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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-23270
DOMINION HOMES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-1393233
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5501 Frantz Road, Dublin, Ohio 43017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 614-761-6000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares with no par value
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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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. ( )
Based upon the closing sale price reported on the NASDAQ National Market on
March 25, 1998, the aggregate market value of the Common Shares of the
Registrant held by non-affiliates (assuming, for this purpose, that all
executive officers and directors are affiliates) on that date was $22,883,873.
As of March 25, 1998 there were 6,271,053 Common Shares issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 20, 1998 (in pertinent part, as indicated)............ Part III
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PART I
ITEM 1 BUSINESS
BACKGROUND
The Company was founded in 1976 by Donald Borror, its Chairman of the
Board, and was incorporated in Ohio in October 1993. Prior to the consummation
of the Company's initial public offering in March 1994, the business of the
Company was operated as part of the homebuilding and related divisions (the
"Homebuilding Divisions") of Borror Realty Company ("BRC"), an Ohio corporation
incorporated in 1946. In connection with the Company's initial public offering,
the Company and BRC entered into a Corporate Exchange and Subscription Agreement
pursuant to which the Company acquired substantially all of the operating assets
of the Homebuilding Divisions. At March 25, 1998, BRC owned 4,082,000 Common
Shares of the Company, representing 65.1% of the issued and outstanding Common
Shares.
The principal executive offices of the Company are located at 5501
Frantz Road, Dublin, Ohio and its telephone number is (614) 761-6000.
MARKET OVERVIEW
The Company is currently the second largest homebuilder in the Central
Ohio market (based upon revenues and closings) and had a 22.7% share of the
homebuilding market in 1997. Columbus, the capital of Ohio, has been a stable
market, with diverse economic and employment bases. Columbus is the home of The
Ohio State University, which has the second largest number of students on one
campus of any university in the United States. In addition, a number of notable
organizations have their headquarters in Central Ohio, including Honda of
America Manufacturing, Inc., The Limited, Inc., Nationwide Insurance Company,
Banc One Corporation, Wendy's International, Inc., Huntington Bancshares
Incorporated, Battelle Memorial Institute, Worthington Industries, Inc., The
Scotts Company and Cardinal Health, Inc.
Columbus also is the county seat of Franklin County and the largest
city in the Columbus Metropolitan Statistical Area (the "CMSA"). The CMSA
includes Franklin, Pickaway, Madison, Fairfield, Delaware and Licking Counties
(the "CMSA Counties"). References herein to Central Ohio means the CMSA Counties
and Union County. The Company builds homes in Union County and in all of the
CMSA Counties except Pickaway and Madison Counties.
PRODUCTS
The Company offers three distinct series of single-family homes that
are differentiated by size, price, standard features and available options. This
product diversity allows the Company to target specific market segments and
appeal to a wide range of home buyers. The Company's products range from starter
homes to executive homes with prices from $95,500 to more than $300,000. Homes
offered in the Century Series generally range in size from 1,100 to 1,900 square
feet, at prices from $95,500 to $175,000, and are targeted to appeal primarily
to young, entry level home buyers. Homes offered in the Celebrity Series
generally range in size from 1,700
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to 2,400 square feet, at prices from $135,000 to $205,000, and are targeted to
appeal to both entry level and first-time, move-up home buyers. Homes offered in
the Tradition Series generally range in size from 2,000 to 3,000 square feet, at
prices from $160,000 to more than $300,000, and are targeted to appeal primarily
to existing homeowners who desire to move up to larger homes with more
amenities. The Company has offered condominiums for sale in the past but is
currently focused on single-family homes.
The Company is a "full option" homebuilder. Each of the Company's homes
has a standard design and basic features. After the purchaser has chosen a home
from among the 40 standard floor plans and elevations available, the purchaser
can "individualize" the home, at additional cost, through the selection of
structural, exterior and interior options. Structural options include two-foot
side-wall extensions, side-load garages and master bathrooms. Exterior/interior
options include brick or stone facades, fireplaces, and upgrades on bathroom and
kitchen fixtures, cabinets, tiles and floorings. The Company's homes feature
nationally recognized and industry leading brand names, including Trane(R)
natural gas furnaces, Andersen(R) wood windows, Armstrong(R) flooring, General
Electric(R) appliances, Wilsonart(R) decorative laminate, Aristokraft(R)
cabinets and the Kohler(R) family of bathroom and kitchen fixtures.
MARKETING AND SALES
The Company markets all of its homes under the "Dominion Homes(SM)"
tradename. The Company employs an extensive targeted marketing program that
includes advertising in newspapers and magazines, by direct mail, on billboards
and on radio and television. The Company's advertising typically emphasizes
either the quality of its homes, the location of its communities, the brand name
components used in its homes or the wide variety of its home styles and options.
The Company believes these factors differentiate its products and re-enforce its
"Dominion Homes - The Best of Everything(SM)" brand awareness program. At the
end of 1997, according to a third party survey, the Dominion Homes name was
recognized by 86% of the Central Ohio respondents.
The Company also markets a "Helping Hand Program" to purchasers of its
Century Series Homes. The Helping Hand Program is a work equity program approved
by HUD which permits home buyers to reduce their down payments by performing
some minor construction tasks themselves. Through training seminars conducted
monthly by the Company's personnel and a detailed video, participating home
buyers receive step-by-step guidance on completing these tasks. The Company
aggressively markets this program because it enables the Company to sell homes
to entry level home buyers who otherwise would not have the down payment
necessary to qualify for mortgage financing. This program also allows home
buyers to purchase homes with more desirable features and amenities than they
would otherwise qualify to purchase. In 1997, approximately 76% of the
purchasers of the Company's Century Series homes participated in the Helping
Hand Program.
The Company conducts its home sales from on-site sales offices in
furnished model homes. Each sales representative is an employee of the Company
and is trained and equipped to fully explain the features and benefits of the
Company's homes, to determine which home best suits the customer's needs and to
explain the construction process. The Company devotes significant
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attention to the training and re-training of sales representatives to assure
high levels of professionalism and product knowledge. The Company believes that
the use of an in-house sales staff allows for a more knowledgeable sales
presentation and enables the Company to communicate a consistent message to its
customers. Sales representatives are compensated on a commission and bonus
basis. At December 31, 1997, the Company employed 29 sales representatives and
operated 26 model homes, of which one was leased from BRC.
The Company welcomes independent broker participation because it
believes that such participation introduces the Company to customers who might
not otherwise consider purchasing a home from the Company. In 1997, the Company
paid sales commissions of $3.6 million to independent brokers on 771 homes that
had an aggregate sales price of $116.6 million.
The Company uses promotional and sales incentives such as discounts on
the purchase price of its homes or options to market its products. It is the
Company's intention to use this practice on a selective or seasonal basis to
target slow sales areas and manage production capacity. The Company also offers
a discount to customers who previously purchased one of its homes, to employees
of subcontractors it uses in the building process, and to its own employees.
Sales of the Company's homes are made pursuant to standard sales
contracts. These contracts generally require the purchaser to make a $500
deposit at the time of execution of the contract and to pay the balance of the
cash down payment, typically up to 3.0% of the purchase price, at the start of
construction.
The Company generally does not commence construction of a home until it
obtains a sales contract and notice from the customer's lender that mortgage
financing has been approved. However, the Company routinely commences
construction of a home with a sales contract that is contingent upon the
customer selling an existing home. Some customers fail to complete their
contracts, which results in partially constructed homes that are no longer under
contract. In addition, the Company selectively starts construction of a limited
number of homes without a contract to create an inventory in anticipation of
seasonal demand and to attract customers, such as corporate transferees, who
need homes within 60 to 90 days. At December 31, 1997, the Company had 109
inventory homes in various stages of construction.
DESIGN AND CONSTRUCTION
The Company believes that it is a leading innovator in new home
construction. Its homes include superior construction features such as its
engineered floor truss system; safer, less steep stairs; B.F. Goodrich(R) CPVC
plumbing pipe; and Twenty First Century wiring, which includes Category 5 wiring
and two-way interactive cable wiring.
