Co-Lender
Agreement dated December 23, 1996 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.52 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
* 10.3.4.c Third Amendment to Loan and Co-Lender
Agreement dated October 24, 1997 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on
Form 10-Q for the quarter ended September
27, 1997.
* 10.3.4.d Fourth Amendment to Loan and Co-Lender
Agreement dated April 4, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.2 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
* 10.3.4.e Fifth Amendment to Loan and Co-Lender
Agreement dated October 28, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of
21
<PAGE> 22
Columbus and Old Kent Bank, incorporated
herein by reference to Exhibit 10.4 to the
Registrant's Report on Form 10-Q for the
quarter ended October 3, 1998.
* 10.3.5 Line of Credit Agreement for Real Estate Loans,
Open-end Mortgage, Assignment of Rents and Security
Agreement, and Mortgage Notes between D.I.Y. Home
Warehouse, Inc. and National City Bank, Columbus and
Old Kent Bank dated April 28, 1995, incorporated
herein by reference to Exhibit 10.1 to the
Registrant's Report on Form 10-Q for the quarter
ended April 1, 1995.
* 10.3.5.a First Amendment to Line of Credit
Agreement; Open-end Mortgage, Assignment
of Rents and Security Agreement
(Leasehold) for Trumbull County; Open-end
Mortgage, Assignment of Rents and Security
Agreement for Summit County; Mortgage Note
to National City Bank, Columbus dated
September 15, 1995; Mortgage Note to Old
Kent Bank dated September 15, 1995,
incorporated herein by reference to
Exhibit 10.1 to Registrant's Report on
Form 10-Q for the quarter ended September
30, 1995.
* 10.3.5.b Second Amendment to Line of Credit
Agreement dated December 22, 1995 between
D.I.Y. Home Warehouse, National City Bank,
Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.39 to
the Registrant's Report on Form 10-K for
the fiscal year ended December 30, 1995.
* 10.3.5.c Third Amendment to Line of Credit
Agreement Dated December 23, 1996 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.53 to the Registrant's Report
on Form 10-K for the fiscal year ended
December 28, 1996.
* 10.3.5.d Fourth Amendment to Line of Credit
Agreement dated October 24, 1997 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.3 to the Registrant's Report on
Form 10-Q for the quarter ended September
27, 1997.
* 10.3.5.e Fifth Amendment to Line of Credit
Agreement dated April 4, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.1 to the Registrant's Report on
Form 10-Q for the quarter ended July 4,
1998.
* 10.3.5.f Sixth Amendment to Line of Credit
Agreement dated October 28, 1998 between
D.I.Y. Home Warehouse, Inc., National City
Bank of Columbus and Old Kent Bank,
incorporated herein by reference to
Exhibit 10.5 to the Registrant's Report on
Form 10-Q for the quarter ended October 3,
1998.
* 10.3.6 First Amendment to Security Agreement dated December
22, 1995 between D.I.Y. Home Warehouse, National City
Bank, Columbus, and Old Kent Bank, incorporated
herein by reference to Exhibit 10.38 to the
Registrant's Report on Form 10-K for the fiscal year
ended December 30, 1995.
* 10.3.7 First Amendment to Subordination Agreement dated
December 22, 1995 between D.I.Y. Home Warehouse,
National City Bank, Columbus, and Old Kent Bank, and
Edgemere Enterprises, Inc., incorporated herein by
reference to Exhibit 10.39 to the Registrant's Report
on Form 10-K for the fiscal year ended December 30,
1995.
22
<PAGE> 23
* 10.3.8 Partial Release of Mortgage to Open-End Mortgage
Assignment of Rents and Security Agreement for
Richland County, Stark County, Summit County,
Trumball County and Medina County by Old Kent Bank
dated October 28, 1998, incorporated herein by
reference to Exhibit 10.6 to the Registrant's Report
on Form 10-Q for the quarter ended October 3, 1998.
* 10.3.9 Modification to Revolving Credit Agreement, Line of
Credit Agreement, and Loan and Co-lender Agreement
between D.I.Y. Home Warehouse, Inc., National City
Bank, Columbus, and Old Kent Bank dated February 20,
1996, incorporated herein by reference to Exhibit
10.42 to the Registrant's Report on Form 10-K for the
fiscal year ended December 30, 1995.
* 10.3.10 General Business Lease Agreement with IBM Credit
Corporation dated May 30, 1996, incorporated herein
by reference to Exhibit 10.1 to the Registrant's
Report on Form 10-Q for the quarter ended June 29,
1996.
* 10.3.11 Amendment No. 1 to Open-End Mortgage, Assignment of
Rents and Security Agreement for Richland County,
Stark County, Summit County, Trumball County and
Medina County between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank dated October
28, 1998, incorporated herein by reference to Exhibit
10.7 to the Registrant's Report on Form 10-Q for the
quarter ended October 3, 1998.
* 10.3.12 First Amendment to Mortgage Note between D.I.Y. Home
Warehouse, Inc. and National City Bank dated October
28, 1998, incorporated herein by reference to Exhibit
10.8 to the Registrant's Report on Form 10-Q for the
quarter ended October 3, 1998.
* 10.3.13 Second Amendment to Security Agreement dated October
28, 1998 between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank, incorporated
herein by reference to Exhibit 10.9 to the
Registrant's Report on Form 10-Q for the quarter
ended October 3, 1998.
* 10.3.14 Second Amendment to Subordination Agreement dated
October 28, 1998 between D.I.Y. Home Warehouse, Inc.,
National City Bank and Old Kent Bank, incorporated
herein by reference to Exhibit 10.3 to the
Registrant's Report on Form 10-Q for the quarter
ended October 3, 1998.
* 10.3.15 Credit and Security Agreement dated October 27, 1998
among D.I.Y. Home Warehouse, Inc. and the Lenders
which are signatures hereto and National City
Commercial Finance, Inc, as agent and National City
Bank as Letter of Credit Bank, incorporated herein by
reference to Exhibit 10.1 to the Registrant's Report
on Form 10-Q for the quarter ended October 3, 1998.
* 10.4 Real Estate Purchase Agreement (Mansfield) between DIY Ohio
Real Estate Associates Limited Partnership and D.I.Y. Home
Warehouse, Inc. dated as of March 1, 1994, incorporated herein
by reference to Exhibit 10.40 to the Registrant's Report on
Form 10-K for the fiscal year ended January 1, 1994.
** 10.5 Real Estate Purchase Agreement (Mansfield and Canton) between
D.I.Y. Home Warehouse, Inc. and Gabriel Brothers, Inc. dated
March 3, 1999, filed herewith.
** 10.6 Sale of Merchandise Agreement (Mansfield and West Market)
between D.I.Y Home Warehouse, Inc. and Schottenstein Bernstein
Capital Group, LLC, dated June 3 1999, filed herewith.
** 10.7 Sale of Merchandise Agreement (Boardman) between D.I.Y Home
Warehouse, Inc. and Schottenstein Bernstein Capital Group,
LLC, dated June 11, 1999, filed herewith.
23
<PAGE> 24
** 13.1 Annual Report to the Shareholders of D.I.Y. Home Warehouse,
Inc. for the fiscal year ended January 1, 2000, certain
portions of which are incorporated by reference herein.
** 23.1 Consent of PricewaterhouseCoopers LLP, filed herewith.
** 27.1 Financial Data Schedule for the fiscal year ended January 1,
2000, filed herewith.
- ------------------
* Previously filed
** Filed herewith
24
<PAGE> 1
EXH 10.01.10d
AMENDMENT NO.4 TO AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
---------------------------------
This Amendment No. 4 to Amended and Restated Employment Agreement is
executed as of November 30th, 1999, by Clifford L. Reynolds (the "Executive")
and D.I.Y. Home Warehouse, Inc., an Ohio corporation (the "Company").
RECITALS
--------
A. Executive and the Company are parties to a certain Amended and
Restated Employment Agreement, dated as of January 1, 1995, as amended by
Amendment No. 1 to Amended and Restated Employment Agreement dated as of
November 21, 1996, by Amendment No. 2 to Amended and Restated Employment
Agreement dated as of May 28, 1998 and Amendment No. 3 to Amended and Restated
Employment Agreement dated as of March 11, 1999 (collectively, the "Agreement").
B. The parties desire to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Section 1 of the Agreement is hereby amended to read, in its
entirety, as follows:
1. EMPLOYMENT. For a period of nine (9) years from and after
January 1, 1995 (the "Effective Date") , unless sooner
terminated as provided below or extended upon mutual agreement
of the parties, the Company will employ Executive as the
President of the Company, to perform such services for and on
behalf of the Company as the Company's Board of Directors may
from time to time direct consistent with Executive's title and
position, and Executive hereby accepts such employment, upon
the terms and conditions set forth in this Agreement.
Executive's principal place of business will be located within
a fifty (50) mile radius of downtown Cleveland, Ohio.
2. As amended hereby, the Agreement shall continue in full force and
effect and is hereby ratified and confirmed.
<PAGE> 2
3. This Amendment No. 4 may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 4
as of the date set forth above.
EXECUTIVE
/s/ Clifford L. Reynolds
-----------------------------------
Clifford L. Reynolds
COMPANY
D.I.Y. Home Warehouse, Inc.,
an Ohio corporation
By: /s/ Fred A. Erb
-------------------------------
Fred A. Erb
Its: Chairman
<PAGE> 1
EXH 10.01.11c
AMENDMENT NO.3 TO AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
---------------------------------
This Amendment No. 3 to Amended and Restated Employment Agreement is
executed as of November 30, 1999, by R. Scott Eynon (the "Executive") and D.I.Y.
Home Warehouse, Inc., an Ohio corporation (the "Company").
RECITALS
--------
A. Executive and the Company are parties to a certain Amended and
Restated Employment Agreement, dated as of January 1, 1995, as amended by
Amendment No.1 to Amended and Restated Employment Agreement dated as of May 28,
1998 and Amendment No.2 to Amended and Restated Employment Agreement dated as of
March 11, 1999 (collectively, the "Agreement").
B. The parties desire to amend the Agreement as set forth below.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Section 1 of the Agreement is hereby amended to read, in its
entirety, as follows:
1. EMPLOYMENT. For a period of nine (9) years from and after
January 1, 1995 (the "Effective Date") , unless sooner
terminated as provided below or extended upon mutual agreement
of the parties, the Company will employ Executive as the Vice
President - Operations of the Company, to perform such
services for and on behalf of the Company as the Company's
Board of Directors may from time to time direct consistent
with Executive's title and position, and Executive hereby
accepts such employment, upon the terms and conditions set
forth in this Agreement. Executive's principal place of
business will be located within a fifty (50) mile radius of
downtown Cleveland, Ohio.
2. As amended hereby, the Agreement shall continue in full force and
effect and is hereby ratified and confirmed.
3. This Amendment No.3 may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 3
as of the date set forth above.
EXECUTIVE
/s/ R. Scott Eynon
-----------------------------------
R. Scott Eynon
COMPANY
D.I.Y. Home Warehouse, Inc.,
an Ohio corporation
By: /s/ Fred A. Erb
-------------------------------
Fred A. Erb
Its: Chairman
<PAGE> 1
EXH 10.5
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT is made at Valley View, Ohio, this 3rd day of
March, 1999, between D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation
(hereinafter called "Seller"), and GABRIEL BROTHERS, INC. a West Virginia
corporation (hereinafter called "Buyer").
WHEREAS, Seller owns the real estate described on Exhibit A attached
hereto (hereinafter referred to as the "'Mansfield Property"); and
WHEREAS, Seller owns the real estate described on Exhibit B attached
hereto (hereinafter referred to as the "Canton Property"); and
WHEREAS, Seller desires to sell the Mansfield Property and the Canton
Property (the Mansfield Property and the Canton Property are hereinafter
collectively referred to as the "Properties") to Buyer and Buyer desires to
purchase the Properties from Seller;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. PURCHASE AND SALE. Seller agrees to sell and convey to Buyer, and
Buyer agrees to purchase and pay for, the Properties. The Properties will
include the land and any and all buildings, improvements, rights, privileges,
and easements appertaining thereto.
2. PURCHASE PRICE. The total purchase price for the Properties is Eight
Million Six Hundred Thousand Dollars ($8,600,000). The purchase price is payable
by Buyer as follows:
A. One Hundred Thousand Dollars ($100,000) receipt of which is
hereby acknowledged by Seller, which sum will be non-refundable upon
<PAGE> 2
satisfactory completion of the Due Diligence Investigation (except in
the case of Seller's breach).
B. A non-refundable (except in the case of Seller's breach)
Four Hundred Forty Thousand Dollars ($440,000) deposit, to be paid,
upon Buyer's satisfactory completion of the Due Diligence
Investigation.
C. The balance of the purchase price, namely Eight Million
Sixty Thousand Dollars ($8,060,000) in cash, which shall be deposited
into escrow on or before the closing date of this transaction.
All deposits shall be held in an interest bearing account, and the
deposits and any accrued interest shall be fully refundable to the Purchaser in
the event of termination of the Agreement during or until the expiration of the
"Due Diligence Investigation." Thereafter, the deposit and any accrued interest
will be non-refundable in the event of a termination by Purchaser (except in the
case of Seller's breach).
3. CLOSING. The closing date of this transaction shall be within thirty
(30) days after the satisfactory completion of Buyer's Due Diligence
Investigation, but in no event will the closing date be later than July 1, 1999.
Possession to the Canton Property will be delivered at Closing and possession of
the Mansfield Property will be delivered within ninety (90) days after the
Closing. At closing, the parties will execute the Post Occupancy Agreement
attached hereto as Exhibit C with respect to the Mansfield Property.
2
<PAGE> 3
4. SELLER'S DISCLAIMER. BUYER ACKNOWLEDGES THAT EXCEPT AS IS
SPECIFICALLY SET FORTH HEREIN THAT SELLER IS NOT MAKING ANY REPRESENTATIONS OR
WARRANTIES EITHER EXPRESS OR IMPLIED REGARDING THE CONDITION, FITNESS OR USE OF
THE PROPERTIES. SUBJECT TO BUYER APPROVING THE RESULTS OF ITS DUE DILIGENCE
INVESTIGATION, BUYER HEREBY ACCEPTS THE PROPERTIES IN THEIR "AS IS" "WHERE IS"
CONDITION WITH ALL FAULTS.
5. DUE DILIGENCE. This Agreement, and Buyer's obligation to purchase
the Properties hereunder, is subject to Buyer satisfactorily completing to its
sole reasonable discretion a diligent investigation and inspection of the
Properties within ninety (90) days from the date hereof (the "Due Diligence
Investigation"). Buyer's investigations and inspections may include, without
limitation, tests of the subsurface soil conditions of the Properties, boundary
surveys, engineering reports, feasibility studies (including, without
limitation, economic feasibility studies), and environmental inspections. Buyer.
and Buyer's agents will have reasonable access to the Properties for such
inspections. Buyer hereby agrees to defend, indemnify and hold Seller harmless
from the acts of Buyer or Buyer's agents resulting from access to the
Properties during the Due Diligence Investigation. Buyer's failure to object in
writing to Seller within such 90-day period shall be deemed to be satisfactory
completion of the Buyer's Due Diligence Investigation. If within such ninety
(90) day period, Buyer objects to an item relating to the Properties, and Seller
does not remediate such item prior to the closing date, then this transaction
will be null and void and any purchase price already paid will be returned to
3
<PAGE> 4
Buyer. Buyer agrees to keep the results of its Due Diligence Investigation
confidential, except that full disclosure will be made to Seller.
6. TITLE. Seller shall convey the Properties to Buyer by general
warranty deed, warranting title to be free and clear of all liens, encumbrances,
clouds and defects whatsoever caused by Seller, except restrictions,
reservations, limitations, easements and conditions of record which are approved
by Buyer in accordance with subparagraph 7.B. below, zoning ordinances, and
taxes and assessments, both general and special, which are a lien but not yet
due and payable. Said deed shall be deposited into escrow on or before the
closing date.
7. TITLE INSURANCE. A. On the closing date, Buyer will obtain an
Owner's Policy of Title Insurance in the full amount of the purchase price to be
issued by the Akron office of Chicago Title Insurance Company (hereinafter
called "title company") in its customary form, insuring marketable title to the
Properties to be good in Buyer, subject only to any exceptions to be set forth
in the deed which are approved by Buyer as set forth below. Prior to closing,
each party will receive an insured closing letter from Chicago Title Insurance
Company.
B. A preliminary title report, with a special tax search included, in
the form of a commitment to issue the required title policy requested by Buyer
("title report") will be ordered by Seller for the benefit of Buyer upon
execution hereof. In addition, upon execution hereof, Buyer will order an ALTA
survey of the Properties. The title report and the survey must be completed
within forty-five (45) days from the date hereof. Within ten (10) days of
Buyer's receipt of the title report and the ALTA survey for both Properties,
Buyer will notify Seller and the title company of any restrictions,
reservations, limitations, easements and conditions of
4
<PAGE> 5
record (together herein called "title defects") disclosed in said title report
or survey which are objectionable to Buyer. Buyer's failure to object in writing
within such 10-day period shall be deemed to be an approval by Buyer for the
items set forth therein and a waiver of any items so disclosed. If Buyer
objects to a title defect, and Seller does not remove such title defect within
twenty (20) days thereafter, then this transaction will be null and void and any
purchase price already paid will be returned to Buyer.
On the closing date, the escrow agent shall notify Seller and Buyer as
to whether the title company is then in a position to issue its title insurance.
If the escrow agent shall notify the parties that (a) the title company will
issue the title insurance, this transaction shall be consummated in accordance
with the terms and provisions of this Agreement; or (b) the title company will
not issue the title insurance, and if Buyer does not forthwith waive the title
defects that the escrow agent shall recite as preventing such issuance, or if
Seller does not forthwith cure the same, then the closing of this transaction
shall be postponed for a reasonable period of time not to exceed thirty (30)
days until Seller shall remove said title defects. If Seller is unable to cure
such title defects within said thirty (30) days, this Agreement shall be null
and void, all funds and documents previously deposited in escrow shall be
returned to the parties, and there shall be no further liability between the
parties. If Buyer shall waive such title defects by so notifying the escrow
agent in writing, or if Seller shall have cured such defects, as provided
herein, the obligations of the parties hereunder shall not be affected by reason
thereof, there shall be no abatement or reduction of the purchase price, and
this transaction shall be consummated in
5
<PAGE> 6
accordance with the terms and provisions of this Agreement, except that such
title defects that are waived by Buyer, if any, shall be set forth as
exceptions in the deed and in the title insurance.
8. SELLER'S INFORMATION. Seller, shall use reasonable efforts to
furnish Buyer with copies of its existing surveys, building plans, environmental
studies and other pertinent or relevant information or reports within its
possession or control relating to the Properties (the "Information"). If the
Information is too voluminous, Buyer will send a representative to Seller's
office to review the Information. Buyer shall immediately review the Information
and within twenty (20) days of Buyer's receipt of the Information, Buyer will
notify Seller in writing of any item disclosed in the Information which is
objectionable to Buyer and whether Buyer still intends to proceed with the
transaction described herein or to abandon such transaction.
NOTWITHSTANDING THE FOREGOING TO THE CONTRARY, SELLER IS NOT MAKING ANY
REPRESENTATIONS OR WARRANTIES REGARDING THE ACCURACY OF THE INFORMATION AND
SELLER HEREBY DISCLAIMS ANY SUCH WARRANTIES EITHER EXPRESS OR IMPLIED. THE
PARTIES ACKNOWLEDGE THAT BUYER IS CONDUCTING THE DUE DILIGENCE INVESTIGATION OF
THE PROPERTY AND THAT BUYER WILL RELY EXCLUSIVELY ON THE RESULTS THEREOF.