The Company employs a full-service architectural department which
controls the design of its homes. Each home design is value-engineered for
greater efficiency in the building process and lower cost to the purchaser. For
example, where possible, back-to-back bathrooms are designed to avoid the need
for multiple drains and room sizes are designed to correspond to standard carpet
widths to avoid the expense and waste involved in cutting carpet. On an ongoing
basis, the design team utilizes the Company's knowledge of the Central Ohio
market and the feedback
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gained from its customers to create new designs and modify existing designs to
keep pace with changing consumer preferences.
The design team is aided by a computer graphics design system. This
system provides the Company with greater flexibility in creating new designs and
modifying existing designs and enhances the Company's ability to accurately
estimate the materials necessary for a particular design.
The Company acts as the general contractor for the construction of its
homes. The Company's construction superintendents, together with the
construction managers to whom they report, monitor construction, coordinate the
activities of subcontractors and suppliers, maintain quality and cost controls
and monitor compliance with zoning and building codes.
The use of subcontractors by the Company enables it to minimize its
investment in employees, equipment and building supply inventory. This practice
also increases the Company's flexibility in responding to changes in the demand
for housing. The Company has long standing business relationships with many of
its subcontractors. These relationships, coupled with the volume and efficient
design of homes built by the Company, have enabled the Company to negotiate
favorable agreements with its subcontractors.
Through its ownership of a lumberyard, which allows it to purchase its
lumber directly from mills and wholesalers, the Company has reduced its exposure
to risks of inadequate supply and significant price fluctuations. From time to
time the Company purchases lumber for delayed delivery to ensure adequate supply
and predictable cost. During 1997, substantially all of the lumber purchased
through the lumberyard was used by the Company.
The Company has implemented various administrative systems to support
its construction operations. For instance, the Company's management information
system allows the Company to control construction costs by making available the
information necessary to monitor subcontractor performance and expenditures on
each home. Subcontracted work is authorized by work orders, the cost of
deviations from the work order must be approved for payment by the Company's
construction superintendents and significant cost variances are investigated.
These techniques permit the Company to effectively monitor gross profit margins.
DECORATING CENTER
Since the introduction of its decorating center in 1990, the Company
has been able to offer customers full-service advice in the decorating process.
Providing the ambiance of a quality retail store, the decorating center features
full-sized samples and vignettes and computer aided graphics that depict the
exterior of the customer's home. These features allow the customer to visualize
color combinations and options, feel the textures and picture how the selections
work together. Management believes that the decorating center reduces customer
anxiety in the decorating and selection process and significantly contributes to
customer satisfaction. The Company's experienced, full-time decorating
consultants are available daily to assist the customer in making selections from
among hundreds of options on display at the decorating center, from bathroom
fixtures to outdoor siding. Beginning in January 1997, the Company placed the
responsibility for
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the sale of decorating options and upgrades with its decorating consultants and
began providing commission on upgrades. Previously these functions were provided
by the Company's sales representatives. Since initiating this change, customer
satisfaction, as well as sales of options and upgrades, have improved.
CUSTOMER SATISFACTION PROGRAM
The Company's strategy is customer driven and market focused. The
Company recognizes that, for most customers, the purchase of a home represents
the single largest investment that they will ever make. The Company strives to
ensure the soundness of this investment through the delivery of quality homes
that are located in attractive communities and that provide lasting value.
The Company also understands that many prospective customers are
uncertain about how to choose a homebuilder and a home and have little knowledge
about home construction. Accordingly, every phase of the Company's operations,
from the beginning of the selling process through construction, closing and
service after the closing, educates and involves the customer in the
homebuilding process.
At the construction conference, the construction superintendent
assigned to the customer's home meets with the customer to review the home plans
and explain the construction process and schedule. Because the Company wants the
customer to see the quality built into the customer's home, the customer is
invited to visit the home site at any time during the course of construction.
The Company's "Gold Medal" quality assurance program is designed to
provide the customer with peace of mind. Under this program, each home is
subject to eight separate inspections by the Company's construction personnel,
and members of the Company's senior management inspect randomly selected homes
on a monthly basis. Because of the Company's attention to quality and its
commitment to "doing it right the first time," the Company offers a
comprehensive warranty program that features a two-year warranty covering all
mechanical elements (including heating, plumbing and electrical systems), roof,
windows and doors, as well as a twenty-five year warranty covering all major
structural components. The structural warranty on each home is automatically
transferable to subsequent owners of the home. The Company also passes along to
its customers all warranties provided by manufacturers and suppliers. The
Company believes that its warranty program is one of the best warranty packages
offered in the homebuilding industry.
The Company invites each customer at and after closing to complete
questionnaires that rate the customer's sales representative, construction
superintendent and decorating consultant and provide certain other information
regarding the customer's homebuilding experience. The Company uses the
information obtained from these questionnaires to refine its products, programs
and services to assure that the Company continues to be responsive to its
customers.
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LAND ACQUISITION AND DEVELOPMENT
The Company believes that one of its key strengths has been its ability
to identify and acquire property to be utilized as lots for future residential
home development. The Company's practice has been to develop most of the lots on
which it builds its homes. The Company generally does not buy unimproved land
for speculation and generally limits its investment in unimproved land to an
amount that it expects to be able to develop and sell within three to five
years. All of the Company's land purchases must be reviewed by the Company's
Strategic Land Committee comprised of the Company's Chief Executive Officer and
certain other members of senior management.
The Company believes that it obtains certain advantages through its
practice of acquiring and developing unimproved land. This practice provides the
Company with the ability to: (i) improve its profit margins by reducing the cost
of finished lots; (ii) maintain an adequate supply of finished lots to meet
market demand; (iii) control the details of development and create in its
communities a distinctive look of quality and success; and (iv) construct homes
more efficiently.
The Company believes that its understanding of the Central Ohio market
also gives it an advantage in identifying and acquiring unimproved land with
good market potential. In considering the suitability of unimproved land for
development, the Company reviews such factors as (i) availability of existing
community services such as sewers, water, gas and electricity; (ii) estimated
costs of development; (iii) quality of school systems; (iv) population growth
patterns; (v) proximity to existing developed areas; (vi) employment growth
rates; (vii) anticipated absorption rates for new housing; and (viii)
availability of transportation.
Although the Company purchases land and engages in land development
activities primarily for the purpose of maintaining an adequate supply of lots
on which to build, the Company also sells unimproved land and finished lots to
developers and other homebuilders. Revenues from the sale of unimproved land and
developed lots in 1997 was $2.2 million.
Prior to the acquisition of unimproved land, the Company ensures that
any necessary zoning, environmental or other governmental approvals required to
develop the land into residential lots have been obtained and that the land is
served by utilities. The Company's engineering and design professionals then
plan and engineer the land and construct the streets, sewers, water and drainage
facilities and other improvements to meet the Company's specifications. In
developing land, the Company is required by some municipalities and other
governmental authorities to provide letters of credit to secure performance of
the Company's obligations to install sewers, streets and other improvements. At
December 31, 1997, the Company had an aggregate of $6.6 million of letters of
credit outstanding for these purposes. The Company does not believe that any of
the outstanding letters of credit are likely to be drawn upon.
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To limit its risk, the Company attempts to control land through the use
of option and contingent purchase contracts. These contracts condition the
Company's obligation to purchase land upon the Company's review and approval of
such matters as zoning, utilities, soil and subsurface conditions, environmental
and wetland conditions, levels of taxation, traffic patterns, development costs,
title matters and other property-related criteria.
The Company designs each of its residential communities to have its own
identity. Through its control over the details of development, from the
placement of streets to the design of each community entryway, the Company
creates in each of its communities a distinctive look of quality and success.
The Company generally completes the sale of homes in its communities in time
periods that range from three to five years from first to last sale, with
smaller communities generally taking less time to complete than larger ones. In
addition, the Company typically incorporates a homeowner association for
communities with common areas to ensure the continued maintenance of the common
areas after the community is developed.
The Company occasionally enters into joint venture agreements with
other homebuilders to own and develop communities. The primary reason is to
limit the Company's exposure to owning large amounts of land in a single
community and the risks associated with longer holding periods for those larger
communities. The Company also has purchased finished lots in certain communities
which were developed by BRC under various joint venture agreements. The lots
were purchased at a purchase price equal to the lesser of (i) BRC's adjusted tax
basis in such lots plus $500 per lot or (ii) the fair market value of such lots.
Such purchases totaled approximately $4.8 million for the year ended December
31, 1997.
Land inventory owned by the Company includes land titled in the
Company's name or which the Company is committed to purchase. Land inventory
controlled by the Company represents land which the Company has the right to
acquire under contingent purchase contracts and option contracts, including
option contracts with BRC. The option contracts with BRC relate to 10 finished
lots and unimproved land which the Company expects will be developed into an
estimated 47 finished lots.
The following table sets forth the Company's land inventory as of
December 31, 1997:
<TABLE>
<CAPTION>
Finished Lots Under Unimproved Land Total
Land Inventory Lots Development Estimated Lots Estimated Lots
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<S> <C> <C> <C> <C>
Owned by the Company 1,285 248 3,600 5,133
Controlled by the Company 10 0 2,783 2,793
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1,295 248 6,383 7,926
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</TABLE>
CUSTOMER FINANCING
The Company currently does not offer customer financing because it does
not own or operate a mortgage lending business. However, the Company does assist
customers in obtaining financing by referring them to independent mortgage
brokers that offer qualified customers a
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variety of financing options, including both government insured and conventional
financing programs. Additionally, the Company pays certain elements of its
customers' costs of financing with certain mortgage lenders with which the
Company has a relationship, including his or her loan origination fees, rate
commitment fees and discount points. In the event that a customer chooses to
make his or her own financing arrangements, the Company will reduce the purchase
price of the home.
Upon request and the payment of a fee, the Company will build a home
under FHA or VA guidelines to allow the customer to finance the purchase through
a FHA or VA mortgage program. In comparison to conventional financing,
government insured financing generally allows customers to purchase homes with a
higher percentage of their incomes directed toward housing expenses and with
lower down payments (as little as 1% when used in conjunction with the Company's
Helping Hand Program). FHA and VA rules also are generally more liberal with
respect to the amount of points and closing costs that the seller may pay.
During 1997, 49.7% of the Company's closings involved government insured
financing. At December 31, 1997, the FHA financing limit was $123,900 in the
CMSA Counties and $107,500 in Union County. On March 1, 1998, the FHA financing
limit was increased to $128,700 in the CMSA Counties and $118,000 in Union
County.
In addition, the Company offers other non-conventional financing
programs, including the Company's Helping Hand Program which is available to
purchasers of its Century Series Homes. This work-equity program, approved by
HUD, allows home buyers to reduce down payments significantly by performing
certain minor construction tasks themselves.
Because virtually all of the Company's customers use long-term first
mortgages to finance their home purchases, adverse economic conditions,
increases in unemployment, increases in mortgage interest rates and a reduction
in the scope or funding of government programs could deter or eliminate a
substantial number of potential customers for the Company's homes.
TITLE INSURANCE AGENCY
During the first quarter of 1997, the Company participated in the
creation of a title insurance agency, Alliance Title Agency, that began
operating on April 1, 1997. Alliance was formed to provide title insurance to
the Company's customers and third parties and to facilitate closing of the
Company's homes. The Company believes that, through the operations of Alliance,
the Company has improved its service to customers and enhanced its
administrative processes.
AVAILABILITY OF LABOR AND RAW MATERIALS
During periods of increased construction activity, the homebuilding
industry has faced shortages in the availability of skilled labor. Waiting for
skilled labor to become available may result in construction delays, while the
use of less skilled labor to fill a skilled labor shortage may cause quality
standards to suffer. Additionally, harsh winters could result in a larger than
usual labor demand in the early spring from the homebuilding industry. Increases
in the demand for skilled labor also can result in increases in the cost of such
labor. The Company believes that by taking a long-term approach to its
relationships with subcontractors and by providing a consistent
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stream of work it is able to enhance its ability to retain subcontractors and
better control the cost of skilled labor.
The principal raw materials used in the homebuilding industry, lumber,
brick and concrete, as well as plumbing and electrical supplies, generally are
available from a variety of sources, but are subject to periodic price
fluctuations. In particular, lumber has occasionally been subject to limited
availability and significant price increases. Because the Company may not be
able to pass on to its customers price increases in raw materials or labor,
future price increases in these items could have a material adverse effect on
the Company's profitability.
COMPETITION
The homebuilding industry in the Central Ohio market is highly
competitive. The Company competes with national, regional and local
homebuilders, some of which have greater financial, marketing, sales and other
resources than the Company. The Company competes with other homebuilders and the
resale market for the sale of homes on the basis of such factors as location,
price, design and the Company's reputation for quality and service. The Company
also competes with other homebuilders for materials and skilled labor and with
other homebuilders and land developers for financing and desirable unimproved
land. The Company believes that its primary competitive strengths are: (i) its
knowledge of the Central Ohio market, which has allowed it to capitalize on
opportunities for advantageous land acquisition in desirable locations; (ii) its
ability to design and offer communities and homes that home buyers find
appealing and (iii) its reputation for quality and service.
REGULATION
The Company is subject to environmental, wetlands, zoning, land use,
sales, building design, construction, health and safety and other regulation by
various federal, state and local authorities. The Company must obtain licenses,
permits and approvals from various governmental authorities to conduct its
business, the granting of which are beyond the Company's control. The Company is
subject to local regulations which impose zoning and density requirements in
order to limit the areas for residential development and the number of houses
within particular areas.
The Company could be subject to periodic delays or could be precluded
entirely from developing land due to building moratoriums. Generally, such
moratoriums relate to insufficient water or sewage facilities within specific
areas or subdivisions. To date, moratoriums have not had a material adverse
effect on the Company's business.
The Company generally conditions its obligation to purchase unimproved
land on, among other things, obtaining acceptable zoning and soil and wetland
studies. Accordingly, land development activities historically have not been
materially adversely affected by zoning restrictions or environmental
liabilities. However, there can be no assurance that zoning restrictions will
not adversely affect the Company in the future or that the Company will not
incur material liabilities relating to the removal of hazardous waste or other
environmental matters affecting land acquired by the Company.
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Increasingly stringent requirements could be imposed on homebuilders
and land developers in the future. Such requirements could have a material
adverse effect on the Company and the industry. Although the Company cannot
predict the effect of compliance with any such additional regulatory
requirements, the Company could be required to implement time-consuming and
expensive compliance programs.
SERVICE MARKS
The Company has adopted, has used and owns registrations in the State
of Ohio for the service marks "Dominion Homes(SM)" and "Tradition Homes(SM)".
The Company also has adopted, has used, and owns the service marks in the
State of Ohio for "The Best Building Experience(SM)" and "Building Relationships
That Last(SM)". In 1996, the Company was awarded federal registrations of the
latter two service marks. In January 1998, the Company was awarded federal
registration of the service mark "The Best of Everything(SM)". The Company
is currently pursuing federal registration of the service mark "Dominion
Homes(SM)".
EMPLOYEES
On December 31, 1997, the Company employed 348 people (including 17
part-time employees), of which 148 were employed in construction, 68 in sales,
55 in the lumber division, and 77 in management, administrative or clerical
positions. Although the Company's employees are not represented by labor unions
or covered by collective bargaining agreements, certain of the subcontractors
engaged by the Company are represented by labor unions or are subject to
collective bargaining arrangements. The Company believes that its relationships
with its employees and subcontractors are generally good.