9. SELLER'S REPRESENTATIONS. Seller hereby represents, which
representations shall be effective as of the closing date and shall survive the
transfer of title to Buyer or Buyer's nominee, as follows:
6
<PAGE> 7
(a) Seller has received no notices or orders from any governmental
authority with respect to the condition of the Properties or repair of the
same, or with respect to any claim of a violation of any laws, ordinances,
zoning codes, building codes or orders applicable thereto;
(b) that there are no actions, suits or proceedings against the Seller
with respect to the Properties, and that, to its actual knowledge, there are no
investigations pending or actions, suits or proceedings at law or in equity or
investigations threatened against Seller that would adversely affect this
transaction or the Properties being sold hereunder;
(c) that, to its actual knowledge, all documents delivered or required
hereunder to be delivered to Buyer and ail warranties herein made by Seller are
accurate and complete and there has been no material change in any of the facts,
circumstances or subject matter of this transaction of which Buyer has not been
informed; and
(d) that the sale and transfer of the Properties aforesaid is or shall
be prior to the closing date duly authorized in accordance with law, and within
the scope of authority of the party or parties conveying the Properties, and
evidence of such authority shall be presented to Buyer prior to the closing of
this transaction.
7
<PAGE> 8
10. DAMAGE. From the date hereof, through the closing date, Seller
agrees to maintain its existing property and casualty insurance relating to the
Property. If there is any significant structural damage to the Properties prior.
to transfer of record title then Buyer may, at Buyer's option, (i) elect to
continue this Agreement In full force and effect, in which case Seller shall
forthwith assign to Buyer all rights of Seller to the insurance recovery due by
reason of said damage (if any); or (ii) elect to rescind and void this
Agreement, and thereupon there shall be returned to Buyer all money, papers or
documents deposited by Buyer, and there shall be returned to Seller all papers
or documents deposited by Seller. After transfer of record title to the
Properties to Buyer, the risk of loss shall be and is assumed by Buyer.
11. TAXES AND ASSESSMENTS. Real estate taxes and assessments, both
general and special will be prorated as of the date of the transfer of title
based upon the most recent tax duplicate.
12. BROKER. Seller and Buyer represent to each other, which
representation shall survive the closing of this transaction, that no real
estate broker was involved in this transaction and that no brokerage fees or
other compensation is due any real estate broker or any other person because of
this transaction except for Jim Cummins Real Estate and Petroplus & Associates,
Inc. whose commission of two and one-half percent (2.5%) of the purchase price
will be the responsibility of Seller. The commission will be split equally
between such brokers and will be paid only in the event title to the Property
transfers to Buyer and the purchase price is paid to Seller. The parties shall
indemnify and hold each other harmless from any other broker claims made under
their authority.
8
<PAGE> 9
13. ESCROW. This transaction shall be placed in escrow with the title
company ("escrow agent"). An executed counterpart of this Agreement shall be
deposited with the escrow agent by Buyer, and this Agreement shall serve as the
escrow instructions. The escrow agent may attach its standard conditions of
acceptance thereto; provided, however, that in the event said standard
conditions are inconsistent or in conflict with the terms of this Agreement,
then this Agreement shall control.
14. CLOSING DATE. On the closing date, the escrow agent shall file for
record the deed and any other instruments required to be recorded and shall
thereupon deliver to each of the parties the funds and documents to which they
shall be respectively entitled, together with its escrow statement, provided
that the escrow agent shall then have on hand all funds and documents necessary
to complete the within transaction and provided the title company has stated in
writing that it shall be in a position to, and will issue and deliver, upon the
filing of the deed for record, title insurance required hereunder.
In closing this transaction, the escrow agent shall charge Seller with
the following:
(a) the cost of any transfer tax;
(b) one-half (1/2) the escrow fee;
(c) the brokerage commissions; and
(d) all other charges properly borne by Seller consistent with the
terms of this Agreement;
and immediately thereafter shall deliver to Seller the balance of the funds in
its hands due under the terms hereof, and any documents due Seller.
On closing, said escrow agent shall charge Buyer with the following:
9
<PAGE> 10
(a) any cost of financing this transaction which may be arranged
for by Buyer;
(b) the cost of filing the deed for record;
(c) the cost of a title report, title search and the title
insurance policy;
(d) one-half (1/2) the escrow fee; and
(e) all other charges properly borne by Buyer consistent with the
terms of this Agreement;
and immediately thereafter, said escrow agent shall deliver to Buyer the title
policy, the recorded deed or Recorder's receipt therefor, any prorations to
which Buyer is entitled, and any other funds or documents due Buyer.
15. NOTICES. Any notice which may be or is required to be given
pursuant to the provisions of this Agreement shall be deemed to be sufficiently
given if personally delivered or sent by certified or registered mail, postage
prepaid, return receipt requested, and addressed as follows:
If to Seller, to: D.I.Y. Home Warehouse, Inc.
5811 Canal Road
Valley View, Ohio 44125
Attention: Clifford Reynolds, President
With a copy to: Mr. Reynold Hendrickson
Edgemere Enterprises, Inc.
44 E. Long Lake Road
Bloomfield Hills, Michigan 48304
With a copy to: Mr. Harold O. Maxfield, Jr.
Cavitch, Familo, Durkin & Frutkin Co., L.P.A.
14th Floor, The East Ohio Building
Cleveland, Ohio 44114
10
<PAGE> 11
If to Buyer, to: Gabriel Brothers, Inc.
Real Estate Department
55 Scott Avenue
Morgantown, West Virginia 26505
With a copy to: Mr. Parry Petroplus
Petroplus & Associates, Inc.
1000 Hampton Center, Suite C
Morgantown, West Virginia 26505
With a copy to: Mr. Eric H. London
Jackson & Kelly
6000 Hampton Center
Morgantown, West Virginia 26507
With a copy to: Mr. Robert Cooper
Jim Cummins Real Estate
One Cascade Plaza
Akron, Ohio 44308
16. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of Seller and Buyer and their respective administrators, successors
and assigns.
17. CONFIDENTIAL NATURE OF TRANSFER. The parties agree to keep the
existence of this transaction confidential until transfer of title. Buyer agrees
to notify all employees and/or agents that have or will have knowledge of this
transaction of the confidential nature of this transaction, including, without
limitation, employees or agents that will conduct the Due Diligence
Investigation. The parties agree that they will jointly approve any news
release(s) regarding this transaction. Buyer acknowledges that Seller may suffer
significant damages if the existence of this transaction becomes known to
customers and/or employees prior to the transfer of title to Buyer.
18. CLOSING OF BOTH PROPERTIES. The parties acknowledge that this
transaction contemplates the purchase of the Mansfield Property and the Canton
Property and that the
11
<PAGE> 12
Properties may not be separately purchased hereunder, and that this transaction
is contingent upon Buyer acquiring both of the Properties.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
the day and year first above written.
SELLER:
D.I.Y. HOME WAREHOUSE, INC.
By: /s/ R. Scott Eynon
-----------------------------------------
Title: V. P. Operations
---------------------------------------
Printed Name: R. Scott Eynon
-------------------------------
BUYER:
GABRIEL BROTHERS, INC.
By: /s/ James Gabriel
-----------------------------------------
Title: Pres.
---------------------------------------
Printed Name: James Gabriel
-------------------------------
12
<PAGE> 13
PARCEL 1
--------
Located in the Southwest Quarter, Section 13, Springfield Township, Village of
Ontario, Richland County, Ohio, being a part of an area formerly known as Gramac
Allotment and recorded in Plat Volume 17, Page 158, consisting of inlot numbers
1694 through 1699, 1705 through 1718, of the consecutive numbered inlots in the
Village of Ontario, together with portions of Sigrud Road, Edgar Road, and
Cheryl Road, all now vacated. The same being more particularly described as
follows:
Beginning at the Northwest corner of inlot 1697, the same being located
on the south right-of-way line of West Fourth Street Road (US 30 N);
Thence South 75(degrees) 15' 00" East a distance of 104 feet, more or
less, and continuing South 79(degrees) 56' 40" East a distance of
138.99 feet, all on and along the South right-of-way of West Fourth
Street Road;
Thence South 11(degrees) 16' 00" West 184 feet, more or less, to a
point thence South 79(degrees) 56' 40" East 147 feet, more or less to
point
Thence South 11(degrees) 16' 00" West on and along the centerline of
Cheryl Road a distance of 192.92 feet to a point on the westerly
extension of the North line of inlot 1719;
Thence South 89(degrees) 38' 00" East on and along the extension of the
North line of inlot 1719, a distance of 25.03 feet to a point on the
East right-of-way of Cherly Road;
Thence South 00(degrees) 00' 20" West on and along the East
right-of-way of Cherly Road, a distance of 255.74 feet to a point on
the North right-of-way of US Route 20 S;
Thence South 70(degrees) 20' 00" West a distance of 58.42 feet, and
continuing South 62(degrees) 01' 20" West a distance of 200.70 feet all
on and along the North right-of-way of US Route 30 S to a point on the
South right-of-way on Edgar Road, now vacated;
EXHIBIT A
Page 1 of 4
<PAGE> 14
PARCEL 1 CONTINUED
- ------------------
Thence North 89(degrees) 05' 40" West on and along the South right-of-way of
Edgar Road, the same also being the North right-of-way of US Route 30 S, a
distance of 489.89 feet to Northeast corner of inlot 1756;
Thence North 00(degrees) 54' 20" East on and along the northerly extension of
the east line of inlot 1756, a distance of 25.00 feet to a point on centerline
of Edgar Road, now vacated;
Thence North 89(degrees) 05' 40" West a distance of 90.00 feet and continuing
North 83(degrees) 41' 30" West a distance of 33.13 feet on and along the
centerline of Edgar Road and the westerly extension thereof to a point on the
West right-of-way of Edgar Road;
Thence North 01(degrees) 59' 00" East on and along the West right-of-way of
Edgar Road, now vacated, and the northerly extension thereof a distance of
280.50 feet to a point on the centerline of Sigrud Road, thence South
88(degrees) 02' 00" East a distance of 45.03 feet, and continuing North
87(degrees) 55' 24" East a distance of 180.45 feet all on and along the
centerline of Sigrud Road, now vacated, to a point on the southerly extension of
the west line of inlot 1705;
Thence North 01(degrees) 59' 00" East on and along the west line of inlot 1705
1705 and the extension thereof a distance of 253.60 feet to the northwest corner
of inlot 1705;
Thence South 87(degrees) 54' 00" East on and along the north line of inlot
numbers 1705 and 1706 a distance of 99.75 feet to the southwest corner of inlot
1699;
Thence North 01(degrees) 39' 00" East on and along the west line of inlot 1699 a
distance of 88 feet, more or less to a point; thence South 79(degrees) 56' 40"
East 137 feet, more or less, thence South 11(degrees) 16' 00" West 180.00 feet,
more or less to the northwest corner of inlot 1697, the same beginning the place
of beginning of parcel of land herein described.
EXHIBIT A
Page 2 of 4
<PAGE> 15
PARCEL 2
- --------
Located in the Southwest Quarter, Section 13, Springfield Township, Village of
Ontario, Richland County, Ohio, being a part of an area formerly known as Framac
Allotment and recorded in Plat Volume 17, Page 158, consisting of inlot numbers
1694 through 1700, 1705 through 1718, of the consecutive numbered inlots in the
Village of Ontario, together with portions of Sigrud Road, Edgar Road, and
Cheryl Road, all now vacated. The same being more particularly described as
follows:
Beginning at the Northwest corner of inlet 1697, the same being located
on the South right-of-way line of West Fourth Street Road (US 30 N):
thence, North 75(degrees) 15' 00" West 152.00 feet to a point, thence,
North 76(degrees) 09' 00" West 13.65 feet to the corner of said lot,
thence South 01(degrees) 39' 00" West a distance of 195.40 feet to a
corner, thence South 79(degrees) 56' 40" East a distance of 132.74 feet
to a corner, thence North 11(degrees) 16' 00" East a distance of 180.00
feet to the northwest corner of inlot 1697, the same being the place of
beginning of the parcel of land herein described.
SAVE AND EXCEPT THE FOLLOWING:
Situated in the Village of Ontario, Township of Springfield, County of Richland,
State of OH and being a part of the Southwest Quarter of Section 13, Range 19,
Township 21, also known as part of the Gramac Allotment recorded in Plat Volume
17, Page 158, being a part of Inlot Numbers One Thousand Six Hundred
Ninety-seven (#1697), One Thousand Six Hundred Ninety-eight (#1698) and One
Thousand Six Hundred Ninety-nine (#1699), being more particularly described as
follows: Beginning at a survey marker set at the Northwest corner of Inlot #1699
thence South 76 degrees 26 minutes 15 seconds East along the Southerly right of
way of West Fourth Street, a distance of 13.65 feet to 3/4 inch water pipe
found; thence South 75 degrees 22 minutes 43 seconds East along the Southerly
right of way of West Fourth Street a distance of 190.83 feet to a survey marker
set; thence South 14 degrees 17 minutes 46 seconds West distance of 187.84 feet
to a railroad spike set; thence North 76 degrees 53 minutes 49 seconds West a
distance of 160.81 feet to a railroad spike set on the East line of lands now or
formerly owned by Joy Limited Partnership as recorded in Deed Volume 904, Page
265; thence North ??? degree 28 minutes 46 seconds East along the East line of
said Joy Partnership Lands, a distance of 197.00 feet to the survey marker set
at the point of beginning, containing 0.798 acres of land more or less, subject
to all highways, easements, and use restrictions of record. This description is
based upon an actual field survey. All bearings are based upon the South line of
lands not or formerly owned by D.I.Y. Home Warehouse, Inc., as recorded in
Official Record volume 295 Page 200, also being the Northerly right of way of
U.S.R. 30-S, bearing being North 89 degrees 04 minutes 50 seconds West. Bearings
are for the determination of angular measurement only. Survey markers set are
5/8 inch x 30 inch long reinforcing bar with plastic cap stamped "RICHLAND ENG.
R.L.S. 4939". Deed References: Official Record Volume 295, Page 200 According to
survey made by Robert A. Cunning, Registered Surveyor #4939.
Permanent Parcel #______________________________________
EXHIBIT A
Page 3 of 4
<PAGE> 16
ALSO SAVE AND ACCEPT THE FOLLOWING:
Located in the Village of Ontario, Township of Springfield, County of Richland,
State of Ohio and being a part of the Southwest Quarter of Section 13,
Township 21, Range 19, also known as part of the former Gramac Allotment
recorded in Plat Volume 17, Page 158 and being a part of Lot Number 1711
together with portions of Sigrud and Edgar Roads now vacated and more
particularly described as follows:
Beginning at a point in the intersection of the centerline of Lexington-
Springmill Rd. C.H. 133 with its intersection with the centerline of Sigrud Rd.
Thence S 88 degrees 09' 21" E along the centerline of Sigrud Rd. a distance of
159.97 feet to a pk nail set and the True Place of Beginning.
Thence continuing S 88 degrees 09' 21" E along the centerline of vacated
Sigrud Rd. a distance of 41.73 feet to a pk nail set.
Thence N 88 degrees 23' 06" E along the centerline of vacated Sigrud Rd. a
distance of 38.35 feet to a pk nail set.
Thence S 02 degrees 06' 38" W a distance of 284.17 feet to a pk nail set on the
centerline of vacated Edgar Rd.
Thence N 89 degrees 07' 48" W along the centerline of vacated Edgar Rd. a
distance of 51.51 feet to an iron pin set.
Thence N 83 degrees 41' 00" W a distance of 28.58 feet to an iron pin found on
the west line of vacated Edgar Rd.
Thence N 02 degrees 06' 38" E along the west line of vacated Edgar Rd. a
distance of 280.50 feet to the True Place of Beginning and containing
22608.2650 square feet but subject to all legal highways also all easements of
record.
EXHIBIT A
Page 4 of 4
<PAGE> 17
[MAP]
EXHIBIT B
<PAGE> 18
POST-OCCUPANCY AGREEMENT
This Post-Occupancy Agreement Made this ___ day of ____________, 1999, by
and between DIY HOME WAREHOUSE, INC., an Ohio Corporation, party of the first
part, ("Seller"), and GABRIEL BROTHERS, INC., a West Virginia Corporation, party
of the second part, ("Purchaser"), the same parties under that Purchase and Sale
Agreement regarding the real estate situate in the cities of Mansfield and
Canton, State of Ohio, (collectively the "Property"), as more fully described on
Exhibit A and Exhibit B attached hereto.
WHEREAS, the Seller and the Purchaser have agreed to enter into this
Occupancy Agreement, thereby permitting the continued occupancy of the Property
by the Seller under the terms and conditions set forth herein and made a part of
this Occupancy Agreement.
WITNESSETH:
That in and for valuable consideration, the sufficiency of which is hereby
acknowledged by the parties, the Purchaser hereby agrees, and the Seller hereby
accepts the following provisions of the Agreement:
1. The date of occupancy by the Seller shall be from the date of closing
until midnight of the ninetieth (90th) day after the closing (the "90-day
post-occupancy period").
2. The Seller may at their option vacate the Property prior to expiration
of the "90-day post-occupancy period".
3. Seller shall pay no rent during the "90-day post-occupancy period".
4. During the Seller's "90-day post-occupancy period", Purchaser shall be
permitted free and full access to the Property.
5. The Seller agrees to hold the Purchaser harmless from any claims or
actions which arise as a result of Seller's actions, the act of their agents, or
any other persons entering upon the Property during the Seller's "90-day
post-occupancy period".
6. The Seller agrees to maintain its existing property and casualty
insurance on the Property during the "90-day post-occupancy period".
7. This Post-Occupancy Agreement is solely for the Seller's right of
possession of the Property, pursuant to the provisions of this Agreement, and is
not intended to establish a landlord/tenant relationship.
EXHIBIT C
<PAGE> 19
8. The Seller agrees to pay any and all bills for usage of available
utilities on the Property incurred by Seller during the "90-day post-occupancy
period".
9. The Seller agrees to pay its pro-rata share of the general and special
real estate taxes assessed upon the Property during the "90-day post-occupancy
period".
10. In the event Seller fails to vacate the Property at the expiration of
the "90-day post occupancy period", Seller shall pay to purchaser the sum of
Nine Thousand Dollars, ($9,000.00) per week. Payments shall be made only on a
weekly basis, and payment shall not be subject to proration on a daily basis.
WITNESS the following signatures and seals:
WITNESSES: Gabriel Brothers, Inc.,
A West Virginia Corporation
- ------------------------------ ---------------------------------
By:
------------------------------
Its:
-----------------------------
Date:
----------------------------
DIY Home Warehouse, Inc.,
An Ohio Corporation
- ------------------------------ ---------------------------------
By:
------------------------------
Its:
-----------------------------
Date:
----------------------------
<PAGE> 1
EXH 10.6
Mr. Eric Glassman
D.I.Y. Home Warehouse, Inc.