OTHER INFORMATION
Information regarding seasonality, practices of the Company regarding
working capital items and backlog orders is contained in the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
ITEM 2 PROPERTIES
During 1997, the Affiliated Transaction Review Committee of the Board
of Directors of the Company (composed of the three independent directors)
reviewed and approved the sale by the Company to BRC of the Company's corporate
office building and the contemporaneous execution by the Company of a long-term
lease with BRC for the corporate office building. The sale was closed and the
lease was executed on December 29, 1997. The purpose of the transaction from the
Company's perspective was to create additional liquidity with which to invest in
assets associated with the homebuilding process and to allow the Company to
reduce it's financing costs. The office building was sold at a price of
$3,950,000, less a credit of up to $200,000 for roof repairs and sidewalk
improvements, together with parking expansion. The lease is for a term of twelve
years at a rental rate of $12.00 per square foot on a total net basis with two
options to renew for periods of five years each at then-current market rates.
Both the
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sale price and rental rates were established by an MAI appraisal commissioned by
the Committee, and confirmed in a review for the Committee by a second MAI
appraiser.
The Company owns a lumberyard located on 6.1 acres in Columbus, Ohio.
The facility includes ten buildings containing approximately 75,000 square feet
of space. Two buildings are constructed of steel and the remaining eight
buildings are constructed of concrete block and wood.
The Company leases space in a shopping center owned by BRC which the
Company uses for its 4,200 square foot decorating center and a 1,350 square foot
architectural office.
In addition, the Company leases from unaffiliated third parties
approximately 5,400 square feet of office-warehouse space in three locations
under short term leases. The Company uses the facilities for warranty operations
and storage.
During 1997, the Company entered into a program with an unaffiliated
third party to which the Company expects to sell and lease back most of its
model homes. In prior years the Company occasionally sold and leased back model
homes, however the majority were owned by the Company. During 1997, fourteen
model homes were sold and leased back pursuant to this program. The Company also
sold and leased back an additional two model homes to another unaffiliated third
party.
ITEM 3 LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, most of which
arise in the ordinary course of business and some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5 STOCK MARKET PRICES AND DIVIDEND POLICY
The Company's Common Shares are traded on the Nasdaq National Market
under the symbol "DHOM." The following table sets forth for the periods
indicated the high and low sales prices for the Common Shares, as reported by
the Nasdaq National Market.
<TABLE>
<CAPTION>
SALES PRICES
--------------------
CALENDAR YEAR ENDING DECEMBER 31, 1998 HIGH LOW
-------------------------------------- ---- ---
<S> <C> <C>
First Quarter (Through March 25, 1998)............................ $12.50 $9.25
CALENDAR YEAR ENDED DECEMBER 31, 1997 HIGH LOW
------------------------------------- ---- ---
First Quarter..................................................... $5.13 $4.38
Second Quarter.................................................... $5.00 $4.38
Third Quarter..................................................... $9.00 $4.38
Fourth Quarter.................................................... $12.00 $7.63
CALENDAR YEAR ENDED DECEMBER 31, 1996 HIGH LOW
------------------------------------- ---- ---
First Quarter..................................................... $4.88 $3.25
Second Quarter.................................................... $4.63 $3.88
Third Quarter..................................................... $4.38 $3.75
Fourth Quarter.................................................... $4.63 $4.00
</TABLE>
On March 25, 1998, the last sale price of the Common Shares, as
reported by the Nasdaq National Market, was $11.88 per share, and there were
approximately 92 holders of record of the Common Shares.
The Company has not paid any dividends in the past and does not
anticipate that it will pay any dividends in the near term. The provisions of
the Company's bank credit facilities limit the amount of dividends that the
Company may pay during any calendar year to 25% of the Company's net income
after taxes for such year.
13
<PAGE> 14
ITEM 6 SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table summarizes certain selected financial and operating
data of the Company since the initial public offering in 1994 and of the
Homebuilding Divisions of BRC prior to the initial public offering. This data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements of
the Company, including the notes thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA 1997 1996 1995 1994 1993
- ----------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues.................................... $207,926 $175,579 $178,112 $161,895 $141,821
Gross profit................................ 49,553 39,081 27,102 32,701 33,745
Income from operations...................... 18,919 12,756 887 6,333 11,983
Income (loss) before income taxes........... 13,274 6,411 (5,182) 3,315 8,968
Provision for income taxes(1)............... 5,569 2,374 (1,684) 1,326 3,587
Net income (loss)(1)........................ 7,705 4,037 (3,498) 1,989 5,381
Diluted earnings (loss) per share(1)(3)..... 1.20 0.64 (0.56) 0.35 1.39
Total assets at year end.................... 117,795 103,826 105,031 118,215 75,216
Long term obligations at year end........... 57,763 54,563 61,782 70,363 50,828
OPERATING DATA 1997 1996 1995 1994 1993
- -------------- ---- ---- ---- ---- ----
Homes:
Sales contracts (2)......... 1,402 1,308 1,253 1,103 1,284
Closings.................... 1,387 1,188 1,206 1,138 1,067
Backlog at year end......... 703 688 568 521 556
Aggregate sales value of homes in backlog
at year end................. $106,686 $101,202 $83,167 $75,438 $80,036
</TABLE>
- -----------------------
(1) Pro forma for 1994 and 1993.
(2) Net of cancellations.
(3) All earnings per share calculations reflect the adoption of SFAS No.
128 "Earnings per Share".
14
<PAGE> 15
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company achieved record revenues, number of homes delivered and net
income for 1997. Revenues for 1997 increased by 18.4% to $207.9 million from
$175.6 million for 1996. Net income increased by 90.9% to $7.7 million in 1997
from $4.0 million in 1996. The Company delivered a record 1,387 homes in 1997
compared to 1,188 homes in 1996. Home sales for 1997 increased by 7.2% to 1,402
from 1,308 for 1996. Despite the record number of homes delivered in 1997, the
Company ended 1997 with a record backlog of 703 sales contracts compared with
688 at the end of 1996. The Company's market share in Central Ohio grew to 22.7%
by year-end 1997 from 18.9% at year-end 1996.
The Company's record performance was due, in part, to programs the
Company implemented in 1997 to increase revenues and enhance productivity,
including a new and expanded marketing campaign, improved administrative
systems, increased production capacity and better utilization of subcontracted
labor. The latter programs directly contributed to a decrease in the amount of
time from the Company acceptance of the sales contract to the home delivery
date. Favorable economic conditions, generally stable interest rates, a mild
winter season and selective price increases also contributed to the favorable
results.
One of the Company's key strengths has been its ability to identify and
acquire property to be used as lots for future residential home development. The
Company generally develops and sells land within a three to five year period
from the date of its acquisition. Following two years of strong homebuilding
sales and limited land acquisitions, the Company increased its land inventory in
1997. Investment in land and land development inventories increased to $62.9
million at December 31, 1997 from $50.0 million at the end of 1996.
Substantially all of such increase in land and land development inventories
occurred as a result of an increase in finished lots in inventory. Undeveloped
land and land in development remained relatively constant between the two
periods. The Company's objective in creating the larger inventory of developed
lots as of December 31, 1997 is to meet the anticipated demand during the first
half of 1998.
A portion of the Company's growth in 1997 included activities which are
complementary to its core homebuilding business. The Company participated in the
creation of a title insurance agency, Alliance Title Agency, Ltd. ("Alliance"),
which commenced operations on April 1, 1997. The Company owns 49.9% of the
equity of Alliance and reports its investment using the equity method of
accounting. The balance of the equity of Alliance is beneficially owned by an
unaffiliated company and an individual who became an employee of the Company in
January 1998. Alliance was formed to provide title insurance to the Company's
customers and third parties and to facilitate the closing of the Company's
homes. The Company believes that, through the operations of Alliance, the
Company has improved its service to customers and enhanced its administrative
processes. In addition, the Company continued to expand its lumber division by
increasing its truss manufacturing capacity as well as its delivery and
distribution systems.
During 1997, the Company initiated substantial upgrades to the
Company's computer
15
<PAGE> 16
systems to increase operating efficiencies, provide the technology for growth
both within and outside of Central Ohio and address the Year 2000 issues. Most
of the implementation of these upgrades will take place during 1998.
COMPANY OUTLOOK
The Company believes that it is well positioned for future growth in
1998 due to the record number of homes in backlog at the end of 1997, strong
sales activity in early 1998, further implementation of operational and
administrative improvements, and ongoing cost control programs, combined with
the expected continuation of a favorable economic environment. The Company
believes that these factors, in conjunction with the addition of five additional
sales locations in Central Ohio, will lead to a positive comparison with 1997
results.