5811 Canal Road, Suite 180
Cleveland, Ohio 44125
June 3, 1999
Dear Eric:
Upon execution by D.I.Y. Home Warehouse, Inc., having a principle place
of business located at 5811 Canal Road, Valley View, Ohio 44125("Merchant"),
this letter shall serve as the agreement (the "Agreement") between Merchant and
Schottenstein Bernstein Capital Group, LLC having a principle place of business
located at 1800 Moler Road, Columbus, Ohio 43207 (the "Agent") for Agent to act
as Merchant's sole and exclusive agent to sell all of the merchandise (the
"Merchandise") in Merchant's stores listed on Schedule A attached (the "Stores"
and individually a "Store") by means of a "Store Closing," and or "Total
Liquidation" sale (the "Sale"). In consideration of the mutual promises and
covenants contained herein and other good and valuable consideration. Merchant
and Agent agree as follows:
1. AGENCY. Merchant appoints Agent its exclusive agent for the purpose
ot conducting the Sale of the Merchandise located at the Stores. Agent shall be
responsible, with Merchant's assistance, for securing any required licenses and
permits and complying with any "going-out-of-business" laws, rules, ordinances
and regulations. Merchant shall pay any fees and expenses incurred in connection
therewith and Agent will post any bonds required in connection with such
licenses and permits.
2. INVENTORY. As soon as practicable after Merchant's acceptance of
this Agreement, Merchant shall cause to be taken a "retail dollar" and or SKU
physical inventory of the Merchandise in the Stores (the "Inventory Count"). The
date that the Inventory Count is taken in each Store shall be referred to as to
each Store as the "Inventory Date". The Inventory Count shall be taken by RGIS
or another independent inventory service mutually designated by Merchant and
Agent (the "Inventory Service") the cost of which shall be shared equally by
Merchant and Agent. Each Store
<PAGE> 2
shall be closed during the Inventory Count and during the Inventory Count,
neither Merchant nor Agent shall enter such Store without each having a
representative present, except in the case of an emergency. Merchant and Agent,
will provide one or more representative at the store during the Inventory Count.
The Inventory Count shall be taken on the basis of the lowest ticketed price of
each item of Merchandise except for (i) out of season inventory which shall be
valued at fifty (50%) percent of the lowest ticketed price and (ii) damaged,
display and clearance Merchandise price for which Merchant and Agent shall agree
upon a price. Merchant shall remove from the Sale any item of damaged,
clearance, or display Merchandise for which a price cannot be agreed upon as
well as Merchandise as to which Merchant and Agent cannot agree upon the
seasonality. Notwithstanding any of the above, the reduction in the Retail
Value, resulting from Merchant and Agent's pricing of damaged, display and
clearance Merchandise, shall not exceed Fifty Thousand Dollars ($50,000) per
Store.
3. RETAIL VALUE. The term "Retail Value" herein shall mean the aggregate of the
item values of the respective items of all the Merchandise. Merchandise shall
include all goods owned by Merchant and located at the Stores on the Inventory
Date except: (i) goods which Merchant shall have reasonably shown to belong to
sublessees, licensees or concessionaires of Merchant or to have been placed in
the Stores on consignment; and (ii) furniture, fixtures, equipment and
improvements to realty located in the Stores. The ticketed price of any item of
Merchandise shall not include any sales or gross receipts taxes. If any item of
Merchandise has more than one ticket, the lower retail price shall prevail
unless Merchant establishes that such Merchandise was inadvertently priced
incorrectly. Merchandise arriving at the Stores following the Start Date ("On
Order Merchandise"), shall be valued at the lowest ticketed price less the
discount then prevailing in the Stores.
4. SALE TERM. The Sale shall start no later than June 18,1999 (the "Start
Date"), and shall end no later than the close of business at each Store,
approximately ten weeks thereafter, on August 27, 1999, unless extended by
agreement of the parties (the "End Date"). Agent may terminate the Sale prior to
the End Date at any Store in its reasonable discretion. At the conclusion
2
<PAGE> 3
of the Sale, Agent agrees to leave the Stores in "broom clean" condition, with
all Merchandise (regardless of the condition) being removed by Agent, except for
removal of furniture, fixtures, equipment and remaining Supplies (as defined in
Section 10 hereof) and to leave the Stores in the same condition as on the Start
Date, ordinary wear and tear excepted.
5. GUARANTEED PAYMENT. Agent guarantees that Merchant shall receive an amount
equal to fifty three and one-half percent (53.5%) of the Retail Value (the
"Guaranteed Payment") of the Merchandise. In the event that the aggregate value
of all the Merchandise shall be less than Six Million Five Hundred Thousand
Dollars ($6,500,000), the Guaranteed Payment shall be reduced in accordance with
Schedule B. The Guaranteed Payment will be reduced pro rata for increments or
partial increments in accordance with Schedule B. Moreover, in the event that
Agent cannot start the Sale until (i) after June 18th but before June 25th, the
Guaranteed Payment shall be reduced by one half of one percent (.5%) (e.g. from
53.5% to 53%), (ii) after June 25th but before July 2, the Guaranteed Payment
shall be reduced by one percent (1%) (e.g. from 53.5% to 52.5%), and (iii) after
July 2 but before July 9, the Guaranteed Payment shall be reduced by one and one
half percent (1.5%) (e.g.53.5% to 52%). The parties agree to negotiate in good
faith any further reduction in the Guaranteed Payment in the event Agent is
prohibited from starting the Sale until after July 9th.
Merchant shall retain all amounts collected during the Sale, as well as
any insurance proceeds resulting from the loss of any Merchandise subject to
this Agreement (the "Proceeds"), out of which it shall pay Expenses of Sale, as
set forth below, and satisfy the Guaranteed Payment. After satisfaction of the
Guaranteed Payment and payment of Expenses of Sale, Agent shall be entitled to
receive all additional Proceeds as its commission herein. As security for the
Guaranteed Payment and Expenses of Sale, Agent will deliver to Merchant an
irrevocable Letter of Credit, in a form attached hereto as Schedule C from Wells
Fargo Bank in the amount of $3,500,000 having an expiration date of not earlier
than September 30, 1999. In the event, following the End Date, that Proceeds
from the Sale are insufficient to satisfy the Guaranteed Amount and Expenses of
Sale, Merchant shall be entitled to draw down upon the Letter of Credit for the
amount of the deficiency.
3
<PAGE> 4
6. SALE CONDUCT. Agent shall conduct the Sale in the name of Merchant in full
and complete compliance with applicable laws, rules, or ordinances in the manner
in which Agent in its discretion reasonably deems fit, including, but not
limited to, advertising, pricing of Merchandise, number and type of personnel,
Store hours, Store maintenance and security. Agent may advertise the Sale as a
Store Closing, or Total Liquidation or similar type sale in accordance with
applicable law and applicable leasehold agreements. Notwithstanding the
Guaranteed Payment, Agent acknowledges that Merchant will after the End Date
have a significant number of stores in Ohio which will continue to operate under
Merchant's name. As a result, Agent will conduct the Sale using its best efforts
and in such a manner as to minimize any bad publicity or loss of goodwill
arising from the conduct of the Sale. Agent may use Merchant's employees to the
extent Agent deems feasible, and Agent may select and schedule the number and
type of Merchant's employees required for the Sale, however, Merchant's
employees shall at all times remain employees of Merchant. On and after the
Start Date, Merchant shall pay, as an Expense of Sale, as hereinafter defined,
the gross wage payroll paid to Merchant's employees used in the Stores by the
Agent during the Sale plus (a) the related payroll taxes (including FICA and
Unemployment), (b) Worker's Compensation and (c) health care insurance benefits
(subsections (a), (b) and (c) collectively, the "Benefits") not in excess of
fifteen and 57/100 percent (15.57%) of said gross payroll (the "Fringe Benefit
Cap"). Any amounts in excess of the Fringe Benefit Cap shall be at Merchant's
Expense, as hereinafter defined.
Merchant and Agent acknowledge and agree, that (i) nothing herein nor
any of Agent's actions taken in respect hereto shall be deemed to constitute an
assumption by Agent of any of Merchant's obligations relating to any of
Merchant's employees including, without limitation, vacation, pension,
withdrawal, severance pay, vacation pay, sick leave or pay, maternity leave or
pay, Worker Adjustment Retraining Act ("WARN") claims (if any) and other
termination type claims and obligations; and (ii) Merchant hereby indemnifies
Agent in respect to any claims asserted by any of Merchant's employees, except
as to claims arising out of the negligence or wrongful act
4
<PAGE> 5
or omission of Agent, and Merchant is solely and specifically responsible for
all of Merchant's obligations under any collective bargaining agreements and any
purported oral service contracts.
7. EXPENSES OF SALE. Merchant shall collect all Proceeds out of which shall be
paid all "Expenses of Sale." In the event that Proceeds are not sufficient to
pay such Expenses of Sale, Merchant shall be entitled to draw down upon the
Letter of Credit, as set forth in Paragraph 6, for the amount of the deficiency
after the End Date. Expenses of Sale shall be (i) the actual gross wage payroll
paid to Merchant's employees used in the Stores by the Agent during the Sale
plus the cost of the Benefits for such employees not to exceed the Fringe
Benefit Cap; (ii) advertising expense; (iii) signage for the Sale; (iv) security
in the Stores; (v) bank card fees and charge backs; (vi) telephone charges for
the Stores in excess of base charges; (vii) Agent's supervision expenses; (viii)
any other expenses directly attributable to the Sale authorized by Agent and
(ix) occupancy costs on a per diem per Store basis as per attached Schedule D.
Agent shall bill Merchant weekly for any Expenses of Sale paid by Agent which
shall be promptly paid from Proceeds collected by Merchant.
8. MERCHANT'S EXPENSES. During the Sale, Merchant shall be responsible for
payment of the following items none of which shall be deemed an Expense of Sale:
(i) all occupancy costs not included in Schedule D; (ii) any Benefits in excess
of the Fringe Benefit Cap; (iii) all other employee benefits, including but not
limited to union dues, termination pay, pension benefits, severance pay,
vacation paY, sick leave or pay, maternity leave or pay and WARN claims (if
any); (iv) major maintenance; and (v) costs not directly attributable to the
Sale.
9. TAXES. Merchant shall collect all sales, excise and gross receipts taxes (and
not income taxes) (collectively the "Sales Taxes") payable to any taxing
authority having jurisdiction, which taxes shall be added to the sales price and
be paid by the customer at the time Merchandise is purchased. Merchant shall
indemnify and hold Agent harmless from and against any and all costs (including,
but not limited to, reasonable attorneys' fees), assessments, fines or penalties
which Agent may incur as a direct or indirect consequence of the failure by
Merchant to pay Sales Taxes to the proper taxing authorities and/or the failure
by Merchant to promptly file with taxing
5
<PAGE> 6
authorities any and all returns, reports and other documents required by
applicable law to be filed or delivered to such taxing authorities.
10. SUPPLIES. Agent shall have the right to use in connection with the Sale,
without any charge, all signs and promotional materials, furniture, equipment,
fixtures and supplies, including, but not limited to, bags, boxes, twine, paper
and similar sales materials ("Supplies"), located at the Stores on the Start
Date. Agent shall have no obligation to account to Merchant for any of the
Supplies used during the Sale, but all Supplies remaining in the Stores on the
End Date shall be left on the premises and remain Merchant's property. Should
additional Supplies be required in any of the Stores during the Sale, Merchant
agrees to promptly provide such additional Supplies to Agent, if available at
Merchant's cost plus shipping costs, such cost to be an Expense of Sale.
Merchant covenants and warrants that it has not and will not remove any Supplies
from the Stores in contemplation of this Agreement.
11. CREDIT CARDS, GIFT CERTIFICATES AND RETURNS. All sales shall be for cash or
upon bank credit cards (excluding private label cards). During the Sale, all
bank credit card sales shall be through Merchant's bank credit card system. All
bank card fees including charge backs in connection with the Sale shall be an
Expense of Sale. Agent will be responsible for any reserves required by
Merchant's bank credit card provider. For fourteen (14) days following the Start
Date, Agent shall accept customer returns of first quality goods purchased prior
to the Start Date. Items accepted for return shall be added to Merchandise for
the purpose of calculating Retail Value, but shall not reduce Proceeds. All
sales shall be advertised, "FINAL," and all sales receipts shall be marked
"FINAL," by Agent. Agent shall accept Merchant's gift certificates during the
Sale. Gift Certificates shall be treated as cash and the value thereof added to
Proceeds. Agent shall, on behalf of Merchant, offer refunds to customers with
goods on layaway. The amounts refunded to layaway customers shall not reduce
Proceeds.
6
<PAGE> 7
12. MERCHANT'S WARRANTIES. Merchant hereby warrants and represents:
a. Merchant is a corporation, duly and validly existing and in good
standing under the laws of the State of Ohio. Merchant is and during the Sale
will be authorized and duly qualified as a corporation to do business and is in
good standing in all jurisdictions in which the Stores are located.
b. (i) This Agreement and all other documents executed by Merchant in
accordance with this Agreement are the valid and binding obligations of Merchant
enforceable in accordance with their terms; (ii) Merchant has taken all
necessary corporate action required to authorize the execution, performance and
delivery of this Agreement and the related documents; (iii) no court order or
decree of any federal, state or local government authority, or other action
known to Merchant, is in effect which will or may prevent or impair consummation
of the transactions contemplated by this Agreement; and (iv) the consent of any
person or entity, including any landlord, is not required with respect to the
transaction contemplated herein;
c. Except for the lien of National City Commercial Finance, Merchant
owns and will own at the Start Date and during the Sale good and marketable
title to all of the Merchandise (together with the proceeds and accounts
receivable arising therefrom), free and clear of all liens, mortgages, pledges,
charges, encumbrances, equities or claims whatsoever. Agent shall be entitled to
retain all proceeds, subject to section 5, free and clear of all liens,
mortgages, pledges, charges, encumbrances, equities or claims whatsoever.
d. Merchant shall not ship goods into the Stores without Agent's
consent, which consent will not be unreasonably withheld, nor raise any prices
of the Merchandise in contemplation of the Sale. The mix of Merchandise in the
Stores shall be comparable to that found in the Merchant's ongoing stores.
7
<PAGE> 8
e. No actions or proceedings have been instituted against Merchant or
have been threatened, preventing or which may prevent the consummation of the
transactions contemplated by this Agreement. Merchant is reasonably current on
all accounts payable, due and owing to parties whose cooperation is necessary
for operation of the Sale, including but not limited to landlords, newspapers
and utilities.
f. No notice of terminable default under the leases, licenses or
subleases relating to the Stores has been noticed thereunder, and such leases do
not prohibit the transactions under this Agreement or of the Sale contemplated
herein.
g. Merchant represents and warrants that it will not prior to or during
the Sale grant any lien or encumbrance on the Merchandise or the Proceeds.
h. There is no outstanding order, judgment, injunction award or decree
of any court, governmental or regulatory body or arbitration tribunal by which
the Merchant or the Merchandise is bound which would materially interfere with
the transactions herein, and as of the date of execution herein there is no
action, suit, claim, legal, administrative or arbitral proceedings (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) against the Merchant or the Merchandise which would, if determined
adversely to the Merchant, be likely to have a material adverse effect upon the
transactions contemplated hereby, nor to the best of Merchant's knowledge are
there any facts which are likely to give rise to any such action, suit, claim or
legal, administrative or arbitral proceeding or investigation.
i. The Retail Value of the Merchandise shall be not less than Six
Million Dollars ($6,000,000).
j. Agent shall be permitted to pass on all applicable manufacturers
warranties to customers.
8
<PAGE> 9
k. Merchant represents and warrants that it has not raised any prices
in contemplation of the Inventory Count and that all pricing, including pricing
of On-Order merchandise and merchandise from the distribution center will be
done in accordance with Merchant's historic practices.
l. The Stores will have been operated up through the Start Date in a
manner consistent with Merchant's ongoing Stores.
m. No point of sale activity shall have occurred outside the ordinary
course of business.
n. Merchandise offered for Sale by Agent with a discount of no lower
than ten percent (10%) shall be lower in price then the same Merchandise
advertised in Merchant's circulars scheduled to run on June 13th and June 20th.
In the event of any such discrepancy herein, Agent shall be entitled to offer
customers the lower of the two prices. Agent's sole remedy shall be a credit
from Merchant for the amount of the discrepancy.
13. AGENT'S WARRANTIES. Agent hereby warrants and represents:
a. Agent is a limited liability corporation, duly and validly existing
and in good standing under the laws of the State of Delaware. Agent is, and
during the Sale will be, authorized and duly qualified to do business in each
jurisdiction where the failure to so qualify would have a material adverse
effect on Agent's ability to perform hereunder.
b. (i) This Agreement and all other documents executed by Agent in
accordance with this Agreement are the valid and binding obligations of Agent
enforceable in accordance with their terms; (ii) Agent has taken all necessary
action required to authorize the execution, performance and delivery of this
Agreement and the related documents; (iii) no court order or decree of any
9
<PAGE> 10
federal, state or local government authority, or other action known to Agent, is
in effect which will or may prevent or impair consummation of the transactions
contemplated by this Agreement; and (iv) the consent of any person or entity, is
not required with respect to the transactions contemplated herein.
c. There is no outstanding order, judgment, injunction award or decree
of any court, governmental or regulatory body or arbitration tribunal by which
the Agent is bound which would materially interfere with the transactions
herein, and there shall be no action, suit, claim, legal, administrative or
arbitral proceedings (whether or not the defense thereof or liabilities in
respect thereof are covered by insurance) against the Agent which would, if
determined adversely to the Agent, be likely to have a material adverse effect
upon the transactions contemplated hereby, nor are there any facts which are
likely to give rise to any such action, suit, claim or legal, administrative or
arbitral proceeding or investigation.
14. NON COMPLETE. During the Sale, neither Merchant nor any affiliate of
Merchant shall run a store closing, liquidation or similar sale in competition
with the Sale at any store trading under the D.I.Y. Home Warehouse name within
the advertising area of any of the Stores without the prior written approval of
Agent.
15. INSURANCE. a. Merchant at its expense shall continue until the End Date, in
such amounts as Merchant currently has in effect, all of Merchant's liability
insurance policies, including but not limited to, comprehensive public liability
policies covering injuries to persons and property in or in connection with
Merchant's operation of the Stores and, from and after the acceptance by
Merchant of this Agreement, shall cause Agent to be named as additional insured,
as its interests may appear, with respect to all such policies. On or before the
Start Date, Merchant shall deliver to Agent certificates evidencing such
insurance policies, setting forth the duration thereof and the naming of Agent
as an additional insured, as its interests may appear, in accordance with the
provisions hereof, all in form reasonably satisfactory to Agent. Merchant shall
be responsible for
10
<PAGE> 11
the payment of all deductibles, retentions or self-insured amounts under such
policies except in the event liability arises by reason of the negligence or
wrongful act or omission of Agent or Agent's independent contractors.
b. Merchant at its expense shall provide fire, theft and extended
coverage casualty insurance on the Merchandise in a total amount at least equal
to the retail value thereof. From and after the Start Date, said coverage will
contain a loss payable clause in favor of Merchant's lender and Agent, as their
interests may appear. In the event of a loss to the Merchandise included in the
Inventory Count occurring on or after the Start Date, the proceeds of such
insurance attributable to the Merchandise shall be paid to Agent and such
proceeds shall be included as part of the Proceeds. On or before the Start Date,
Merchant shall deliver to Agent certificates evidencing such insurance policies,
setting forth the duration thereof and the naming of Agent as a loss payee in
accordance with the provisions hereof, all in form reasonably acceptable to
Agent. Merchant shall be responsible for the payment of all deductibles or
self-insured amounts under such policies except in the event liability arises by
reason of the negligence or wrongful act or omission of Agent or Agent's
independent contractors.
c. Merchant shall at all times during the Sale maintain in full force
and effect Worker's Compensation Insurance in compliance with all statutory
requirements.
d. During the performance and length of this Agreement, Agent will
maintain workers compensation, commercial general liability and automobile
liability insurance and will name Merchant as an additional insured on all such
policies.