The Company's growth strategy is to maximize sales in each of the
Company's existing sales locations in Central Ohio as well as to increase the
overall number of its sales locations within Central Ohio. Additionally, the
Company has been actively evaluating opportunities to expand regionally to new
markets outside of Central Ohio.
The Company has developed a long-term information systems strategy, one
aspect of which is to address exposure related to the impact on its computer
systems of the Year 2000 issues. Key financial, information and operations
systems have been assessed and plans developed in order to mitigate the Year
2000 issues. These plans include upgrades of purchased software and conversion
of in-house developed software. The Company is currently in various stages of
implementing the upgrades and expects to invest between $2.0 - $2.5 million in
this effort with the cost to be allocated over a five year period. Costs of
replacing computer software programs are expected to be primarily accounted for
and financed as operating leases. The costs of reprogramming computer programs
that are not replaced will be expensed as incurred and are not expected to be
material. All programs subject to Year 2000 concerns will be evaluated utilizing
internal and external resources to reprogram, replace and test. The Company
intends to initiate during 1998 a communication plan with significant suppliers
to determine the status of their Year 2000 compliance programs. Management
believes its plans will adequately address the Year 2000 issues and does not
currently anticipate a material impact on the Company's operations and financial
results. However, if such upgrades and conversions are not made, or are not
timely completed, the Year 2000 issues could have a material impact on the
operations and financial results of the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The statements contained in this report under the caption "Company
Outlook" and other provisions of this report which are not historical facts are
"forward looking statements" that involve various important risks, uncertainties
and other factors which could cause the Company's actual results for 1998 and
beyond to differ materially from those expressed in such forward looking
statements. These important factors include, without limitation, the following
risks and uncertainties: real or perceived adverse economic conditions and/or an
increase in mortgage interest rates, mortgage commitments that expire prior to
homes being delivered, the Company's
16
<PAGE> 17
ability to install public improvements or build and close homes on a timely
basis due to adverse weather conditions, delays in the zoning, permitting or
inspection processes, the effect of changing consumer tastes on the market
acceptance for the Company's products, the impact of competitive products and
pricing, the effect of shortages or increases in the costs of materials, labor
and financing, the continued availability of credit, the outcome of litigation,
the impact of changes in government regulation, the problems associated with the
Year 2000 issue and the other risks described in the Company's Securities and
Exchange Commission filings.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company has experienced, and expects to continue to experience, significant
seasonality and quarter-to-quarter variability in homebuilding activity levels.
Typically, closings and related revenues will increase in the second half of the
year. The Company believes that this seasonality reflects the tendency of home
buyers to shop for a new home in the Spring with the goal of closing in the Fall
or Winter. Weather conditions can also accelerate or delay the scheduling of
closings.
The following table sets forth certain data for each of the last eight
quarters:
<TABLE>
<CAPTION>
Sales Backlog
Three Revenues Contracts Closings (at period end)
Months Ended (in thousands) (in units)(1) (in units) (in units)
------------ -------------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
Mar. 31, 1996 $36,318 425 255 738
June 30, 1996 $41,524 325 278 785
Sept. 30, 1996 $45,916 305 301 789
Dec. 31, 1996 $51,821 253 354 688
Mar. 31, 1997 $36,997 356 266 778
June 30, 1997 $56,672 333 380 731
Sept. 30, 1997 $58,723 380 383 728
Dec. 31, 1997 $55,534 333 358 703
</TABLE>
- ------------------
(1) Net of cancellations.
At December 31, 1997 the aggregate sales value of homes in backlog was
$106.7 million compared to $101.2 million at December 31, 1996. The average
sales value of homes in backlog at December 31, 1997 increased to $151,800 from
$147,100 at December 31, 1996.
The Company annually incurs a substantial amount of indirect
construction costs which are essentially fixed in nature. For purposes of
financial reporting, the Company capitalizes these costs to real estate
inventories on the basis of the ratio of estimated annual indirect costs to
direct construction costs to be incurred. Thus, variations in construction
activity cause fluctuations in interim and annual gross profits.
17
<PAGE> 18
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
items from the Statements of Operations contained in the Financial Statements
expressed as percentages of total revenues, as well as certain operating data:
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues............................................... 100.0% 100.0% 100.0%
Cost of real estate sold............................... 76.2 77.7 84.8
----- ----- -----
Gross profit...................................... 23.8 22.3 15.2
Selling, general and administrative.................... 14.7 14.5 14.7
Settlement of litigation............................... -- 0.5 --
----- ----- -----
Income from operations............................ 9.1 7.3 0.5
Interest expense....................................... 2.7 3.6 3.4
----- ----- -----
Income (loss) before income taxes................. 6.4 3.7 (2.9)
Provision for income taxes............................. 2.7 1.4 (0.9)
----- ----- -----
Net income (loss)................................. 3.7% 2.3% (2.0)%
===== ===== =====
Homes:
Sales contracts................................... 1,402 1,308 1,253
Closings.......................................... 1,387 1,188 1,206
Backlog at year end............................... 703 688 568
Average sales price of homes closed
during the year (in thousands).................... $148 $145 $141
Average sales price of homes in backlog
at year end (in thousands)........................ $152 $147 $146
Aggregate sales price of homes in backlog at year
end (in thousands)..................................... $106,686 $101,202 $83,167
</TABLE>
A home is included in "sales contracts" when the Company's standard
sales contract, which requires a deposit and generally has no contingencies
other than for buyer financing and/or for the sale of an existing home, is
executed. "Closings" or "deliveries" represent homes for which the closing has
occurred and conveyance of the deed has passed from the Company to the buyer.
Revenue and cost of real estate sold are recognized at the time of closing.
"Backlog" represents homes for which the Company's standard sales contract have
been executed, but for which closings had not occurred as of the end of the
period.
Homes included in "sales contracts" and in "backlog" in the foregoing
table are net of cancellations. Most cancellations occur because customers
cannot qualify for financing. While most cancellations occur prior to the start
of construction, some cancellations occur during the construction process. The
cancellation rates for homes in backlog as of December 31, 1996, 1995 and 1994
were 15.2%, 12.7%, and 11.1%, respectively.
18
<PAGE> 19
1997 COMPARED TO 1996
REVENUES. Revenues for 1997 increased to $207.9 million from $175.6
million for 1996, an increase of $32.3 million or 18.4%. The increase in
revenues was primarily the result of a 16.8% increase in the number of homes
delivered and a 2.2% increase in the average price per delivered home. In 1997
the Company delivered 1,387 homes compared to 1,188 homes in 1996, an increase
of 199 homes. Included in the 199 additional deliveries are 16 model homes the
Company sold and leased back to use as sales models. The increase in the number
of homes delivered in 1997 as compared to 1996 was due to a larger backlog of
homes at the beginning of 1997, a greater number of homes sold, more favorable
weather conditions and increased construction efficiencies which led to shorter
building times. The average price per delivered home increased to $148,100 in
1997 from $144,900 in 1996, an increase of $3,200. The increase in the average
price per delivered home occurred principally in the second half of the year and
reflects the purchase of larger homes with more customer selected options in
1997 than in 1996. The Company also was able to selectively increase the prices
of some of its homes. Included in revenues are other revenues, consisting
principally of the sale of land and building supplies to other homebuilders. In
1997, land sales to other homebuilders decreased to $2.2 million from $2.4
million in 1996 and building supply sales decreased to $300,000 from $1.1
million in 1996. The decrease in building supply sales resulted from the
Company's lumber division's increased focus of its activities on the Company's
internal needs.