16. PEACEFUL POSSESSION. Merchant agrees during the Sale to grant and provide
Agent peaceful and quiet possession of the Stores and to take no action relating
to the Stores which would disturb such possession, including, without
limitation, any action to modify or terminate any existing ADT or similar
security system or cash register maintenance agreements or remove any of
11
<PAGE> 12
the furniture, fixtures or equipment from the Stores. Merchant agrees to
maintain in operation at the expense of Merchant for the benefit of Agent (i)
the point of sale equipment in the Stores and (ii) the management information
systems.
17. INDEMNIFICATION. Agent and Merchant each agree to indemnify and defend and
hold harmless the other from any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees, costs and expenses, asserted against, resulting to or imposed upon
Merchant or Agent, directly or indirectly, by reason of or resulting from
either's (i) material breach or failure to comply with any of the agreements,
covenants, representations or warranties contained in this Agreement, or (ii)
any negligent or wrongful act or omission of either or its employees.
18. DEFAULT. a. For the purpose of this Agreement, an "Event of Default" shall
be deemed to have occurred:
(1) upon the failure by Merchant or Agent to perform promptly and fully
any material obligation or covenant hereunder or any material obligation or
covenant in any document delivered pursuant hereto or any collateral agreement
to this Agreement after having received five (5) days' prior written notice,
except in the case of a nonmonetary default which is incapable of being cured
within such notice period and diligently proceeds to cure said default and (a)
the party in default has taken all steps necessary to commence to cure such
default within such notice period and (b) such failure to cure, in the case of a
default by Merchant, will not adversely affect, in any material way, Agent's
ability to conduct the Sale in the manner contemplated herein;
(2) if any of the warranties or representations made by Merchant or
Agent herein proves to be untrue or false in a material way; or
(3) if any breach of this Agreement by Merchant results in the Agent
being unable to conduct or complete the Sale at any Store as contemplated
herein.
12
<PAGE> 13
b. In the event of an interruption of the Sale and/or occurrence of an
Event of Default resulting from any act or omission of Merchant which prevents
Agent from conducting or completing the Sale at any Store as provided by this
Agreement, Agent may, at its option, either (i) proceed with the Sale at the
Store location(s) affected or (ii) require Merchant, at Merchant's expense, to
move the Merchandise to another reasonably proximate Store designated by Agent,
or (iii) notify Merchant as to the termination of the Sale as to the particular
Store location, in which event, Agent shall be made whole and (i) Agent shall be
reimbursed for all its out of pocket expenses referable to such Store, (ii)
Merchant shall be entitled to retain all Proceeds at such Store prior to the
interruption or Event of Default as well as any remaining Merchandise. Merchant
and Agent agree that in the event that the (i) West Akron Store is the Store
that is subject to interruption or an Event of Default and removed from the Sale
as contemplated herein, the Guaranteed Payment for the remaining Mansfield Store
shall be increased to fifty-three and 75/100 percent (53.75%) and (ii) if the
Mansfield Store is the Store that is subject to interruption or an Event of
Default and removed from the Sale as contemplated herein, the Guaranteed Payment
for the remaining West Akron Store shall be decreased to fifty-three and 25/100
percent (53.25%). Merchant acknowledges that Agent would be irreparably injured
in the event of any failure by Merchant to promptly and fully perform any
obligation hereunder if such failure directly or indirectly interferes with the
conduct by Agent of the Sale, and hereby consents, in the event of any such
failure or in the event that any such failure is threatened or appears imminent,
to the entry of an injunction specifically enforcing the terms of this
Agreement.
c. No right or remedy granted in or pursuant to this Agreement shall be
exclusive of any other right or remedy so granted or otherwise available. Every
such right or remedy shall be cumulative and shall be in addition to every other
right or remedy so granted or existing at law or in equity or by statute, or
created, granted or existing pursuant to any agreement to which Agent and/or
Merchant is or may hereafter become a party.
13
<PAGE> 14
19. JURISDICTION. This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio without regard to the conflicts of laws
principles thereof.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties with respect to these transactions and supersedes and cancels all prior
agreements including, but not limited to all proposals, letters of intent or
representations, written or oral, with respect thereto.
21. MODIFICATIONS. This Agreement may not be modified except in a writing
executed by each of the parties.
22. ASSIGNMENT. Except as specifically provided in this Section, or upon written
consent of the parties hereto, this Agreement shall not inure to the benefit of,
or, shall not be assignable to, any person or entity other than Merchant and
Agent. All of the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the successors in interest of the
respective parties hereto.
23. NOTICES. All notices under this Agreement shall be sent by hand, by
recognized overnight courier service or by certified mail, return receipt
requested to: (a) Merchant at the address listed on the first page hereof, to
the attention of Mr. Clifford Reynolds , President, with a copy to Mr. Harold O.
Maxfield, Jr., Cavitch, Familo, Durkin and Frutkin Co. L.P.A, 14th Floor, East
Ohio Building, Cleveland, Ohio 44114; (b) Agent, at the address listed on the
first page hereof to the attention of Scott Bernstein, Esq. All notices
delivered hereunder will be effective upon receipt.
24. CONFIDENTIAL NATURE OF TRANSACTION. The parties agree to keep the existence
of this transaction confidential until Merchant completes the transfer of its
properties in North Canton, Mansfield and Akron (the "Properties"). Agent agrees
to notify all employees and/or agents that have or will have knowledge of this
transaction of the confidential nature of this transaction. The parties agree
that they will jointly approve any news release(s) regarding this
14
<PAGE> 15
transaction. Agent acknowledges that Merchant may suffer significant damages if
the existence of this transaction becomes known to customers and/or employees.
25. CONTINGENCIES. The parties acknowledge that this transaction is contingent
upon the transfer of the Properties by Merchant and if the Properties are not
transferred by June 30, 1999 then this Agreement will be null and void.
26. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. Such execution may be by facsimile. Any
party signing via facsimile shall forward an original hard copy of such
signature to the other party, but the failure to send said original signature
shall not affect the enforceability of this Agreement against such party, the
parties hereto agreeing that a facsimile signature may be treated as an original
signature hereunder.
Please acknowledge your acceptance hereof by signing a copy and returning it to
us.
Very truly yours,
SCHOTTENSTEIN BERNSTEIN CAPITAL GROUP, LLC
By: Scott Bernstein
--------------------------------------
Its: Vice President - General Counsel
--------------------------------------
ACCEPTED THIS 3 DAY OF June, 1999.
D.I.Y. Home Warehouse, Inc.
By: /s/ Eric I Glassman
------------------------------
Printed Name: Eric I Glassman
--------------------
Title: V/P-CFO
---------------------------
15
<PAGE> 16
Schedules
Schedule A - List of Stores
Schedule B - Stepdown Schedule, Guaranteed Payment
Schedule C - Form of Letter of Credit
Schedule D - Per Diem Occupancy
16
<PAGE> 17
MANSFIELD STORE
---------------
2063 West Fourth Street
Mansfield, Ohio 44906
WEST MARKET STORE
-----------------
1890 West Market Street
Akron, Ohio 44313.
SCHEDULE A
<PAGE> 18
D.I.Y. HOME WAREHOUSE, INC.
SCHEDULE 1
SUGGESTED STEPDOWN SCHEDULE
SUGG
INVT LEVEL ADJ
7,000,000 CUM
7,053,356 0.00%
6,953,356 0.00%
6,853,356 0.00%
6,753,356 0.00%
6,653,356 0.00%
6,553,356 0.00%
6,500,000 0.00%
6,400,000 0.20%
6,300,000 0.40%
5,200,000 0.60%
6,100,000 0.80%
6,000,000 1.00%
SCHEDULE B
<PAGE> 19
LETTER OF CREDIT
GUARANTEED PAYMENT
IRREVOCABLE LETTER OF CREDIT
Beneficiary Applicant
- ----------- ---------
Schottenstein Bernstein Capital Group, LLC
1800 Moler Road
Columbus, Ohio 43207
Amount
------
USD ____________(U.S. Dollars)
Expiry: September 30, 1999
Dear Sir(s):
We hereby issue in your favor our Irrevocable Letter of in the amount
of _________ U.S. dollars.
We hereby irrevocably authorize you to draw on us, in an aggregate
amount not to exceed the amount of this Letter of Credit, by your draft or
drafts, payable at sight, drawn on Wells Fargo Bank bearing the clause: "Drawn
under Wells Fargo Bank Letter of Credit No..--------" and accompanied by your
certificate appropriately completed and signed by you in the form of the
attached Annex A
Special Conditions:
1. Wells Fargo Bank is not responsible for any calculations
confirming the proper amount of the draft pursuant to the
attached Annex A, Certificate for Drawing.
SCHEDULE C
<PAGE> 20
2. This original Letter of Credit must be returned with any
drawing hereunder which results in the frill or partial
payment of the amount of this Letter of Credit.
3. Upon delivery to us of a Reduction Certificate, the amount of
this Letter of Credit shall be reduced by the amount set forth
in such Reduction Certificate.
4. Upon delivery to us of a certificate from you in the form of
Annex C, the expiry date shall be the date set forth in such
certificate, which in no event shall be later than September
30, 1999.
We certify that your draft drawn and in conformity with the terms of
this Letter of Credit will be duly honored on presentation after receipt if
presented to us on or before the expiry date. Payment upon the draft shall be
made by us to you in immediately available funds by wire transfer to your
account in the United States specified for payment in the draft presented to us
at the earliest opportunity.
We hereby undertake that we will not modify, revoke or terminate this
Letter of Credit without your written consent.
Yours Faithfully,
Wells Fargo Bank
--------------------
Authorized Signature
ANNEX A
CERTIFICATE FOR DRAWING
<PAGE> 21
The undersigned, being the President of, hereby certifies with
reference to Wells Fargo, Letter of Credit No. _____________ that:
1. The amount of the sight draft which accompanies this drawing
certificate is $________
2. _____________has determined that the Proceeds are insufficient to
satisfy the Guaranteed Payment, Expenses of Sale as those terms are
defined in the Agreement, dated (the "Agreement"), by and between and
Schottenstein Bernstein Capital Group, LLC.
3. ___________default under the terms of the Agreement.
4. _______________ three (3) business days notice to the Agent of its
intent to submit the sight draft which accompanies this certificate.
5. Capitalized terms used herein but not defined shall have the meanings
set forth in the Agreement.
IN WITNESS WHEREOF,________ d this Certificate for Drawing to be
executed and delivered as of the ____day of _________, 1999.
By:
---------------------------
Name:
-------------------------
President
Sworn to before me this:
____day of _________, 1999.
- ------------------------------
Notary Public
<PAGE> 22
<TABLE>
<CAPTION>
SCHEDULE D
OCCUPANCY COSTS
MANSFIELD WEST MARKET TOTAL
Total Total
Total Average Avg/ Total Average Avg/ Avg/ Avg/
1998 1997 Week 1998 1997 Week Week Week/Store
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rent $ $ $ - $ - $ - $201,696 $201,696 $ 403,392 $201,696 $ 3,879 $ 3,879 $ 1,939
Mortgage
Interest $196,901 $196,909 $ 393,802 $196,901 $3,787 $ - $ - $ - $ 3,787 $ 1,893
Disposal $ 3,388 $ 4,821 $ 8,009 $ 4,005 $ 77 $ 7,042 $ 13,439 $ 20,481 $ 10,241 $ 197 $ 274 $ 137
Real Estate
Taxes $ 15,892 $ 17,804 $ 33,696 $ 16,848 $ 324 $ 39,264 $ 43,680 $ 82,944 $ 41,472 $ 798 $ 1,122 $ 561
R & M
premise $ 14,944 $ 15,294 $ 30,238 $ 15,119 $ 291 $ 18,396 $ 18,348 $ 36,744 $ 18,372 $ 353 $ 644 $ 322
Utilities $114,214 $123,747 $ 237,961 $118,981 $2,288 $133,115 $141,651 $ 274,768 $137,383 $ 2,642 $ 4,930 $ 2,485
Equipment
Rental $ 35,570 $ 37,319 $ 72,889 $ 36,445 $ 701 $ 21,975 $ 25,362 $ 47,337 $ 23,689 $ 455 $ 1,156 $ 578
Insurance $ 40,607 $ 50,804 $ 91,411 $ 45,706 $ 879 $ 40,607 $ 50,804 $ 91,411 $ 45,706 $ 879 $ 1,758 $ 879
Outside
Service $ 22,263 $ 32,117 $ 54,380 $ 27,190 $ 523 $ 21,028 $ 22,342 $ 43,368 $ 21,684 $ 417 $ 940 $ 470
R & M
Equipment $ 16,406 $ 15,209 $ 31,615 $ 15,808 $ 304 $ 16,250 $ 14,874 $ 31,124 $ 15,582 $ 299 $ 603 $ 30
Telephone $ 25,906 $ 27,098 $ 53,004 $ 26,502 $ 510 $ 16,949 $ 17,870 $ 34,819 $ 17,410 $ 335 $ 844 $ 422
Loss
Prevention $ 13,689 $ 18,726 $ 32,415 $ 16,208 $ 312 $ 13,425 $ 15,763 $ 29,188 $ 14,594 $ 281 $ 592 $ 296
- ----------------------------------------------------------------------------------------------------------------------------------
Total
Occupancy $499,780 $539,640 $1,039,420 $519,710 $9,994 $529,745 $565,829 $1,095,574 $547,787 $10,534 $20,529 $10,264
==================================================================================================================================
</TABLE>
<PAGE> 1
EXH 10.7
Mr. Eric Glassman
D.I.Y. Home Warehouse, Inc.
5811 Canal Road, Suite 180 June 11, 1999
Cleveland, Ohio 44125
Dear Eric:
Upon execution by D.I.Y. Home Warehouse, Inc., having a principle place
of business located at 5811 Canal Road, Valley View, Ohio 44125 ("Merchant"),
this letter shall serve as the agreement (the "Agreement") between Merchant and
Schottenstein Bernstein Capital Group, LLC having a principle place of business
located at 1800 Moler Road, Columbus, Ohio 43207 (the "Agent") for Agent to act
as Merchant's sole and exclusive agent to sell all of the merchandise (the
"Merchandise") in Merchant's store listed on Schedule A attached (the "Store")
by means of a "Store Closing," and or "Total Liquidation," sale (the "Sale"). In
consideration of the mutual promises and covenants contained herein and other
good and valuable consideration, Merchant and Agent agree as follows:
1. AGENCY. Merchant appoints Agent its exclusive agent for the purpose of
conducting the Sale of the Merchandise located at the Store. Agent shall be
responsible, with Merchant's assistance, for securing any required licenses and
permits and complying with any "going-out-of-business" laws, rules, ordinances
and regulations. Merchant shall pay any fees and expenses incurred in connection
therewith and Agent will post any bonds required in connection with such
licenses and permits.
2. INVENTORY. As soon as practicable after Merchant's acceptance of this
Agreement, Merchant shall cause to be taken a "retail dollar" and or SKU
physical inventory of the Merchandise in the Store (the "Inventory Count"). The
date that the Inventory Count is taken in each Store shall be referred to as to
each Store as the "Inventory Date". The Inventory Count shall be taken by RGIS
or another independent inventory service mutually designated by Merchant and
Agent (the "Inventory Service") the cost of which shall be shared equally by
Merchant and Agent. Each Store shall be closed during the Inventory Count and
during the Inventory Count, neither Merchant nor
<PAGE> 2
Agent shall enter such Store without each having a representative present,
except in the case of an emergency. Merchant and Agent, will provide one or more
representative at the store during the Inventory Count. The Inventory Count
shall be taken on the basis of the lowest ticketed price of each item of
Merchandise except for (i) out of season inventory which shall be valued at
fifty (50%) percent of the lowest ticketed price and (ii) damaged, display and
clearance Merchandise price for which Merchant and Agent shall agree upon a
price. Merchant shall remove from the Sale any item of damaged, clearance, or
display Merchandise for which a price cannot be agreed upon as well as
Merchandise as to which Merchant and Agent cannot agree upon the seasonality.
Notwithstanding any of the above, the reduction in the Retail Value, resulting
from Merchant and Agent's pricing of damaged, display and clearance Merchandise,
shall not exceed Fifty Thousand Dollars ($50,000) per Store.
3. RETAIL VALUE. The term "Retail Value" herein shall mean the aggregate of the
item values of the respective items of all the Merchandise. Merchandise shall
include all goods owned by Merchant and located at the Store on the Inventory
Date except: (i) goods which Merchant shall have reasonably shown to belong to
sublessees, licensees or concessionaires of Merchant or to have been placed in
the Store on consignment; and (ii) furniture, fixtures, equipment and
improvements to realty located in the Store. The ticketed price of any item of
Merchandise shall not include any sales or gross receipts taxes. If any item of
Merchandise has more than one ticket, the lower retail price shall prevail
unless Merchant establishes that such Merchandise was inadvertently priced
incorrectly. Merchandise arriving at the Store following the Start Date ("On
Order Merchandise"), shall be valued at the lowest ticketed price less the
discount then prevailing in the Store.
4. SALE TERM. The Sale shall start no later than June 18, 1999 (the "Start
Date"), and shall end no later than the close of business at each Store,
approximately ten weeks thereafter, on August 27, 1999, unless extended by
agreement of the parties (the "End Date"). Agent may terminate the Sale prior to
the End Date at any Store in its reasonable discretion. At the conclusion of the
Sale, Agent agrees to leave the Store in "broom clean" condition, with all
Merchandise (regardless of the condition) being removed by Agent, except for
removal of furniture, fixtures,
2
<PAGE> 3
equipment and remaining Supplies (as defined in Section 10 hereof) and to leave
the Store in the same condition as on the Start Date, ordinary wear and tear
excepted.
5. GUARANTEED PAYMENT. Agent guarantees that Merchant shall receive an amount
equal to fifty one and one-half percent (51.5%) of the Retail Value (the
"Guaranteed Payment") of the Merchandise. In the event that the aggregate value
of all the Merchandise shall be less than Three Million Two Hundred Fifty
Thousand Dollars ($3,250,000), the Guaranteed Payment shall be reduced in
accordance with Schedule B. The Guaranteed Payment will be reduced pro rata for
increments or partial increments in accordance with Schedule B. Moreover, in the
event that Agent cannot start the Sale until (i) after June 18th but before June
25th, the Guaranteed Payment shall be reduced by one half of one percent (.5%)
(e.g. from 51.5% to 51%), (ii) after June 25th but before July 2, the Guaranteed
Payment shall be reduced by one percent (1%) (e.g. from 51.5% to 50.5%), and
(iii) after July 2 but before July 9, the Guaranteed Payment shall be reduced by
one and one half percent (1.5%) (e.g. 51.5% to 50.0%). The parties agree to
negotiate in good faith any further reduction in the Guaranteed Payment in the
event Agent is prohibited from starting the Sale until after July 9th.
In addition to the Guaranteed Payment, Merchant will be entitled to
fifty percent (50%) of the Net Profit of the Sale. For purposes of this
Agreement, Net Profit of the Sale is the gross proceeds of the sale after
payment of the Guaranteed Payment, Expenses of Sale and payment to Agent of an
amount equal to two percent (2%) of the Retail Value.
Merchant shall retain all amounts collected during the Sale, as well as
any insurance proceeds resulting from the loss of any Merchandise subject to
this Agreement (the "Proceeds"), out of which it shall pay Expenses of Sale, as
set forth below, and satisfy the Guaranteed Payment. After satisfaction of the
Guaranteed Payment and payment of Expenses of Sale, and subject to the sharing
of the Net Profit of the Sale set forth above, Agent shall be entitled to
receive its share of the Proceeds as its commission herein. As security for the
Guaranteed Payment and Expenses of Sale, Agent will deliver to Merchant an
irrevocable Letter of Credit, in a form attached hereto as Schedule C from Wells
Fargo Bank in the amount of$1,250,000 having an expiration date of not earlier
than
3
<PAGE> 4
September 30, 1999. In the event, following the End Date, that Proceeds from the
Sale are insufficient to satisfy the Guaranteed Amount and Expenses of Sale,
Merchant shall be entitled to draw down upon the Letter of Credit for the amount
of the deficiency.