GROSS PROFIT. Gross profit for 1997 increased to $49.6 million from
$39.1 million for 1996, representing a gross profit margin improvement to 23.8%
from 22.3%. This 1.5% improvement in gross profit margin is attributable to the
delivery of homes with more customer selected options, which have a higher gross
profit margin, selective price increases, a declining mortgage rate environment
that minimized the costs of the financing the Company pays on behalf of its
customers and more effective control of direct construction costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1997 increased to $30.6 million from $25.5 million
for 1996. This increase was primarily due to the costs associated with selling
and delivering a larger number of homes in 1997 compared to 1996 and increased
promotional efforts. As a percentage of revenues, selling, general and
administrative expenses increased slightly to 14.7% for 1997 compared to 14.5%
for 1996.
INTEREST EXPENSE. Interest expense decreased to $5.6 million for 1997
compared to $6.3 million for 1996. The primary reason for the decrease was a
recognition of less net capitalized interest expense, a lower average term debt
balance and reduced bank fees. The weighted average rate of interest of the
Company's revolving line of credit was 8.9% for 1997 and 8.8% for 1996. The
average revolving line of credit borrowings outstanding were $57.5 million and
$58.7 million for 1997 and 1996, respectively.
PROVISION FOR INCOME TAXES. Income tax expense for 1997 increased to
$5.6 million from $2.4 million for 1996. The Company's estimated annual
effective tax rate increased to 42.0% for 1997 from 37.0% for 1996. The lower
effective tax rate in 1996 was attributable to recognition of state tax loss
carryforwards which by 1997 had been fully utilized.
19
<PAGE> 20
1996 COMPARED TO 1995
REVENUES. Revenues for 1996 decreased to $175.6 million from $178.1
million for 1995, a decrease of $2.5 million or 1.4%. This decrease was
primarily the result of the 18 fewer homes delivered in 1996 compared to 1995.
In 1996, the Company delivered 1,188 homes compared to 1,206 homes in 1995. The
decrease in deliveries is attributed to construction delays due to difficult
weather conditions during the first few months of 1996, limited availability of
key subcontractor labor and fewer inventory homes delivered during 1996 compared
to 1995. The average price of homes delivered during 1996 increased to $144,900
from $141,000 in 1995 due to price increases and reduced sales discounts.
Included in revenues are other revenues, consisting principally of the sale of
land and building supplies to other homebuilders. In 1996, land sales to other
homebuilders decreased to $2.4 million from $6.5 million in 1995 and building
supply sales decreased to $1.1 million from $1.6 million for the same time
periods.
GROSS PROFIT. Gross profit for 1996 increased to $39.1 million from
$27.1 million for 1995, representing a gross profit margin improvement to 22.3%
from 15.2%. This 7.1 percentage point improvement in gross profit margin is
attributable primarily to price increases, reduced sales discounts and improved
control of direct construction costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1996 decreased to $25.5 million from $26.2 million
for 1995. As a percentage of revenues, selling, general and administrative
expenses decreased slightly to 14.5% for 1996 compared to 14.7% for 1995.
SETTLEMENT OF LITIGATION. During 1996, the Company agreed to the
settlement of a class action that resulted in a charge to operations in the
fourth quarter of $850,000 or 0.5% of revenues.
INTEREST EXPENSE. Interest expense increased to $6.3 million for 1996
compared to $6.1 million for 1995. Although the Company's average indebtedness
decreased to $58.7 million for 1996 from $66.3 million in 1995, the Company's
weighted average interest rate increased to 8.8% for 1996 compared to 8.2% for
1995. Previously capitalized interest charged to expense exceeded interest
capitalized during 1996 by $500,000.
PROVISION FOR INCOME TAXES. Income tax expense for 1996 was $2.4
million compared to an income tax benefit of $1.7 million for 1995. The
Company's effective tax rate increased to 37.0% for 1996 compared to an
effective tax rate benefit of 32.5% for 1995 due principally to the Company's
inability to utilize certain deductions for tax purposes during 1995. During
1996, the Company continued to use tax benefits associated with tax loss
carryforwards that lowered the effective tax rate for 1996 by 3.7%. These tax
benefits were fully utilized in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's capital needs have depended upon sales
volume, asset turnover, land acquisition and inventory levels. The Company's
traditional sources of capital have been internally generated cash, bank
borrowings and seller financing. The Company has incurred
20
<PAGE> 21
substantial indebtedness in the past and expects to incur substantial
indebtedness in the future to fund its operations and its investment in land.
During 1997, the Company began to explore expanding into areas outside
of Central Ohio. Such expansion will require additional capital resources,
particularly if such expansion would be accomplished through the acquisition of
one or more homebuilders. To meet this need, the Company is exploring additional
sources of capital to augment its traditional sources.
SOURCES AND USES OF CASH
1997 COMPARED TO 1996
Net cash used in operating activities was $6.5 million for 1997
compared to net cash provided by operating activities of $7.4 million for 1996.
The Company used cash generated from the sale of homes to invest in real estate
inventories to meet customer demand and to replace inventories under options
that are no longer available. Land and land development costs increased to $62.9
million as of December 31, 1997 from $50.0 million as of December 31, 1996 due
to an increase in finished lots in inventory. The Company increased finished
lots in inventory to meet the anticipated demand during the first half of 1998.
Homes under construction increased to $46.7 million as of December 31, 1997,
from $43.0 million as of December 31, 1996, reflecting the larger number of
homes under construction at the end of 1997 as compared to 1996. The increase in
homes under construction was reduced by $2.3 million for homes in inventory that
were sold during 1997 and leased back to the Company for use as sales models.
Net cash provided by investing activities during 1997 was $3.3 million compared
to net cash used by investing activities of $200,000 during 1996. The primary
reason for this difference is that the Company sold its office facility for $4.0
million during 1997. Net cash provided by financing activities was $3.2 million
during 1997 compared to net cash used by financing activities of $7.2 million
during 1996.
SOURCES AND USES OF CASH
1996 COMPARED TO 1995
Net cash provided by operating activities for 1996 was $7.4 million
compared to $12.4 million for 1995. Net income provided cash flow of $4.0
million in 1996 compared to a use of cash resulting from a loss of $3.5 million
in 1995. These amounts were offset by increases in real estate inventories in
1996 of $1.0 million compared to reduced real estate inventories in 1995 of
$14.9 million. In addition, $1.0 million in refundable income taxes were
received in 1996. During 1996, accounts payable, deposits on homes under
contract and accrued liabilities provided cash flow of $1.9 million compared to
providing cash flow of $1.2 million in 1995. Additionally, increases in accounts
receivable, prepaid expenses and other assets resulted in a $100,000 use of cash
in 1996 compared to providing cash of $1.2 million during 1995. Net cash used in
investing activities decreased $500,000 because of a reduction in expenditures
for property and equipment, and increased proceeds from sale of property and
equipment in 1996. Net cash used in financing activities, which reflects
payments on debt, decreased to $7.2 million in 1996 from $11.7 million in 1995,
principally as a result of cash flow generated from operations.
21
<PAGE> 22
REAL ESTATE INVENTORIES
The Company's practice is to develop most of the lots upon which it
builds its homes. The Company generally does not buy unimproved land for
speculation and generally limits its investment in unimproved land to an amount
it expects to be able to develop and sell within the next three to five years.
At December 31, 1997, the Company either owned or had under contract to purchase
lots or land that could be developed into approximately 5,100 lots, and the
Company controlled through option agreements an additional 2,800 lots. Included
in the 2,800 lots controlled through option agreements were 57 lots owned by
BRC. During 1997, the Company exercised options to purchase 1,300 controlled
lots, including 188 lots from BRC. Option agreements expire at varying dates
through June 30, 2001. The Company's decision to exercise any particular option
or otherwise acquire additional land is based upon an assessment of a number of
factors, including its existing land inventory at the time and its evaluation of
the future demand for its homes. During 1997, the Company sold lots and land to
other builders for $2.2 million.
Land and land development costs at December 31, 1997 increased from the
previous year end as a result of increased sales activity, replacement of land
inventory depleted but not replaced during the previous two years and a need to
replace lots no longer available to the Company from BRC. Homes under
construction also increased from year end as a result of having more homes under
construction and having homes generally at a more advanced stage of
construction. The aggregate investment in inventory homes, however, declined
$1.8 million to $6.8 million at December 31, 1997 from $8.6 million at December
31, 1996. On December 31, 1997, the Company had 109 inventory homes in various
stages of construction, compared to 140 inventory homes in various stages of
construction at December 31, 1996. Unsold inventory homes are not reflected in
sales or backlog. Also included in real estate inventories are building
materials and supplies.