6. SALE CONDUCT. Agent shall conduct the Sale in the name of Merchant in full
and complete compliance with applicable laws, rules, or ordinances in the manner
in which Agent in its discretion reasonably deems fit, including, but not
limited to, advertising, pricing of Merchandise, number and type of personnel,
Store hours, Store maintenance and security. Agent may advertise the Sale as a
Store Closing, or Total Liquidation or similar type sale in accordance with
applicable law and applicable leasehold agreements. Notwithstanding the
Guaranteed Payment, Agent acknowledges that Merchant will after the End Date
have a significant number of stores in Ohio which will continue to operate under
Merchant's name. As a result, Agent will conduct the Sale using its best efforts
and in such a manner as to minimize any bad publicity or loss of goodwill
arising from the conduct of the Sale. Agent may use Merchant's employees to the
extent Agent deems feasible, and Agent may select and schedule the number and
type of Merchant's employees required for the Sale, however, Merchant's
employees shall at all times remain employees of Merchant. On and after the
Start Date, Merchant shall pay, as an Expense of Sale, as hereinafter defined,
the gross wage payroll paid to Merchant's employees used in the Store by the
Agent during the Sale plus (a) the related payroll taxes (including FICA and
Unemployment), (b) Worker's Compensation and (c) health care insurance benefits
(subsections (a), (b) and (c) collectively, the "Benefits") not in excess of
fifteen and 57/100 percent (15.57%) of said gross payroll (the "Fringe Benefit
Cap"). Any amounts in excess of the Fringe Benefit Cap shall be at Merchant's
Expense, as hereinafter defined.
Merchant and Agent acknowledge and agree, that (i) nothing herein nor
any of Agent's actions taken in respect hereto shall be deemed to constitute an
assumption by Agent of any of Merchant's obligations relating to any of
Merchant's employees including, without limitation, vacation, pension,
withdrawal, severance pay, vacation pay, sick leave or pay, maternity leave or
pay, Worker Adjustment Retraining Act ("WARN") claims (if any) and other
termination type
4
<PAGE> 5
claims and obligations; and (ii) Merchant hereby indemnifies Agent in respect to
any claims asserted by any of Merchant's employees, except as to claims arising
out of the negligence or wrongful act or omission of Agent, and Merchant is
solely and specifically responsible for all of Merchant's obligations under any
collective bargaining agreements and any purported oral service contracts.
7. EXPENSES OF SALE. Merchant shall collect all Proceeds out of which shall be
paid all "Expenses of Sale." In the event that Proceeds are not sufficient to
pay such Expenses of Sale, Merchant shall be entitled to draw down upon the
Letter of Credit, as set forth in Paragraph 6, for the amount of the deficiency
after the End Date. Expenses of Sale shall be (i) the actual gross wage payroll
paid to Merchant's employees used in the Store by the Agent during the Sale plus
the cost of the Benefits for such employees not to exceed the Fringe Benefit
Cap; (ii) advertising expense; (iii) signage for the Sale; (iv) security in the
Store; (v) bank card fees and charge backs; (vi) telephone charges for the Store
in excess of base charges; (vii) Agent's supervision expenses; (viii) any other
expenses directly attributable to the Sale authorized by Agent and (ix)
occupancy costs on a per diem per Store basis as per attached Schedule D. Agent
shall bill Merchant weekly for any Expenses of Sale paid by Agent which shall be
promptly paid from Proceeds collected by Merchant.
8. MERCHANT'S EXPENSES. During the Sale, Merchant shall be responsible for
payment of the following items none of which shall be deemed an Expense of Sale:
(i) all occupancy costs not included in Schedule D; (ii) any Benefits in excess
of the Fringe Benefit Cap; (iii) all other employee benefits, including but not
limited to union dues, termination pay, pension benefits, severance pay,
vacation pay, sick leave or pay, maternity leave or pay and WARN claims (if
any); (iv) major maintenance; and (v) costs not directly attributable to the
Sale.
9. TAXES. Merchant shall collect all sales, excise and gross receipts taxes (and
not income taxes) (collectively the "Sales Taxes") payable to any taxing
authority having jurisdiction, which taxes shall be added to the sales price and
be paid by the customer at the time Merchandise is purchased. Merchant shall
indemnify and hold Agent harmless from and against any and all costs (including,
but not limited to, reasonable attorneys' fees), assessments, fines or penalties
which
5
<PAGE> 6
Agent may incur as a direct or indirect consequence of the failure by Merchant
to pay Sales Taxes to the proper taxing authorities and/or the failure by
Merchant to promptly file with taxing authorities any and all returns, reports
and other documents required by applicable law to be filed or delivered to such
taxing authorities.
10. SUPPLIES. Agent shall have the right to use in connection with the Sale,
without any charge, all signs and promotional materials, furniture, equipment,
fixtures and supplies, including, but not limited to, bags, boxes, twine, paper
and similar sales materials ("Supplies"), located at the Store on the Start
Date. Agent shall have no obligation to account to Merchant for any of the
Supplies used during the Sale, but all Supplies remaining in the Store on the
End Date shall be left on the premises and remain Merchant's property. Should
additional Supplies be required in the Store during the Sale, Merchant agrees to
promptly provide such additional Supplies to Agent, if available at Merchant's
cost plus shipping costs, such cost to be an Expense of Sale. Merchant covenants
and warrants that it has not and will not remove any Supplies from the Store in
contemplation of this Agreement.
11. CREDIT CARDS, GIFT CERTIFICATES AND RETURNS. All sales shall be for cash or
upon bank credit cards (excluding private label cards). During the Sale, all
bank credit card sales shall be through Merchant's bank credit card system. All
bank card fees including charge backs in connection with the Sale shall be an
Expense of Sale. Agent will be responsible for any reserves required by
Merchant's bank credit card provider. For fourteen (14) days following the Start
Date, Agent shall accept customer returns of first quality goods purchased prior
to the Start Date. Items accepted for return shall be added to Merchandise for
the purpose of calculating Retail Value, but shall not reduce Proceeds. All
sales shall be advertised, "FINAL," and all sales receipts shall be marked
"FINAL," by Agent. Agent shall accept Merchant's gift certificates during the
Sale. Gift Certificates shall be treated as cash and the value thereof added to
Proceeds. Agent shall, on behalf of Merchant, offer refunds to customers with
goods on layaway. The amounts refunded to layaway customers shall not reduce
Proceeds.
6
<PAGE> 7
12. MERCHANT'S WARRANTIES. Merchant hereby warrants and represents:
a. Merchant is a corporation, duly and validly existing and in good
standing under the laws of the State of Ohio. Merchant is and during the Sale
will be authorized and duly qualified as a corporation to do business and is in
good standing in the jurisdiction in which the Store is located.
b. (i) This Agreement and all other documents executed by Merchant in
accordance with this Agreement are the valid and binding obligations of Merchant
enforceable in accordance with their terms; (ii) Merchant has taken all
necessary corporate action required to authorize the execution, performance and
delivery of this Agreement and the related documents; (iii) no court order or
decree of any federal, state or local government authority, or other action
known to Merchant, is in effect which will or may prevent or impair consummation
of the transactions contemplated by this Agreement; and (iv) the consent of any
person or entity, including any landlord, is not required with respect to the
transaction contemplated herein;
c. Except for the lien of National City Commercial Finance, Merchant
owns and will own at the Start Date and during the Sale good and marketable
title to all of the Merchandise (together with the proceeds and accounts
receivable arising therefrom), free and clear of all liens, mortgages, pledges,
charges, encumbrances, equities or claims whatsoever. Agent shall be entitled to
retain all proceeds, subject to section 5, free and clear of all liens,
mortgages, pledges, charges, encumbrances, equities or claims whatsoever.
d. Merchant shall not ship goods into the Store without Agent's
consent, which consent will not be unreasonably withheld, nor raise any prices
of the Merchandise in contemplation of the Sale. The mix of Merchandise in the
Store shall be comparable to that found in the Merchant's ongoing stores.
7
<PAGE> 8
e. No actions or proceedings have been instituted against Merchant or
have been threatened, preventing or which may prevent the consummation of the
transactions contemplated by this Agreement. Merchant is reasonably current on
all accounts payable, due and owing to parties whose cooperation is necessary
for operation of the Sale, including but not limited to landlords, newspapers
and utilities.
f. No notice of terminable default under the leases, licenses or
subleases relating to the Store has been noticed thereunder, and subleases do
not prohibit the transactions under this Agreement or of the Sale contemplated
herein.
g. Merchant represents and warrants that it will not prior to or during
the Sale grant any lien or encumbrance on the Merchandise or the Proceeds.
h. There is no outstanding order, judgment, injunction award or decree
of any court, governmental or regulatory body or arbitration tribunal by which
the Merchant or the Merchandise is bound which would materially interfere with
the transactions herein, and as of the date of execution herein there is no
action, suit, claim, legal, administrative or arbitral proceedings (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) against the Merchant or the Merchandise which would, if determined
adversely to the Merchant, be likely to have a material adverse effect upon the
transactions contemplated hereby, nor to the best of Merchant's knowledge are
there any facts which are likely to give rise to any such action, suit, claim or
legal, administrative or arbitral proceeding or investigation.
i. The Retail Value of the Merchandise shall be not less than Three
Million Dollars ($3,000,000).
j. Agent shall be permitted to pass on all applicable manufacturers
warranties to customers.
8
<PAGE> 9
k. Merchant represents and warrants that it has not raised any prices
in contemplation of the Inventory Count and that all pricing, including pricing
of On-Order merchandise and merchandise from the distribution center will be
done in accordance with Merchant's historic practices.
l. The Store will have been operated up through the Start Date in a
manner consistent with Merchant's ongoing stores.
m. No point of sale activity shall have occurred outside the ordinary
course of business.
n. Merchandise offered for Sale by Agent with a discount of no lower
than ten percent (10%) shall be lower in price then the same Merchandise
advertised in Merchant's circulars scheduled to run on June 13th and June 20th.
In the event of any such discrepancy herein, Agent shall be entitled to offer
customers the lower of the two prices. Agent's sole remedy shall be a credit
from Merchant for the amount of the discrepancy.
13. AGENT'S WARRANTIES. Agent hereby warrants and represents:
a. Agent is a limited liability corporation, duly and validly existing
and in good standing under the laws of the State of Delaware. Agent is, and
during the Sale will be, authorized and duly qualified to do business in each
jurisdiction where the failure to so qualify would have a material adverse
effect on Agent's ability to perform hereunder.
b. (i) This Agreement and all other documents executed by Agent in
accordance with this Agreement are the valid and binding obligations of Agent
enforceable in accordance with their terms; (ii) Agent has taken all necessary
action required to authorize the execution, performance and delivery of this
Agreement and the related documents; (iii) no court order or decree of any
federal, state or local government authority, or other action known to Agent, is
in effect which will
9
<PAGE> 10
or may prevent or impair consummation of the transactions contemplated by this
Agreement; and (iv) the consent of any person or entity, is not required with
respect to the transactions contemplated herein.
c. There is no outstanding order, judgment, injunction award or decree
of any court, governmental or regulatory body or arbitration tribunal by which
the Agent is bound which would materially interfere with the transactions
herein, and there shall be no action, suit, claim, legal, administrative or
arbitral proceedings (whether or not the defense thereof or liabilities in
respect thereof are covered by insurance) against the Agent which would, if
determined adversely to the Agent, be likely to.have a material adverse effect
upon the transactions contemplated hereby, nor are there any facts which are
likely to give rise to any such action, suit, claim or legal, administrative or
arbitral proceeding or investigation.
14. NON COMPETE. During the Sale, neither Merchant nor any affiliate of Merchant
shall run a store closing, liquidation or similar sale in competition with the
Sale at any store trading under the D.I.Y. Home Warehouse name within the
advertising area of the Store without the prior written approval of Agent.
15. INSURANCE. a. Merchant at its expense shall continue until the End Date, in
such amounts as Merchant currently has in effect, all of Merchant's liability
insurance policies, including but not limited to, comprehensive public liability
policies covering injuries to persons and property in or in connection with
Merchant's operation of the Store and, from and after the acceptance by Merchant
of this Agreement, shall cause Agent to be named as additional insured, as its
interests may appear, with respect to all such policies. On or before the Start
Date, Merchant shall deliver to Agent certificates evidencing such insurance
policies, setting forth the duration thereof and the naming of Agent as an
additional insured, as its interests may appear, in accordance with the
provisions hereof, all in form reasonably satisfactory to Agent. Merchant shall
be responsible for the payment of all deductibles, retentions or self-insured
amounts under such policies except in the
10
<PAGE> 11
event liability arises by reason of the negligence or wrongful act or omission
of Agent or Agent's independent contractors.
b. Merchant at its expense shall provide fire, theft and extended
coverage casualty insurance on the Merchandise in a total amount at least equal
to the retail value thereof. From and after the Start Date, said coverage will
contain a loss payable clause in favor of Merchant's lender and Agent, as their
interests may appear. In the event of a loss to the Merchandise included in the
Inventory Count occurring on or after the Start Date, the proceeds of such
insurance attributable to the Merchandise shall be paid to Agent and such
proceeds shall be included as part of the Proceeds. On or before the Start Date,
Merchant shall deliver to Agent certificates evidencing such insurance policies;
setting forth the duration thereof and the naming of Agent as a loss payee in
accordance with the provisions hereof, all in form reasonably acceptable to
Agent. Merchant shall be responsible for the payment of all deductibles or
self-insured amounts under such policies except in the event liability arises by
reason of the negligence or wrongful act or omission of Agent or Agent's
independent contractors.
c. Merchant shall at all times during the Sale maintain in full force
and effect Worker's Compensation Insurance in compliance with all statutory
requirements.
d. During the performance and length of this Agreement, Agent will
maintain workers compensation, commercial general liability and automobile
liability insurance and will name Merchant as an additional insured on all such
policies.
16. PEACEFUL POSSESSION. Merchant agrees during the Sale to grant and provide
Agent peaceful and quiet possession of the Store and to take no action relating
to the Store which would disturb such possession, including, without limitation,
any action to modify or terminate any existing ADT or similar security system or
cash register maintenance agreements or remove any of the furniture, fixtures or
equipment from the Store. Merchant agrees to maintain in operation at the
11
<PAGE> 12
expense of Merchant for the benefit of Agent (i) the point of sale equipment in
the Store and (ii) the management information Systems.
17. INDEMNIFICATION. Agent and Merchant each agree to indemnify and defend and
hold harmless the other from any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees, costs and expenses, asserted against, resulting to or imposed upon
Merchant or Agent, directly or indirectly, by reason of or resulting from
either's (i) material breach or failure to comply with any of the agreements,
covenants, representations or warranties contained in this Agreement, or (ii)
any negligent or wrongful act or omission of either or its employees.
18. DEFAULT. a. For the purpose of this Agreement, an "Event of Default" shall
be deemed to have occurred:
(1) upon the failure by Merchant or Agent to perform promptly and fully
any material obligation or covenant hereunder or any material obligation or
covenant in any document delivered pursuant hereto or any collateral agreement
to this Agreement after having received five (5) days' prior written notice,
except in the case of a nonmonetary default which is incapable of being cured
within such notice period and diligently proceeds to cure said default and (a)
the party in default has taken all steps necessary to commence to cure such
default within such notice period and (b) such failure to cure, in the case of a
default by Merchant, will not adversely affect, in any material way, Agent's
ability to conduct the Sale in the manner contemplated herein;
(2) if any of the warranties or representations made by Merchant or
Agent herein proves to be untrue or false in a material way; or
(3) if any breach of this Agreement by Merchant results in the Agent
being unable to conduct or complete the Sale at any Store as contemplated
herein.
12
<PAGE> 13
b. In the event of an interruption of the Sale and/or occurrence of an
Event of Default resulting from any act or omission of Merchant which prevents
Agent from conducting or completing the Sale at any Store as provided by this
Agreement, Agent may, at its option, either (i) proceed with the Sale at the
Store location(s) affected or (ii) require Merchant, at Merchant's expense, to
move the Merchandise to another reasonably proximate Store designated by Agent,
or (iii) notify Merchant as to the termination of the Sale as to the particular
Store location, in which event, Agent shall be made whole and (i) Agent shall be
reimbursed for all its out of pocket expenses referable to such Store, (ii)
Merchant shall be entitled to retain all Proceeds at such Store prior to the
interruption or Event of Default as well as any remaining Merchandise. Merchant
acknowledges that Agent would be irreparably injured in the event of any failure
by Merchant to promptly and fully perform any obligation hereunder if such
failure directly or indirectly interferes with the conduct by Agent of the Sale,
and hereby consents, in the event of any such failure or in the event that any
such failure is threatened or appears imminent, to the entry of an injunction
specifically enforcing the terms of this Agreement.
c. No right or remedy granted in or pursuant to this Agreement shall be
exclusive of any other right or remedy so granted or otherwise available. Every
such right or remedy shall be cumulative and shall be in addition to every other
right or remedy so granted or existing at law or in equity or by statute, or
created, granted or existing pursuant to any agreement to which Agent and/or
Merchant is or may hereafter become a party.
19. JURISDICTION. This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio without regard to the conflicts of laws
principles thereof.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties with respect to these transactions and supersedes and cancels all prior
agreements including, but not limited to all proposals, letters of intent or
representations, written or oral, with respect thereto.
13
<PAGE> 14
21. MODIFICATIONS. This Agreement may not be modified except in a writing
executed by each of the parties.
22. ASSIGNMENT. Except as specifically provided in this Section, or upon written
consent of the parties hereto, this Agreement shall not inure to the benefit of,
or, shall not be assignable to, any person or entity other than Merchant and
Agent. All of the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the successors in interest of the
respective parties hereto.
23. NOTICES. All notices under this Agreement shall be sent by hand, by
recognized overnight courier service or by certified mail, return receipt
requested to: (a) Merchant at the address listed on the first page hereof, to
the attention of Mr. Clifford Reynolds , President, with a copy to Mr. Harold O.
Maxfield, Jr., Cavitch, Familo, Durkin and Frutkin Co. L.P.A, 14th Floor, East
Ohio Building, Cleveland, Ohio 44114; (b) Agent, at the address listed on the
first page hereof to the attention of Scott Bernstein, Esq. All notices
delivered hereunder will be effective upon receipt.
24. CONFIDENTIAL NATURE OF TRANSACTION. The parties agree to keep the existence
of this transaction confidential until Merchant completes the transfer of its
properties in North Canton, Mansfield and Akron (the "Properties"). Agent agrees
to notify all employees and/or agents that have or will have knowledge of this
transaction of the confidential nature of this transaction. The parties agree
that they will jointly approve any news release(s) regarding this transaction.
Agent acknowledges that Merchant may suffer significant damages if the existence
of this transaction becomes known to customers and/or employees.
25. CONTINGENCIES. The parties acknowledge that this transaction is contingent
upon the transfer of the Properties by Merchant and if the Properties are not
transferred by June 30, 1999 then this Agreement will be null and void.
14
<PAGE> 15
26. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. Such execution may be by facsimile. Any
party signing via facsimile shall forward an original hard copy of such
signature to the other party, but the failure to send said original signature
shall not affect the enforceability of this Agreement against such party, the
parties hereto agreeing that a facsimile signature may be treated as an original
signature hereunder.