SELLER-PROVIDED DEBT
The Company had $5.1 million and $2.0 million of seller-provided term
debt outstanding at December 31, 1997 and 1996, respectively. On December 2,
1997, the Company exercised an option to purchase land for a purchase price of
$6.3 million, of which the seller agreed to finance $3.6 million over four
years. The interest rate on the note payable is 6.5%. Interest rates on the
remaining seller-provided debt, which matures within three years, are at 8.0%
and prime.
LAND PURCHASE COMMITMENTS
At December 31, 1997, the Company had commitments to purchase 186
residential lots and unimproved land at an aggregate cost of $5.0 million, of
which $4.1 million is expected to be funded during 1998. In addition, at
December 31, 1997, the Company had cancelable obligations to purchase
residential lots and unimproved land of $26.1 million, of which $13.4 million is
expected to be funded during 1998. The Company had invested $700,000 in good
faith deposits in these cancelable purchase obligations at December 31, 1997.
Included in the $26.1 million of cancelable purchase obligations are $1.3
million of purchase options with BRC.
22
<PAGE> 23
BANK CREDIT FACILITY
The Company's bank credit facility has a maturity date of June 30, 2000
and provides for revolving loans and letters of credit (limited to $15 million
in the aggregate) of up to $90 million in the aggregate, subject to borrowing
base limitations. As of December 31, 1997, the Company had $15.5 million
available under its bank credit facility, after adjustment for borrowing base
limitations. The bank credit facility is not collateralized. See Note 5 to the
Notes to the Financial Statements.
The Company is exploring additional sources of capital to augment its
existing sources. As part of that effort, the Company also is discussing with
certain of its bankers a new bank credit facility that would replace the
existing facility and would provide certain more favorable terms to the Company.
The Company has entered into two contracts to fix the interest rate on
a total of $20.0 million of borrowings under its bank credit facility. Each
contract fixed the interest rate on $10.0 million of the outstanding revolving
line of credit for a term of three years (expiring in October 2000 and January
2001, respectively). The interest rate on the first contract was fixed at a
three month Eurodollar rate of 6.13% plus a variable margin and the interest
rate on the second contract was fixed at a three month Eurodollar rate of 5.48%
plus a variable margin. The variable margin is determined quarterly, based upon
the Company's leverage ratio, and can range from 2.25% to 3.25%. At December 31,
1997, the variable margin was 2.25%, and the Company's overall effective
borrowing rate was approximately 8.1%.
INFLATION AND OTHER COST INCREASES
The Company is not always able to reflect all of its cost increases in
the prices of its homes because competitive pressures and other factors require
it in many cases to maintain or discount those prices. After a sales contract
has been accepted, the Company is generally able to maintain costs with
subcontractors from the date the sales contract is accepted until the date
construction is completed; however, unanticipated additional costs may be
incurred between the date a sales contract is accepted and the date construction
is completed. For example, delays in construction of a home can cause the
mortgage commitment to expire and can require the Company, if mortgage interest
rates have increased, to pay significant amounts to the mortgage lender to
extend the original mortgage interest rate. In addition, during periods of high
construction activities, additional costs may be incurred to obtain
subcontractor availability when certain trades are not readily available, which
additional costs can result in lower gross profits.
ITEM 7A QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Not applicable
23
<PAGE> 24
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS
AND SHAREHOLDERS
OF DOMINION HOMES, INC.
We have audited the accompanying balance sheets of Dominion Homes, Inc.
as of December 31, 1997 and 1996 and the related statements of operations,
changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Dominion Homes, Inc.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Columbus, Ohio
February 2, 1998
24
<PAGE> 25
DOMINION HOMES, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues $207,926 $175,579 $178,112
Cost of real estate sold 158,373 136,498 151,010
-------- -------- --------
Gross profit 49,553 39,081 27,102
Selling, general and administrative 30,634 25,475 26,215
Settlement of litigation 850
-------- -------- --------
Income from operations 18,919 12,756 887
Interest expense 5,645 6,345 6,069
-------- -------- --------
Income (loss) before income taxes 13,274 6,411 (5,182)
Provision for income taxes 5,569 2,374 (1,684)
======== ======== ========
Net income (loss) $ 7,705 $ 4,037 $ (3,498)
======== ======== ========
Earnings (loss) per share
Basic $1.23 $0.65 $(0.56)
======== ======== ========
Diluted $1.20 $0.64 $(0.56)
======== ======== ========
Weighted average shares outstanding
Basic 6,250,918 6,220,033 6,201,387
========= ========= =========
Diluted 6,430,925 6,275,050 6,201,387
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE> 26
DOMINION HOMES, INC.
BALANCE SHEETS
(In thousands, except share information)
================================================================================
<TABLE>
<CAPTION>
December 31,
1997 1996
------- --------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 252 $ 252
Notes and accounts receivable:
Trade 1,443 1,092
Due from financial institutions for residential closings 340 589
Real estate inventories:
Land and land development costs 62,867 49,990
Homes under construction 46,717 43,049
Other 2,177 2,351
-------- --------
Total real estate inventories 111,761 95,390
-------- --------
Prepaid expenses and other 455 526
Deferred income taxes 2,110 1,270
Property and equipment, at cost: 4,325 8,948
Less accumulated depreciation (2,891) (4,241)
-------- --------
Total property and equipment 1,434 4,707
-------- --------
Total assets $117,795 $103,826
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 6,770 $ 6,255
Deposits on homes under contract 1,977 1,825
Accrued liabilities 10,625 8,332
Note payable, banks 52,687 49,770
Term debt 5,076 4,793
-------- --------
Total liabilities 77,135 70,975
-------- --------
Commitments and contingencies
Shareholders' equity
Common shares, without stated value, 12,000,000 shares authorized,
6,266,953 and 6,239,153 shares issued and outstanding, respectively 30,673 30,526
Less deferred compensation (150) (107)
Retained earnings 10,137 2,432
-------- --------
Total shareholders' equity 40,660 32,851
-------- --------
Total liabilities and shareholders' equity $117,795 $103,826
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE> 27
DOMINION HOMES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share information)
================================================================================
<TABLE>
<CAPTION>
Common Shares
------------------------
Retained
Deferred Earnings
Shares Amount Compensation (Deficit) Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 6,191,020 $ 30,320 $ 1,893 $ 32,213
Net loss (3,498) (3,498)
Shares issued - shares awarded 12,850 96 96
Deferred Compensation 10,000 $ (36) (36)
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 6,213,870 30,416 (36) (1,605) 28,775
- ------------------------------------------------------------------------------------------------------------------------------
Net income 4,037 4,037
Shares issued - shares awarded 25,283 110 (93) 17
Deferred Compensation 22 22
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 6,239,153 30,526 (107) 2,432 32,851
- ------------------------------------------------------------------------------------------------------------------------------
Net income 7,705 7,705
Shares issued - shares awarded 27,800 147 (127) 20
Deferred Compensation 84 84
- ------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,266,953 $ 30,673 $(150) $10,137 $ 40,660
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE> 28
DOMINION HOMES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,705 $ 4,037 $ (3,498)
Adjustments to reconcile net income (loss) to cash (used in)
provided by operating activities:
Depreciation and amortization 934 997 1,360
Loss on disposal of property & equipment 91 107
Allowance for doubtful accounts (52) 152 341
Reserve for real estate inventories (483) 549 850
Issuance of common shares for compensation 20 17 96
Deferred income taxes (840) (430) (665)
Changes in assets and liabilities:
Notes and accounts receivable (50) 57 842
Refundable federal income taxes 1,019 (1,019)
Real estate inventories (15,888) (1,001) 14,915
Prepaid expenses (77) (7) 314
Accounts payable 515 (189) (4,056)
Deposits on homes under contract 152 128 231
Increase in accrued liabilities 1,494 1,999 2,660
-------- -------- --------
Net cash (used in) provided by operating activities (6,479) 7,435 12,371
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of property & equipment 3,798 151
Purchase of property & equipment (526) (322) (625)
-------- -------- --------
Net cash provided by (used in) investing activities 3,272 (171) (625)
-------- -------- --------
Cash flows from financing activities:
Payments on note payable, banks (205,972) (118,086) (88,271)
Proceeds from note payable, banks 208,889 114,805 77,967
Proceeds from term debt 3,638
Payments on term debt (3,355) (3,938) (1,437)
Exercise of stock options 7
-------- -------- --------
Net cash provided by (used in) financing activities 3,207 (7,219) (11,741)
-------- -------- --------
Net increase in cash and cash equivalents 45 5
Cash and cash equivalents, beginning of year 252 207 202
======== ======== ========
Cash and cash equivalents, end of year $ 252 $ 252 $ 207
======== ======== ========
Supplemental disclosures of cash flow information:
Interest paid (net of amounts capitalized) $ 1,631 $ 1,367 $ 1,310
======== ======== ========
Income taxes paid $ 6,423 $ 1,878 $ 88
======== ======== ========
Supplemental disclosures of non cash financing activities:
Land acquired by purchase contract or seller financing $ 3,638 $ 3,160
======== ========
Sale of land for note receivable $ 692
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 29
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS OPERATIONS AND BASIS OF PRESENTATION:
The Company, incorporated in October 1993 as BRC Services, Inc.,
changed its name to Borror Corporation on January 19, 1994 and changed its name
to Dominion Homes, Inc. on May 7, 1997. Prior to the Company's initial public
offering of common shares in March 1994, the business of the Company was
operated as part of the homebuilding and related divisions (the "Homebuilding
Divisions") of Borror Realty Company ("BRC"), an Ohio corporation incorporated
in 1946. BRC owned 4,082,000 common shares of the Company at December 31, 1997.
The Company operates primarily as a single-family homebuilder in Central Ohio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS: For purposes of the statements of cash
flows, all highly liquid investments purchased with an original maturity of
three months or less are considered to be cash equivalents.
REAL ESTATE INVENTORIES: Real estate inventories are stated at the
lower of cost or net realizable value. Net realizable value represents
estimates, based on management's present plans and intentions, of sales prices
less development and disposition costs, assuming that disposition occurs in the
normal course of business. Annually, the Company reviews the estimated carrying
values of its properties on an individual project basis. Management evaluates
the recoverability of real estate inventories and other long-lived assets using
several factors in the valuation including, but not limited to, management's
plans for future operations, recent operating results and projected cash flows.
Land and land development costs are allocated to development phases
based on the total number of lots expected to be developed within each
subdivision. As each development phase is completed, land development costs,
including capitalized interest and real estate taxes, are then allocated to
individual lots.
Homes under construction include lot costs, construction costs,
capitalized interest and indirect costs related to development and construction
activities. Indirect costs that do not relate to development and construction
activities, including general and administrative expenses, are charged to
expense as incurred.
Other inventories consist principally of lumber and building supplies.
PROPERTY AND EQUIPMENT: Depreciation and amortization are recognized on
straight-line and declining-balance methods at rates adequate to amortize costs
over the estimated useful lives of the applicable assets. The estimated useful
lives of the assets range from three to forty years. Depreciation expense was
$702,000, $773,000 and $1,204,000 for the years ended December 31, 1997, 1996
and 1995, respectively.
Maintenance, repairs and minor renewals are charged to expense as
incurred while major renewals and betterments are capitalized and amortized. The
asset cost and accumulated
29
<PAGE> 30
depreciation is removed for assets sold or retired, and any resulting gain or
loss is reflected in operations.
EARNINGS PER SHARE: During 1997, the Company adopted Financial
Accounting Standard No. 128 (FAS 128) "Earnings per Share". All prior year
earnings per share amounts have been restated.
Basic earnings per common share is computed by dividing net income
available to common shareholders by the weighted average number of common shares
outstanding during each period. Diluted computations include common share
equivalents, when dilutive, and the elimination of related expenses, net of
income taxes.
WARRANTY COSTS: The Company provides a two-year limited warranty on
materials and workmanship and a twenty-five year warranty against major
structural defects. An estimated amount of warranty cost is provided for each
home at the date of closing based on actual warranty experience. Warranty
expense was $2,082,000, $2,052,000 and $1,603,000 for the years ended December
31, 1997, 1996 and 1995, respectively. Accrued warranty cost was $1,003,000 and
$1,060,000 at December 31, 1997 and 1996, respectively.
INCOME TAXES: The Company records income taxes on the liability method.
This method requires the recognition of deferred income taxes for the impact of
"temporary differences" between the amount of assets and liabilities for
financial reporting purposes and such amounts as determined by tax regulations.
The provision for income taxes consists of the following for the years
ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Currently payable (refundable):
Federal $5,061,000 $2,492,000 $(1,019,000)
State and local 1,348,000 312,000
Deferred:
Federal (737,000) (231,000) (665,000)
State (103,000) (199,000)
---------- ---------- -----------
Income tax expense (benefit) $5,569,000 $2,374,000 $(1,684,000)
========== ========== ===========
</TABLE>
The Company had net operating loss carryforwards of $826,000 for
federal purposes and $4.0 million for state purposes as of December 31, 1995.
These net operating loss carryforwards were fully utilized during 1996.
30
<PAGE> 31
The components of the net deferred tax asset at December 31, are as
follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Assets:
Valuation reserves $ 219,000 $ 330,000
Accrued expenses 1,585,000 969,000
Property & Equipment 13,000
Deferred Gain 351,000
Other 52,000
---------- ----------
Gross deferred tax assets 2,168,000 1,351,000
Liabilities:
Property and equipment 24,000
Other 58,000 57,000
---------- ----------
Gross deferred tax liabilities 58,000 81,000
---------- ----------
Net deferred income taxes as recorded in the balance sheet $2,110,000 $1,270,000
========== ==========
</TABLE>
A reconciliation of the federal corporate income tax rate and the
effective tax rate on income taxes is summarized below for the years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate 34.0% 34.0% 34.0%
Permanent differences .5% .3% .2%
State and local taxes, net of federal benefit 6.7% 1.0%
Other .8% 1.7% (1.7%)
----- ----- -----
Effective income tax rate 42.0% 37.0% 32.5%
===== ===== =====
</TABLE>
INCOME RECOGNITION ON SALES OF REAL ESTATE: The Company recognizes
revenues from the sale of homes at the time the deed is conveyed from the
Company to the buyer. Accounts receivable due from financial institutions
represent payments to be received on completed closings. Gains on sales of model
homes subject to leasing arrangements are deferred and recognized over the term
of the lease.
CAPITALIZATION OF INTEREST: The Company capitalizes the cost of
interest related to construction costs incurred during the construction period
of homes and land development costs incurred while development activities on
undeveloped land are in process. The summary of total interest is as follows:
31
<PAGE> 32
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest incurred $5,532,000 $5,804,000 $6,891,000
Interest capitalized (3,453,000) (4,482,000) (4,712,000)
----------- ----------- -----------
Interest expensed directly 2,079,000 1,322,000 2,179,000
Previously capitalized interest charged to expense 3,566,000 5,023,000 3,890,000
---------- ---------- ----------
Total interest expense $5,645,000 $6,345,000 $6,069,000
========== ========== ==========
Capitalized interest in ending inventory $1,871,000 $2,153,000 $2,874,000
========== ========== ==========
</TABLE>
DEFERRED COSTS: Fees and costs incurred in connection with financing
agreements are capitalized as other assets and amortized over the terms of the
respective agreements. Amortization expense was $148,000, $202,000 and $192,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
ADVERTISING COSTS: The Company expenses advertising costs when
incurred. Advertising expense was $1,763,000, $1,193,000 and $1,272,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.
NEW ACCOUNTING STANDARDS: In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No 131, "Disclosures About Segments of
a