Please acknowledge your acceptance hereof by signing a copy and returning it to
us.
Very truly yours,
SCHOTTENSTEIN BERNSTEIN CAPITAL GROUP, LLC
By: /s/ Thomas Mitchell 6/16/99
--------------------------------------
Its: Asst Corp. Controller
-------------------------------------
ACCEPTED THIS 16 DAY OF June, 1999.
D.I.Y. Home Warehouse, Inc.
By: /s/ Eric I Glassman
--------------------------------------
Printed Name: Eric I Glassman
----------------------------
Title: Vice Pres CFO
------------------------------------
15
<PAGE> 16
Schedules
Schedule A - Store
Schedule B - Stepdown Schedule, Guaranteed Payment
Schedule C - Form of Letter of Credit
Schedule D - Per Diem Occupancy
16
<PAGE> 17
BOARDMAN STORE
--------------
550 Boardman-Poland Road
Boardman, Ohio
SCHEDULE A
<PAGE> 18
Sheet 1
DIY HOME WAREHOUSE, INC.
SCHEDULE 1
SUGGESTED STEP DOWN SCHEDULE
Inventory Level SUGG
Adj
Cum
- -----------------------------------------
3,500,000 100% 0.00%
3,526,678 101% 0.00%
3,476.678 99% 0.00%
3,426,678 98% 0.00%
3,376,678 96% 0.00%
3,326,678 95% 0.00%
3,276,678 94% 0.00%
3,250,000 93% 0.00%
3,200,000 91% 0.20%
3,150,000 90% 0.40%
3,100,000 89% 0.60%
3,050.000 87% 0.80%
3,000,000 86% 1.00%
SCHEDULE B
<PAGE> 19
LETTER OF CREDIT
GUARANTEED PAYMENT
IRREVOCABLE LETTER OF CREDIT
Beneficiary Applicant
- ----------- ---------
Schottenstein Bernstein Capital Group, LLC
1800 Moler Road
Columbus, Ohio 43207
Amount
------
USD____________(U.S. Dollars)
Expiry: September 30, 1999
Dear Sir(s):
We hereby issue in your favor our Irrevocable Letter of in the
amount of _______U.S. dollars.
We hereby irrevocably authorize you to draw on us, in an aggregate
amount not to exceed the amount of this Letter of Credit, by your draft or
drafts, payable at sight, drawn on Wells Fargo Bank bearing the clause: "Drawn
under Wells Fargo Bank Letter of Credit No..------" and accompanied by your
certificate appropriately completed and signed by you in the form of the
attached Annex A
Special Conditions:
1. Wells Fargo Bank is not responsible for any calculations
confirming the proper amount of the draft pursuant to the
attached Annex A, Certificate for Drawing.
SCHEDULE C
<PAGE> 20
2. This original Letter of Credit must be returned with any
drawing hereunder which results in the full or partial payment
of the amount of this Letter of Credit.
3. Upon delivery to us of a Reduction Certificate, the amount of
this Letter of Credit shall be reduced by the amount set forth
in such Reduction Certificate.
4. Upon delivery to us of a certificate from you in the form of
Annex C, the expiry date shall be the date set forth in such
certificate, which in no event shall be later than September
30, 1999.
We certify that your draft drawn and in conformity with the terms of
this Letter of Credit will be duly honored on presentation after receipt if
presented to us on or before the expiry date.
Payment upon the draft shall be made by us to you in immediately available funds
by wire transfer to your account in the United States specified for payment in
the draft presented to us at the earliest opportunity.
We hereby undertake that we will not modify, revoke or terminate this
Letter of Credit without your written consent.
Yours Faithfully,
Wells Fargo Bank
--------------------
Authorized Signature
ANNEX A
CERTIFICATE FOR DRAWING
<PAGE> 21
The undersigned, being the President of, hereby certifies with reference to
Wells Fargo, Letter of Credit No. ___________ that:
1. The amount of the sight draft which accompanies this drawing
certificate is $________
2. ______________has determined that the Proceeds are insufficient to
satisfy the Guaranteed Payment, Expenses of Sale as those terms are
defined in the Agreement, dated (the "Agreement"), by and between
___________ and Schottenstein Bernstein Capital Group, LLC.
3. ___________default under the terms of the Agreement.
4. ________________ three (3) business days notice to the Agent of its
intent to submit the sight draft which accompanies this certificate.
5. Capitalized terms used herein but not defined shall have the meanings
set forth in the Agreement.
IN WITNESS WHEREOF,________ d this Certificate for Drawing to be
executed and delivered as of the _______day of ___________ 1999.
By:
---------------------------
Name:
--------------------------
President
Sworn to before me this:
____day of _________, 1999.
- --------------------------------
Notary Public
<PAGE> 22
DIY
OCCUPANCY COSTS
<TABLE>
<CAPTION>
BOARDMAN
Total Average Avg/
1998 1997 Week
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rent $ 525,740 $ 519,800 $1,045,340 $ 522,670 $ 10,051
Mortgate Interest $ -- $ -- $ --
Disposal $ 10,118 $ 11,912 $ 22,030 $ 11,015 $ 212
Real Estate Taxes $ 63,489 $ 66,199 $ 129,688 $ 64,844 $ 1,247
R & M premise $ 11,034 $ 15,911 $ 27,945 $ 13,973 $ 269
Utilities $ 135,667 $ 134,164 $ 259,831 $ 134,916 $ 2,595
Equipment Rental $ 34,939 $ 38,117 $ 73,056 $ 36,528 $ 702
Insurance $ 40,607 $ 50,804 $ 91,411 $ 45,706 $ 879
Outside Service $ 21,239 $ 24,807 $ 46,046 $ 23,023 $ 443
R & M Equipment $ 15,111 $ 19,675 $ 34,786 $ 17,393 $ 334
Telephone $ 27,436 $ 27,601 $ 55,037 $ 27,519 $ 529
Loss Prevention $ 7,606 $ 15,426 $ 23,032 $ 11,516 $ 221
----------------------------------------------------------------------------------
Total Occupancy $ 892,986 $ 925,215 $1,818,202 $ 909,101 $ 17,483
==================================================================================
</TABLE>
SCHEDULE D
<PAGE> 1
EXH 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, certain information
derived from the Company's Statement of Operations expressed in dollars (000's)
and as a percentage of net sales. The financial information and the discussion
and analysis which follows should be read in conjunction with the accompanying
consolidated financial statements, including the notes thereto, for each of the
three years in the period ended January 1, 2000.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 128,478 100.0% $ 172,600 100.0% $ 210,200 100.0%
Cost of sales 94,830 73.8 127,215 73.7 152,625 72.6
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 33,648 26.2 45,385 26.3 57,575 27.4
Store operating, general and administrative expenses 33,373 26.0 45,336 26.3 49,586 23.6
Store closing and development costs 2,082 1.6 2,143 1.2 1,436 0.7
- ------------------------------------------------------------------------------------------------------------------------------
Operating (loss) income (1,807) (1.4) (2,094) (1.2) 6,553 3.1
Other expense, net 918 0.7 1,761 1.0 1,701 0.8
- ------------------------------------------------------------------------------------------------------------------------------
(Loss) income before income tax (benefit) expense (2,725) (2.1) (3,855) (2.2) 4,852 2.3
Income tax (benefit) expense (1,093) (0.9) (1,556) (0.9) 1,980 0.9
- ------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (1,632) (1.3)% $ (2,299) (1.3)% $ 2,872 1.4%
==============================================================================================================================
</TABLE>
References to the years 1999, 1998 and 1997 relate to the fiscal years ended
January 1, 2000, January 2, 1999 and January 3, 1998, respectively. Fiscal 1999
and 1998 consisted of 52 weeks while fiscal 1997 consisted of 53 weeks.
Fiscal 1999 Compared to Fiscal 1998
Net sales decreased by $44.1 million or 25.6% to $128.5 million during 1999
from $172.6 million during 1998. Continuing store sales, which exclude the
results of the two stores closed during the fourth quarter of 1998 and the three
stores closed during the second quarter of 1999 for both periods, decreased
$18.3 million or $13.4% to $118.1 million in 1999 to $136.4 million in 1998. The
decrease in net sales between the two periods was the result of additional
competition from national warehouse retailers in the Company's markets.
The Company anticipates that net sales for fiscal year 2000 will be below the
net sales recorded during 1999.
Gross profit decreased by $11.7 million or 25.9% to $33.6 million in 1999 from
$45.4 million in 1998. Negatively impacting gross profit during 1999 was $1.8
million of inventory markdown costs included in cost of sales related to the
liquidation of the merchandise inventory at the three stores closed during the
second quarter of 1999. In comparison, 1998's gross profit was negatively
impacted by $.8 million of inventory markdown costs included in cost of sales
related to the liquidation of the merchandise inventory at the two stores closed
during the fourth quarter of fiscal 1998. Continuing store gross profit as a
percentage of net sales, which excludes the results of the five closed stores
for both periods, increased to 27.8% in 1999 from 27.0% in 1998. The increase in
the continuing store gross profit percentage between the two periods reflects
the positive impact of the Company's merchandising mix adjustment.
The Company anticipates that gross profit as a percentage of net sales for
fiscal year 2000 will be comparable with the gross profit as a percentage of net
sales experienced during 1999.
Store operating, general and administrative expenses decreased $12.0 million
or 26.4% to $33.4 million in 1999 from $45.3 million in 1998. Continuing stores
operating, general and administrative expenses as a percentage of net sales,
which exclude the results of the five closed stores for both periods, decreased
to 26.1% in 1999 from 26.4% in 1998. The decrease in the continuing stores
operating, general and administrative expenses as a percentage of net sales
between the two periods reflects the Company's continued management of
controllable expenses despite lower sales volume against which to leverage such
costs. This management of controllable expenses included lower personnel costs
resulting from reduced store and corporate staffing levels, decreased
advertising expenditures, a reduction in the utilization of outside services and
an overall reduction in general operating expenses.
The Company anticipates that store operating, general and administrative
expenses for fiscal year 2000 will be below the store operating, general and
administrative expenses recognized during 1999.
During the first quarter of 1999, the Company recognized $.3 million of store
closing costs from the Bedford, Ohio and Canton, Ohio stores that were closed
during the fourth quarter of 1998. These expenses were recorded in the store
closing and development costs line item of the Company's operating statement.
During the second quarter of 1999, the Company announced the closure of three
stores located in Boardman, Ohio; Mansfield, Ohio; and Akron, Ohio. Concurrent
with the announcement, the Company sold the land and buildings of its Mansfield
and Canton stores for $8.6 million, resulting in a pre-tax gain of $1.9 million.
The gain on the sale of the property was offset by the expenses to close the
three stores which included a $2.6 million write-off of leasehold improvements
and property and equipment, a $.5 million lease termination fee and other store
closing costs of $.2 million. The gain on the sale of property as well as the
offsetting expenses were recorded in the store closing and development costs
line item of the Company's operating statement.
During the fourth quarter of 1999, the Company removed kitchen displays from
its stores in connection with the repositioning of its merchandising mix,
resulting in a $.4 million charge. These expenses were recorded in the store
closing and development costs line item of the Company's operating statement.
Other expense, net decreased $.8 million or 47.9% to $.9 million during 1999
from $1.8 million during 1998. The decrease in other expense, net primarily
reflects the $1.0 million reduction in mortgage interest expense between the two
periods. During 1999, the Company utilized the proceeds from the sale of
property as well as its revolving credit facility to extinguish the remainder of
its outstanding mortgage loans. The reduction in mortgage interest expense
between 1999 and 1998 was partially offset by a $.2 million increase in
revolving credit facility interest expense.
The Company anticipates that other expense, net for fiscal year 2000 will be
below the other expense, net recorded during 1999.
The $1.1 million in income tax benefit recorded during 1999 was comprised of
$.8 million of current federal income tax and $.3 million of deferred tax
benefits. The Company has available net operating loss carryforwards of
approximately $1.6 million and $5.6 million for federal and state income taxes,
respectively. The federal income tax net operating loss carryforwards will
expire principally in the year 2019. Similarly, of the $5.6 million in state
income tax net operating loss carryforwards, approximately $2.0 million will
expire principally in the year 2013 with the remainder expiring principally in
the year 2014. In addition, the Company has available Alternate Minimum Tax
credit carryforwards of approximately $.2 million which may be used indefinitely
to reduce
2
<PAGE> 2
federal income taxes. The effective tax benefit rate was 40.1% in 1999 compared
to an effective tax benefit rate of 40.4% in 1998.
Fiscal 1998 Compared to Fiscal 1997
Fiscal 1998 consisted of 52 weeks compared to 53 weeks in fiscal 1997. Net
sales decreased by $37.6 million or 17.9%, from $210.2 million in 1997 to $172.6
million in 1998. Comparable store sales were impacted by additional national
warehouse competition in a majority of the Company's markets.
Gross profit decreased by $12.2 million, or 21.2%, from $57.6 million in 1997
to $45.4 million in 1998. Gross profit percentage, as a percentage of net sales,
was 26.3% in 1998 compared to 27.4% in 1997. The decrease in gross margin
percentage was impacted by the liquidation sales related to closing two stores
during the fourth quarter of 1998. (See discussion below on store closings.)
Also, a decrease in vendor rebates and discounts resulting from decreased
inventory purchases in 1998 compared to 1997 impacted the 1998 gross margin.
During 1998, the Company continued to focus on enhancing the balance sheet by
reducing inventory levels. As a result, inventory purchases in 1998 were
approximately $37.0 million lower than purchases during 1997.
Store operating, general and administrative expenses decreased $4.3 million,
or 8.6%, to $45.3 million in 1998 from $49.6 million in 1997. The decrease is
due to the Company's ongoing efforts to reduce operating costs. As a percentage
of net sales, store operating, general and administrative expenses increased to
26.3% in 1998 compared to 23.6% in 1997 due to lower sales on which to leverage
these expenses.
During the first quarter of 1998, the Company incurred approximately $.3
million in store development costs as part of completing new merchandising,
marketing and other strategic initiatives implemented in year 1997.
During the fourth quarter of 1998, the Company closed two of its stores. The
Company incurred $1.8 million to close the two stores in the fourth quarter of
1998. Included in the costs are approximately $.7 million related to the write
down of long lived assets of these two stores to their net realizable value. The
remainder represents the operating costs incurred to close these stores.
Other expense, net of $1.7 million, remained relatively the same in 1998
compared to 1997. However, interest expense decreased by approximately $.3
million from $2.2 million in 1997 to $1.9 million in 1998 due primarily to the
benefit of reduced debt levels on average amounts outstanding under the
Revolving Credit Agreement and Mortgage Loans which were approximately $18.2
million during 1998 compared to $22.5 million during 1997. The interest expense
decrease was offset by the gain of $.2 million on the sale of property in 1997.
The income tax benefit of $1.6 million for 1998 consisted of approximately $.6
million of current federal income taxes, and $1.0 million of deferred tax
benefits. The Company has available net operating loss carryforwards of
approximately $.6 million and $2.2 million for federal and state income taxes,
respectively, which expire principally in year 2018 (federal) and in year 2013
(state). In addition, the Company has available Alternate Minimum Tax credit
carryforwards of approximately $.2 million which may be used indefinitely to
reduce federal income taxes.
The effective tax benefit was 40.4% in 1998 compared to an effective tax
expense rate of 40.8% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Statement of Cash Flows reflects cash inflows and outflows from the
Company's operating, investing, and financing activities. The Company's primary
capital needs are to finance merchandise inventories. The Company believes its
existing resources, including cash and cash equivalents, internally generated
funds and bank credit facilities will be sufficient to meet working capital
requirements for the next 12 months.
Cash Flows from Operating Activities
During the year ended January 1, 2000, operating activities provided net cash
of $3.0 million. The primary sources of cash from operating activities included
a $7.2 million reduction in merchandise inventories, $3.3 million from
depreciation and amortization and a $2.6 million loss on the write-off of
leasehold improvements and property and equipment related to the three stores
closed during 1999. Partially offsetting these positive cash flow items were the
$3.9 million decrease in accounts payable, the $3.3 million decrease in accrued
expenses and other liabilities, the $1.9 million gain on the sale of certain
closed stores' property and the Company's $1.6 million net loss for 1999.
During the year ended January 2, 1999, operating activities provided net cash
of approximately $7.6 million. The primary source of cash from operating
activities was $3.7 million from depreciation and amortization and $8.9 million
from reducing inventories, offset by $2.2 million to reduce accounts payable and
the Company's net loss of $2.3 million.
During the year ended January 3, 1998, operating activities provided net cash
of $4.4 million. The primary source of cash from operating activities was $6.2
from net income plus depreciation and amortization. The primary use of cash was
$1.7 million to fund the increase in merchandise inventories and $1.7 million to
reduce accounts payable.
Cash Flows from Investing Activities
Net cash provided by investing activities increased by $9.2 million to $7.8
million during 1999 from net cash used in investing activities of $1.4 million
during 1998. The increase in cash provided by investing activities between the
two periods was due primarily to the $8.1 million in net proceeds from the sale
of land and buildings of the Company's former Mansfield and Canton stores. Net
cash provided by investing activities during 1999 was also positively impacted
by the absence of $1.1 million in additional capital expenditures experienced
during 1998.
Net cash used in investing activities was $1.4 million and $2.7 million in
1998 and 1997, respectively. Capital expenditures incurred in 1998 and 1997 of
$1.4 million and $3.6 million relate primarily to store development costs
associated with the comprehensive renovations of certain store locations.
Capital expenditures during 1997 were offset by $.8 million from the sale of
several parcels of property.
Cash Flows from Financing Activities
Net cash used in financing activities increased by $4.4 million to $10.6
million during 1999 from $6.2 million during 1998. The increase in net cash used
in financing activities between the two periods primarily reflects the $8.6
million increase in net payments against the Company's revolving credit
facility, partially offset by a $4.0 million decrease in mortgage loan payments.
As noted previously, the Company sold the land and buildings of its former
Mansfield and Canton stores for $8.6 million during 1999. These proceeds,
combined with an overall reduction in the utilization of the revolving credit
facility due to lower inventory purchase levels, enabled the Company to reduce
the outstanding balance of its revolving credit facility and extinguish the
remaining outstanding balances on its mortgage loans.
Net cash used in financing activities increased by $4.6 million from $1.6
million during 1997 to $6.2 million during 1998. The increase in net cash used
in financing activities between the two periods was due primarily to the
reduction in net borrowings under the revolving credit and mortgage loans of
approximately $4.3 million as a result of lower inventory purchases. Net cash
used in financing activities of $1.6 million in 1997 was primarily a result of
net principal payments on the Company's mortgage loans, note payable and capital
lease obligations.
On October 27, 1998, the Company entered into a Credit and Security Agreement
(Credit Agreement) with a bank. The Credit Agreement provides for borrowings up
to $20.0 million pursuant to a formula based upon the Company's inventories with
interest at the Company's option of either LIBOR or the prime rate for specified
maturities adjusted by varying points in accordance with the Security Agreement.
The Credit Agreement extends through October 27, 2001. A commitment fee of .375%
per annum is charged on the unused credit facility. Borrowings under the new
Credit Agreement are collateralized substantially by all of the Company's
assets, other than real estate.
The terms of the Credit Agreement require the Company to meet certain
financial covenants, and limit the level of additional indebtedness. The Company
was in compliance with all restrictive covenants of the Credit Agreement at
January 1, 2000.
The Company had $5.3 million and $10.1 million outstanding under its 3
revolving credit facilities at January 1, 2000 and January 2, 1999,
respectively.
3
<PAGE> 3
FORWARD-LOOKING STATEMENT
This Annual Report may contain statements that are forward-looking, as that
term is defined by the Private Securities Litigation Reform Act of 1995 or by
the Securities and Exchange Commission in its rules, regulations and releases.
The Company intends that such forward-looking statements be subject to the safe
harbors created thereby. All forward-looking statements are based on current
expectations regarding important risk factors. Accordingly, actual results may
differ materially from those expressed in the forward-looking statements and the
making of such statements should not be regarded as a representation by the
Company or any other person that the results expressed therein will be achieved.
Important risk factors include, but are not limited to, the following: general
economic conditions; consumer spending and debt levels; housing turnover;
weather; impact on sales and margins from both existing and new competition;
changes in operating expenses; changes in product mix; interest rates; changes
in and the application of accounting policies and practices; adverse results in
significant litigation matters; adverse state and federal regulations and
legislation; the occurrence of extraordinary events including events and acts
of nature or accidents; and the risks described from time to time in the
Company's Securities and Exchange Commission filings.
Dependence on Key Personnel
The Company's operations depend on the continuing efforts of its executive
officers and its senior management. Should the Company be unable to retain any
of its executive officers or senior management, the Company's prospects could be
adversely affected.
Competition
The home improvement, hardware and garden businesses are all highly
competitive. The Company competes against traditional hardware, plumbing,
electrical and home supply retailers, as well as warehouse-format and discount
retail stores and many of the Company's competitors have substantially greater
resources than the Company. Builders Square and Lowe's Company have had stores
in the Company's markets since 1985 and 1994, respectively. However, Builders
Square filed for Chapter 7 bankruptcy protection and exited the Northeastern
Ohio marketplace during 1999. Lowe's has continued to expand, opening additional
locations in 1996, 1997 and 1998. In the fourth quarter of 1997 and continuing
through 1999, Home Depot began operations in several of the Company's markets.
Both Home Depot and Lowe's have announced further expansion plans in 2000. In
addition, there has been increasing consolidation within the home improvement
industry, which may provide certain entities increased competitive advantages.
Specifically, increased competition including, but not limited to, additional
competitors' store locations, price reductions, and advertising and marketing
campaigns could have a material adverse effect on the Company's business.
Seasonality
The Company's business is seasonal in nature. On a per store basis, the
Company generally experiences its lowest sales during the first and fourth
quarters of each fiscal year. The Company believes the seasonality is caused by
the effect of winter weather on consumers' willingness to undertake outdoor home
improvement projects and the lack of significant sales of lawn and garden
products during the first and fourth fiscal quarters. In addition, a longer or
harsher period of winter weather than is usual in the Company's markets, or an
excessively rainy or unseasonably cold spring season, could have a material
adverse effect on the Company's sales. On a per store basis, the Company
generally experiences its highest sales during the second and third quarters.
However, gross profit margins are lower during the second quarter than in the
third quarter due to higher sales of lawn and garden and lumber and building
materials which generally carry lower gross profit margins than the Company's
average gross profit margin. The Company's gross profit margins on furniture,
plumbing, electrical and hardware are generally higher than the Company's
average gross profit margin, and sales of such products are not as seasonal as
sales of lawn and garden and building material products.
The Company's quarterly results of operations may also fluctuate materially
depending on the timing of new store openings, closings and store development
activities.
Inflation
General inflation has not had a significant impact on the Company during the
past three years. The Company's commodity products, primarily lumber and certain
building materials, experience unusual deflation or inflation due to a
combination of price volatility, increased demand and supply levels. Resulting
price increases or decreases are generally passed on to customers through retail
price changes and, accordingly, do not significantly impact the Company.
Year 2000 Issue
BACKGROUND. Some computers, software, and other equipment include programming
code in which calendar year data is abbreviated to only two digits. As a result
of this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems were widely expected to increase in frequency and severity into
and beyond 2000, and are commonly referred to as the "Millennium Bug" or "Year
2000 Problem."
ASSESSMENT. The Company completed its review of its internal computer programs
and systems prior to January 1, 2000 to ensure that the programs and systems
would be Year 2000 compliant. Upon entering the 2000 calendar year, the Company
did not encounter any significant Year 2000 problems and has been able to
operate its business in the normal course without interruption. Additionally,
the Company does not anticipate encountering any significant Year 2000 issues
with its internal computer programs and systems as it continues to operate
during the 2000 calendar year and beyond. The Company incurred approximately $.4
million to complete its Year 2000 efforts and does not anticipate incurring any
additional expenditures related to Year 2000 issues.
INTERNAL INFRASTRUCTURE. The Company believes that it identified and
subsequently modified, upgraded or replaced substantially all of the major
computers, software applications, and related equipment used in connection with
its internal operations prior to January 1, 2000 to ensure that there would be
no material disruption to its business. Upon entering the 2000 calendar year,
the Company did not encounter any significant Year 2000 problems with its
internal infrastructure and has been able to operate its business in the normal
course without interruption. Additionally, the Company does not anticipate
encountering any significant Year 2000 issues with its internal infrastructure
as it continues to operate during the 2000 calendar year and beyond. As such,
the Company does not anticipate incurring any additional expenditures related to
Year 2000 issues.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, photocopiers, telephone switches, security systems, and other
common devices may be affected by the Year 2000 Problem. Upon entering the 2000
calendar year, the Company did not experience any significant Year 2000 problems
with its office and facilities equipment and has been able to operate its
business in the normal course without interruption. Additionally, the Company
does not anticipate encountering any significant Year 2000 problems with its
office and facilities equipment as it continues to operate during the 2000
calendar year and beyond. The Company did not incur any material costs to
address Year 2000 issues in its office and facilities equipment and does not
anticipate incurring any additional expenditures related to Year 2000 issues.
SUPPLIERS. The Company communicated with third party suppliers of the major
computers, software, and other equipment used, operated, or maintained by the
Company prior to January 1, 2000 and identified and, where necessary, resolved
issues involving the Year 2000 Problem. Upon entering the 2000 calendar year,
the Company did not experience any significant Year 2000 problems with these
third party suppliers and has been able to operate its business in the normal
course without interruption. Additionally, the Company does not anticipate
encountering any significant Year 2000 issues with these third party suppliers
as it continues to operate during the 2000 calendar year and beyond.
Based on the procedures completed by the Company prior to January 1, 2000 and
the absence of any significant Year 2000 problems since entering the 2000
calendar year, the Company does not foresee any significant risks associated
with its Year 2000 compliance at this time. As such, the Company will continue
to operate without developing a comprehensive contingency plan as it is deemed
to be unnecessary.
4
<PAGE> 4
STATEMENT OF OPERATIONS D.I.Y. Home Warehouse, Inc.
- -----------------------
<TABLE>
<CAPTION>
-----------------------------------------------------
for the years ended January 1, 2000, January 2, 1999 and January 3, 1998 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 128,477,523 $ 172,600,414 $ 210,199,898
Cost of sales 94,829,103 127,215,341 152,624,851
- -------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 33,648,420 45,385,073 57,575,047
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Store operating, general and administrative 33,372,877 45,336,514 49,585,529
Store closing and development costs 2,082,542 2,143,394 1,436,416
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 35,455,419 47,479,908 51,021,945
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING (LOSS) INCOME (1,806,999) (2,094,835) 6,553,102
Other (expense) income:
Interest expense, net (1,029,603) (1,860,892) (2,151,662)
Other income, net 111,315 100,146 450,186
- -------------------------------------------------------------------------------------------------------------------------------
(Loss) income before income tax (benefit) expense (2,725,287) (3,855,581) 4,851,626
Income tax (benefit) expense (1,093,702) (1,556,130) 1,979,556
- -------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME $ (1,631,585) $ (2,299,451) $ 2,872,070
===============================================================================================================================
NET (LOSS) EARNINGS PER COMMON SHARE, BASIC AND DILUTED $ (0.22) $ (0.30) $ 0.38
===============================================================================================================================
Weighted average common shares outstanding, basic and diluted 7,276,059 7,594,540 7,633,825
===============================================================================================================================
</TABLE>
STATEMENT OF STOCKHOLDERS' EQUITY
- ---------------------------------
<TABLE>
<CAPTION>
for the fiscal years ended January 1, 2000, January 2, 1999 and January 3, 1998
-------------------------------------------------------------------------------
Total
Common Stock Retained Treasury Stockholders'
--------------------------- Earnings Stock Equity
Shares Amount
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 28, 1996 7,630,685 $ 22,942,005 $ 14,312,025 $ -- $ 37,254,030
Shares issued under the Retainer Stock Plan for
Non-Employee Directors 3,174 13,457 13,457
Net income 2,872,070 2,872,070
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, JANUARY 3, 1998 7,633,859 22,955,462 17,184,095 -- 40,139,557
Net loss (2,299,451) (2,299,451)
Purchase of common stock for treasury (357,800) (201,441) (201,441)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, JANUARY 2, 1999 7,276,059 22,955,462 14,884,644 (201,441) 37,638,665
Net loss (1,631,585) (1,631,585)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, JANUARY 1, 2000 7,276,059 $ 22,955,462 $ 13,253,059 $ (201,441) $ 36,007,080
===================================================================================================================================
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE> 5
D.I.Y. Home Warehouse, Inc.
BALANCE SHEET
<TABLE>
<CAPTION>
--------------------------------------
as of January 1, 2000 and January 2, 1999 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 309,349 $ 128,149
Refundable federal income taxes 606,170 706,545
Merchandise inventories 24,084,280 31,261,721
Deferred income taxes 1,636,875 1,542,590
Prepaid expenses and other assets 936,087 780,086
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 27,572,761 34,419,091
- ---------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, AT COST:
Land 2,409,742 4,275,402
Buildings 14,578,286 19,563,279
Furniture, fixtures and equipment 12,611,952 17,825,865
Capital lease assets 839,298 839,298
Leasehold improvements 8,739,049 11,246,915
- ---------------------------------------------------------------------------------------------------------------
39,178,327 53,750,759
Less accumulated depreciation and amortization 15,142,429 17,878,455
- ---------------------------------------------------------------------------------------------------------------
Property and equipment, net 24,035,898 35,872,304
Other assets 196,437 385,910
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 51,805,096 $ 70,677,305
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable, affiliate $ -- $ 300,000
Current maturities of long-term debt 188,900 1,288,330
Accounts payable 4,572,801 8,462,635
Accrued payroll and related expenses 1,264,433 1,935,110
Accrued expenses 871,332 2,143,569
Accrued sales and income taxes 554,043 1,151,434
Customer deposits 73,623 297,273
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 7,525,132 15,578,351
Revolving credit 5,310,031 10,134,153
Long-term debt 100,055 4,438,867
Deferred income taxes 2,862,798 2,887,269
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 15,798,016 33,038,640
- ---------------------------------------------------------------------------------------------------------------
Commitments -- --
STOCKHOLDERS' EQUITY:
Preferred stock, authorized 1,000,000 shares, none issued -- --
Common stock, no par value, 10,000,000 authorized shares,
7,633,859 shares issued at January 1, 2000 and January 2, 1999 22,955,462 22,955,462
- ---------------------------------------------------------------------------------------------------------------
Retained earnings 13,253,059 14,884,644
Treasury stock, 357,800 shares at cost (201,441) (201,441)
- ---------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 36,007,080 37,638,665
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,805,096 $ 70,677,305
===============================================================================================================
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE> 6
STATEMENT OF CASH FLOWS D.I.Y. Home Warehouse, Inc.
- -----------------------
<TABLE>
<CAPTION>
for the fiscal years ended January 1, 2000, January 2, 1999 -------------------------------------------------
and January 3, 1998 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (1,631,585) $ (2,299,451) $ 2,872,070
Adjustments to reconcile net (loss )income to net cash
provided by operating activities:
Depreciation and amortization 3,282,134 3,655,549 3,372,876
Deferred income tax expense (118,756) (924,683) 1,037,230
Common shares issued under Retainer Stock Plan -- -- 13,457
Net gain on sale of property from closed stores (1,859,734) -- --
Loss on write-off of leasehold improvements and property
and equipment from closed stores 2,619,701 848,551 --
Net loss (gain) on disposal of property 10,042 3,649 (214,675)
Changes in operating assets and liabilities:
Refundable federal income taxes 100,375 (340,582) (117,275)
Merchandise inventories 7,177,441 8,895,035 (1,694,631)
Prepaid expenses and other current assets (156,001) 66,264 55,575
Other assets 189,473 88,978 102,554
Accounts payable (3,889,834) (2,152,404) (1,663,416)
Accrued sales and income taxes (597,391) (235,644) (177,980)
Accrued expenses and other liabilities (2,166,564) (13,885) 765,396
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,959,301 7,591,377 4,351,181
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (312,478) (1,434,769) (3,599,180)
Proceeds from sale of property 8,096,741 -- 850,911
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 7,784,263 (1,434,769) (2,748,269)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments, notes payable (300,000) (300,000) (300,000)
Principal payments under capital lease obligations (175,011) (160,739) (157,624)
Principal payments of long-term debt (5,263,231) (9,266,833) (1,540,247)
Proceeds from revolving credit 6,728,464 12,384,153 9,000,000
Principal payments, revolving credit (11,552,586) (8,625,000) (8,625,000)
Purchase of treasury stock -- (201,441) --
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (10,562,364) (6,169,860) (1,622,871)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 181,200 (13,252) (19,959)
Cash and cash equivalents, beginning of year 128,149 141,401 161,360
- -----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 309,349 $ 128,149 $ 141,401
=======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,143,153 $ 1,907,064 $ 2,146,071
=======================================================================================================================
Cash Paid For Income Taxes $ 180,000 $ 456,288 $ 1,446,974
=======================================================================================================================
SUPPLEMENTAL INVESTING AND FINANCING INFORMATION:
Capital lease obligations incurred $ -- $ -- $ 23,310
=======================================================================================================================
</TABLE>
See Accompanying Notes to Financial Statements.
7
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS D.I.Y. Home Warehouse, Inc.
- -----------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
D.I.Y. Home Warehouse, Inc. ("DIY" or the "Company") operates retail
warehouse-format home improvement centers that sell products primarily to
do-it-yourself home repair and remodeling customers. The Company's "DIY Home
Warehouse" stores are located in Northeast Ohio and range in size from 66,000 to
109,000 square feet of enclosed selling space and 12,000 to 20,000 square feet
of outside selling space.
The significant accounting policies followed in the preparation of the
accompanying financial statements are summarized below.
Fiscal Year
The Company's fiscal year is comprised of 52 or 53 weeks, ending on the
Saturday nearest December 31. Unless otherwise stated, references to the years
1999, 1998 and 1997 relate to the fiscal years ended January 1, 2000, January 2,
1999 and January 3, 1998, respectively. Fiscal 1999 and 1998 consisted of 52
weeks while fiscal 1997 consisted of 53 weeks.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Financial Instruments
The Company has provided fair value estimates and information about valuation
methodologies of financial instruments in this note and Note 2 - Debt to the
accompanying financial statements. The Company's financial instruments consist
of investments in cash and cash equivalents and obligations under notes payable
and long-term debt.
Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments, with a
maturity of three months or less, carried at cost plus accrued interest, which
are readily convertible into cash. The carrying value for cash and cash
equivalents approximates fair value.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents. The Company places its
cash equivalents with high quality financial institutions.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out ("FIFO") method.
Advertising Costs
Advertising and promotion costs are charged to operations in the year
incurred. Advertising expense was $1,387,964, $2,624,787 and $2,181,935 in 1999,
1998 and 1997, respectively.
Store Closing Costs
During the first quarter of 1999, the Company incurred $259,656 of additional
closing costs associated with the closure of its Bedford, Ohio and Canton, Ohio
stores announced during the fourth quarter of 1998. These expenses have been
included in the store closing and development costs line item of the
accompanying statement of operations.
During the second quarter of 1999, the Company announced the closing of its
Boardman, Ohio; Mansfield, Ohio and Akron, Ohio stores and incurred $1,472,887
in closing costs, net of a gain on the sale of property from closed stores of
$1,859,734 (see Property, Equipment and Depreciation below). Included in these
net costs are the $2,619,701 write down of long-lived assets of these three
stores to their net realizable value, a $463,327 lease termination fee and
miscellaneous other closing costs of $249,593. These expenses have been included
in the store closing and development costs line item of the accompanying
statement of operations. In addition to these operating expenses, the Company
incurred $1,773,000 of inventory markdown costs related to the liquidation of
the merchandise inventories of the three closed stores. These inventory markdown
costs have been included in the cost of sales line item of the accompanying
statement of operations.
During the fourth quarter of 1998, the Company announced the closing of two of
its Bedford and Canton stores and recorded $1,837,703 of expense to close these
stores. Included in these costs are the write down of long-lived assets of these
two stores to their net realizable value. These expenditures have been included
in the store closing and development costs line item of the accompanying
statement of operations. In addition to these operating expenses, the Company
incurred $780,000 of inventory markdown costs related to the liquidation of the
merchandise inventories of the two closed stores. These inventory markdown costs
have been included in the cost of sales line item of the accompanying statement
of operations.
Store Development Costs
In connection with the repositioning of its merchandising mix, the Company
incurred $349,999 in store development expenses during the fourth quarter of
1999 to eliminate kitchen displays in its stores. These costs have been included
in the store closing and development costs line item of the accompanying
statement of operations.
The Company incurred $305,691 and $1,436,416 in store development costs during
1998 and 1997. During 1997, management assessed the business strategies and
opportunities available to the Company for it to differentiate itself in the
warehouse-format home improvement retail market. This comprehensive process
resulted in the development of new merchandising, marketing and other strategic
initiatives to strengthen the Company's market position. Select marketing and
merchandising programs were implemented on a Company-wide basis during 1997 and
the first quarter of 1998. Certain of the costs incurred in 1997 and 1998 relate
to the development and creative design of these strategic concepts while other
costs pertain to implementation including marketing, advertising, promotions and
payroll costs. These expenditures have been included in the store closing and
development costs line item of the accompanying statement of operations.
Property, Equipment and Depreciation
Property and equipment are recorded at historical cost and are depreciated
over the estimated useful lives of the assets using the straight-line method for
financial reporting purposes. The ranges of the estimated useful lives are:
buildings, 39 years; furniture, fixtures and equipment, 5-10 years; and
leasehold improvements, over the shorter of the useful life of the asset or the
initial term of the lease. At retirement or sale, the cost of the assets and
related accumulated depreciation are removed from the appropriate accounts, and
any resulting gain or loss is included in current income. Fully depreciated
assets are written off against accumulated depreciation. Routine maintenance,
repairs and renewals are expensed as incurred. Renewals and improvements which
substantially increase the life of property and equipment are capitalized.
In the second quarter of 1999, the Company sold the land and buildings of its
closed Mansfield and Canton stores for net proceeds of $8,096,741. These sales
resulted in a pre-tax gain of $1,859,734 which has been included in the store
closing and development costs line item of the accompanying statement of
operations.
Depreciation expense for 1999, 1998 and 1997 amounted to $3,282,134,
$3,655,549 and $3,372,876, respectively. Amortization of capital lease assets
has been included in depreciation expense. Accumulated amortization related to
capital leases amounted to $595,817, $429,364 and $261,504 in 1999, 1998 and
1997 respectively.
8
<PAGE> 8
Earnings Per Share
Earnings per share have been computed according to Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
January 1, 2000 January 2, 1999 January 3, 1998
----------------------------------------------------
<S> <C> <C> <C>
Net (loss) income applicable to
common shares $(1,631,585) $(2,299,451) $ 2,872,070
=================================================================================================
Weighted average common shares
outstanding for the period 7,276,059 7,594,540 7,633,825
Diluted effect of exercise of stock options -- -- --
- -------------------------------------------------------------------------------------------------
Weighted average common shares, assuming
issuance of the above securities 7,276,059 7,594,540 7,633,825
=================================================================================================
Net (loss) earnings per common share:
Basic $ (0.22) $ (0.30) $ 0.38
Diluted $ (0.22) $ (0.30) $ 0.38
</TABLE>
Options to purchase 928,000 shares of common stock at a weighted average
exercise price of $3.14 per share were outstanding at January 1, 2000 but were
not included in the computation of diluted earnings per share for 1999 because
the options would have an anti-dilutive effect on the net loss for the year.
Options to purchase 885,000 shares of common stock at a weighted average
exercise price of $3.63 per share were outstanding at January 2, 1999 but were
not included in the computation of diluted earnings per share for 1998 because
the options would have an anti-dilutive effect on the net loss for the year.
Options to purchase 998,000 shares of common stock at a weighed average
exercise price of $3.68 per share were outstanding at January 3, 1998 but were
not included in the computation of diluted earnings per share for 1997 because
the options' exercise prices were greater than the average market price for the
common shares for the year.
Reclassifications
Certain items in the 1998 and 1997 financial statements and notes thereto have
been reclassified to conform to the 1999 presentation.
2. DEBT
The Company has a Credit and Security Agreement (the "Credit Agreement") with
a bank. The Credit Agreement provides for borrowings up to $20,000,000 pursuant
to a formula based upon the Company's inventories with interest at the Company's
option of either LIBOR or the prime rate for specified maturities adjusted by
varying points as specified in the Credit Agreement. The Credit Agreement
extends through October 27, 2001. A commitment fee of .375% per annum is charged
on the unused credit facility. Borrowings under the Credit Agreement are
collateralized substantially by all of the Company's assets, except for real
estate. The terms of the Credit Agreement require the Company to meet certain
financial covenants and limit the level of additional indebtedness. The Company
was in compliance with all restrictive covenants of the Credit Agreement at
January 1, 2000.
The Company had $5,310,031 and $10,134,153 outstanding under the Credit
Agreement at January 1, 2000 and January 2, 1999, respectively, at weighted
average annual interest rates of 7.4% during 1999 and 7.2% during 1998.
<TABLE>
<CAPTION>
Long-term debt consists of the following: ---------------------
1999 1998
---------------------
<S> <C> <C>
Mortgage loans due in monthly installments of $98,206 including
principal and interest at 10.3% per annum, due January 1,
2005, collateralized by certain real property. $ -- $3,821,737
Mortgage loans due in monthly installments of $34,796 including
principal and interest at 9.28% per annum, due May 1,
2005, collateralized by certain real property. -- 1,441,494
Capital lease obligations (Note 4) 288,955 463,966
- --------------------------------------------------------------------------------------------------
Long-term debt 288,955 5,727,197
Less current maturities of long-term debt 188,900 1,288,330
- --------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities $100,055 $4,438,867
==================================================================================================
</TABLE>
Principal amounts of long-term debt payable, including capital lease
obligations in fiscal years 2000 and 2001 are $189,900 and $100,055,
respectively.
The carrying amount of the Company's borrowings under the Credit Agreement
approximate fair value. The fair value of the Company's long-term debt
outstanding at January 2, 1999 was estimated using a discounted cash flow
analysis based on the Company's then-current incremental borrowing rate for
similar types of borrowing arrangements. The carrying value of this debt,
$5,727,197, was estimated to have a fair value of $6,100,000 at January 2, 1999.
The Note payable, affiliate balance of $300,000 outstanding as of January 2,
1999 represented a demand note payable to Edgemere Enterprise, Inc., an entity
owned by the Company's majority shareholder. The note bore interest at .75%
above the base lending rate of Comerica Bank and was subordinated to the
Company's revolving credit facility and other debt with its banks. During 1999,
1998 and 1997, the Company made principal payments of $300,000 each on the Note
payable, affiliate in accordance with the terms of the subordination agreement
with the Company's banks. Interest expense on the Note payable, affiliate was
$7,650, $31,526, and $64,295 during 1999, 1998 and 1997, respectively.
During 1999, 1998 and 1997, interest expense was $1,032,114, $1,865,949 and
$2,170,060, respectively.
3. INCOME TAXES
The Company accounts for income taxes in accordance with the FASB Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the tax rates and laws that are currently in
effect.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Income tax (benefit) expense include the following:
-----------------------------------------------
1999 1998 1997
-----------------------------------------------
Federal $ (800,464) $ (622,968) $ 935,053
Deferred (293,238) (933,162) 761,469
State and local -- -- 283,034
- -------------------------------------------------------------------
$(1,093,702) $(1,556,130) $ 1,979,556
===================================================================
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate follows:
<TABLE>
<CAPTION>
------------------------------
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate (34.0) % (34.0)% 34.0%
State and local income taxes, net of federal benefit (5.9) (6.3) 6.2
Tax credits and other (0.2) (0.1) 0.6
- ----------------------------------------------------------------------------------------
Effective income tax (benefit) expense rate (40.1)% (40.4)% 40.8%
========================================================================================
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of assets and liabilities. The
deferred tax assets (liabilities) shown on the balance sheet are as follows:
--------------------------------
1999 1998
--------------------------------
Depreciation $(2,954,566) $(2,837,837)
LIFO (110,511) (169,113)
Accrued liabilities 470,244 876,045
State income tax 59,410 129,546
Net operating loss carry forwards 1,309,500 656,680
- -------------------------------------------------------------------------
Net deferred tax liability $(1,225,923) $(1,344,679)
=========================================================================
The Company has available net operating loss carryforwards of approximately
$1,553,000 and $5,585,000 for federal and state income taxes, respectively. The
federal income tax net operating loss carryforwards will expire principally in
the year 2019. Similarly, of the $5,585,000 in state income tax net operating
loss carryforwards, approximately $2,011,000 will expire principally in the year
2013 with the remainder expiring principally in the year 2014. In addition,
9
<PAGE> 9
the Company has available Alternate Minimum Tax credit carryforwards of
approximately $171,000 which may be used indefinitely to reduce federal income
taxes.
4. LEASES AND COMMITMENTS
The Company leases six retail stores, its corporate offices and warehouse
under operating leases. In addition, two of the Company's retail stores are
subject to land leases. The Company's operating leases have remaining terms from
1 to 8 years and have renewal options varying from 2 to 45 years. Five of the
Company's leases require additional lease payments based upon a percentage of
sales above certain sales levels. There were no percentage lease payment
requirements during 1999 or 1998. Percentage lease payments totaled $24,090
during 1997.
Future minimum rental payments required under operating and capital leases
that have non-cancelable lease terms in excess of one year and sublease rentals
due the Company under non-cancelable subleases are as follows:
<TABLE>
<CAPTION>
Capital
Operating Leases Leases
-------------------------------------------------------
Lease Sublease Net Lease
Payments Rental Payments Payments
Year ending: -------------------------------------------------------
<S> <C> <C> <C> <C>
2000 $ 3,023,684 $ 190,695 $ 2,832,989 $207,900
2001 2,830,022 209,800 2,620,222 100,925
2002 1,860,579 131,500 1,729,079 --
2003 1,065,147 -- 1,065,147 --
2004 1,000,068 -- 1,000,068 --
Thereafter 1,480,235 -- 1,480,235 --
- -----------------------------------------------------------------------------
Total minimum
lease payments $11,259,735 $ 531,995 $10,727,740 $308,825
==================================================================
Less amounts
representing interest 19,870
- -----------------------------------------------------------------------------
Present value of net
minimum lease
payments $288,955
=============================================================================
</TABLE>
Total net rental expense for all operating leases for 1999, 1998 and 1997 was
approximately $4,130,985, $3,990,000 and $3,943,000, respectively. Total net
rental expense is net of sublease rental income of $219,880, $187,500 and
$185,510 for 1999, 1998, and 1997, respectively. Also included in total net
rental expense for 1999 was $463,327 of lease termination fees associated with
the closure of the Boardman store.
The Company leased three of its retail stores from the Company's majority
shareholder or affiliated entities during 1999 and four of its retail stores
during 1998 and 1997. The majority shareholder sold one of the retail stores to
a third party during the fourth quarter of 1998. Rents associated with these
leases were $1,357,820, $1,784,555 and $1,873,992 during 1999, 1998 and 1997,
respectively.
5. STOCK OPTIONS
The Company has a Long Term Incentive Plan (the "Plan") which reserves
1,350,000 shares of the Company's authorized common stock for issuance. The Plan
provides for the granting of incentive stock options to purchase shares of
common stock at a price not less than 100% of the fair market value of the stock
on the dates options are granted. Options granted under the Plan vest over three
to five years at the rate of 33% to 20% each year and expire no more than ten
years from the date of grant. On May 21, 1997, the Company's Board of Directors
authorized an amendment to outstanding stock option awards to reprice such stock
options at an exercise price equal to the fair market value of the stock as of
that date. As a result, 796,000 options were repriced at the fair market value
on May 21, 1997. The vesting period of such options was reestablished to vest
over 3 years at a rate of one-third per year. A summary of the Company's stock
option activity and related information for 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
-----------------------------------
Average Option
Stock Option Price Per Share
-----------------------------------
<S> <C> <C>
Outstanding at December 28, 1996 801,000 $ 9.15
Granted 237,500 $ 3.75
Canceled (40,500) $ 7.76
Canceled in connection with stock option repricing (796,000) $ 8.88
Granted in connection with stock option repricing 796,000 $ 3.56
- ---------------------------------------------------------------------------
Outstanding at January 3, 1998 998,000 $ 3.68
Canceled (113,000) $ 4.10
- ---------------------------------------------------------------------------
Outstanding at January 2, 1999 885,000 $ 3.63
Granted 155,000 $ 0.79
Canceled (112,000) $ 3.73
- ---------------------------------------------------------------------------
Outstanding at January 2, 1999 928,000 $ 3.14
================================================================================================
</TABLE>
--------- --------- ---------
1999 1998 1997
--------- --------- ---------
Options exercisable at end of year 602,681 298,641 11,400
Weighted-average option price per share
of options exercisable $ 3.23 $ 3.75 $ 11.66
Options available for future grant 422,000 465,000 352,000
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------------
Range of Outstanding at Weighted Avg. Weighted Avg. Exercisable at Weighted Avg.
Exercise Prices January 1, 2000 Contractual Life Exercise Price January 1, 2000 Exercise Price
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.44 35,000 4.17 $0.44 -- --
$.075 30,000 4.67 $0.75 -- --
$1.00 80,000 4.50 $1.00 80,000 $1.00
$3.56 779,000 2.33 $3.56 519,281 $3.56
$4.69 3,000 1.67 $4.69 2,400 $4.69
$9.00 1,000 -- $9.00 1,000 $9.00
------- -------
928,000 602,681 $3.23
======= =======
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock option plan. Accordingly, since all options are granted at a fixed price
not less than the fair market value of the Company's common stock on the date of
grant, no compensation expense has been recognized relative to its stock option
plan. Had compensation expense for the Company's stock-based plan been
determined based on the fair value at the 1999, 1998 and 1997 grant dates for
awards under the plan consistent with the method of FASB Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation", the
Company's net (loss) income and (loss) earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
------------------------------------------
1999 1998 1997
------------------------------------------
<S> <C> <C> <C> <C>
Net (loss) income As Reported $(1,631,585) $ (2,299,451) $2,872,070
Pro Forma $(1,861,827) $ (2,565,906) $2,664,621
Net (loss) earnings
per common share,
basic and diluted As Reported $ (0.22) $ (0.30) $0.38
Pro Forma $ (0.26) $ (0.34) $0.35
</TABLE>
The fair value of each option granted during 1999 and 1997 was estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions. There were no options granted in fiscal
year 1998.
-------------------------------------------------
1999 1997
-------------------------------------------------
Shares Subject Shares Not Subject
to Repricing to Repricing
-------------------------------------------------
Risk free interest rates 5.1% - 6.0% 6.5% 6.2 - 6.5%
Expected life (years) 5 4 5
Volatility 82% 37% 38%
Dividend yield 0% 0% 0%
Option valuation models, like the Black-Scholes model, require the input of
highly subjective assumptions including the expected stock price volatility.
Since changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock options or the
resultant compensation expense for stock option awards.
10
<PAGE> 10
6. TREASURY STOCK TRANSACTIONS
On November 11, 1998, the Company received an unsolicited offer from a
brokerage firm on behalf of an existing shareholder to sell 357,800 shares of
the Company's stock (the "Shares") at $9/16 ($0.563). At that time, due to the
timing of the proposed transaction, the Company did not participate in the
proposed sale and the shares were acquired by the Company's Chairman and
Controlling Stockholder. On November 23, 1998, the Company accepted the
Controlling Stockholder's offer to sell the Shares to the Company at the price
per share which the Controlling Stockholder paid. The Company's decision to
purchase the Shares was based on the Company's conclusion that the purchase
would enhance shareholder value. The Company's lender approved the purchase of
the Shares. The Company also announced that it has no present intention to
acquire additional shares of its stock.
7. EMPLOYEE BENEFIT PLAN
The Company has a contributory 401(k) savings and investment plan for all
employees who have obtained certain age and length of service requirements.
Eligible employees may contribute up to 15% of their compensation to the plan,
subject to any limitations imposed by federal income tax regulations. In
addition, the Company matches 66% of the participants' contributions up to 6% of
their compensation. Each employee controls the investment of funds credited to
their respective account. Company contributions to this plan were $387,676,
$410,000 and $476,051 during 1999, 1998 and 1997, respectively.
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1999 1st 2nd 3rd 4th(a) Total(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 29,162,507 $ 46,086,969 $ 29,309,501 $ 23,918,546 $ 128,477,523
Gross profit 8,410,291 10,273,571 8,086,499 6,878,059 33,648,420
Net (loss) income (733,005) (758,759) 328,455 (468,276) (1,631,585)
Net (loss) earnings
per common share,
basic and diluted $ (0.10) $ (0.10) $ 0.05 $ (0.06) $ (0.22)
Weighted average
common shares
outstanding, basic
and diluted 7,276,059 7,276,059 7,276,059 7,276,059 7,276,059
</TABLE>
(a) During the fourth quarter of 1999, the Company reduced its general
liability reserve by $325,863 to better reflect its recent actual claims
experience. Additionally, the Company recorded $349,999 in store
development costs during the fourth quarter of 1999 to eliminate kitchen
displays in its stores.
(b) The sum of the 1999 quarterly earnings (loss) per common shares amounts do
not equal the fiscal 1999 loss per common share due to the effects of
rounding.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1998 1st 2nd 3rd 4th(a) Total(b)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 37,412,172 $ 56,334,029 $ 42,900,050 $ 35,954,163 $ 172,600,414
Gross profit 10,684,252 14,458,674 11,267,626 8,974,521 45,385,073
Net (loss) income (797,045) 885,394 (337,491) (2,050,309) (2,299,451)
Net (loss) earnings
per common share,
basic and diluted $ (0.10) $ 0.12 $ (0.04) $ (0.27) $ (0.30)
Weighted average
common shares
outstanding, basic
and diluted 7,633,859 7,633,859 7,633,859 7,476,584 7,594,540
</TABLE>
(a) Fourth quarter adjustments were not material to the quarterly results of
operations.
(b) The sum of the 1998 quarterly earnings (loss) per common shares amounts do
not equal the fiscal 1998 loss per common share due to the effects of
rounding.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
To the Stockholders and Board of Directors
D.I.Y. Home Warehouse, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of D.I.Y. Home Warehouse, Inc. at
January 1, 2000 and January 2, 1999, and the results of its operations and its
cash flows for each of the three years in the period ended January 1, 2000, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Cleveland, Ohio
February 16, 2000
11
<PAGE> 11
SELECTED FINANCIAL DATA AND OPERATING HIGHLIGHTS D.I.Y. Home Warehouse, Inc.
- ------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year
----------------------------------------------------------------
(Amounts in thousands, except per share data) 1999 1998 1997(1) 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 128,478 $ 172,600 $ 210,200 $ 212,068 $ 178,008
Cost of sales 94,830 127,215 152,625 156,612 128,672
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 33,648 45,385 57,575 55,456 49,336
Store operating, general and administrative expenses 33,373 45,336 49,586 46,954 40,935
Store preopening costs -- -- -- -- 1,778
Store development and closing costs 2,082 2,143 1,436 -- --
Other expense, net 918 1,761 1,701 2,147 1,431
- ----------------------------------------------------------------------------------------------------------------------------------
(Loss) income before income tax (benefit) expense (2,725) (3,855) 4,852 6,355 5,192
Income tax (benefit) expense (1,093) (1,556) 1,980 2,570 2,082
- ----------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (1,632) $ (2,299) $ 2,872 $ 3,785 $ 3,110
==================================================================================================================================
Net (loss) earnings per common share, basic and diluted $ (0.22) $ (0.30) $ 0.38 $ 0.50 $ 0.41
==================================================================================================================================
Weighted average common shares outstanding, basic and diluted 7,276 7,595 7,634 7,627 7,625
==================================================================================================================================
</TABLE>
(1) Fiscal year 1997 consisted of 53 weeks; all other years reported consisted
of 52 weeks.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA
<S> <C> <C> <C> <C> <C>
Number of stores open at end of period 11 14 16 16 16
Interior selling square footage at end of period 930,700 1,189,000 1,369,000 1,353,000 1,353,000
Comparable store sales increase (decrease) (13.2)% (17.9)% (2)% 7% (5)%
Number of employees 702 1,009 1,254 1,334 1,325
---------------------------------------------------------------------
(Amounts in thousands) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (at period end)
Working capital $ 20,048 $ 18,841 $ 23,851 $ 20,889 $ 23,297
Total assets 51,805 70,677 81,209 79,764 83,500
Notes payable and current maturities of long-term debt 189 1,588 1,546 1,698 1,452
Long-term debt, less current maturities 5,410 14,573 20,584 22,031 29,415
Stockholders' equity 36,007 37,639 40,140 37,254 33,439
</TABLE>
12
<PAGE> 1
EXH 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
D.I.Y. Home Warehouse, Inc. on Form S-8 (File No. 33-87020) of our report, dated
February 16, 2000, on our audits of the Financial Statements of D.I.Y. Home
Warehouse, Inc. as of January 1, 2000 and January 2, 1999 and for each of the
three years in the period ended January 1, 2000, which report is included in
Exhibit 13.1 of this Form 10-K.
/s/ PricewaterhouseCoopers, LLP
Cleveland, Ohio
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<EXCHANGE-RATE> 1
<CASH> 309,349
<SECURITIES> 0
<RECEIVABLES> 355,419
<ALLOWANCES> 0
<INVENTORY> 24,084,280
<CURRENT-ASSETS> 27,572,761
<PP&E> 39,178,327
<DEPRECIATION> 15,142,429
<TOTAL-ASSETS> 51,805,096
<CURRENT-LIABILITIES> 7,525,132
<BONDS> 5,410,086
0
0
<COMMON> 22,955,462
<OTHER-SE> 13,051,618
<TOTAL-LIABILITY-AND-EQUITY> 51,805,096
<SALES> 128,477,523
<TOTAL-REVENUES> 128,477,523
<CGS> 94,829,103
<TOTAL-COSTS> 94,829,103
<OTHER-EXPENSES> 35,455,419
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,029,603
<INCOME-PRETAX> (2,725,287)
<INCOME-TAX> (1,093,702)
<INCOME-CONTINUING> (1,631,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,613,585)
<EPS-BASIC> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
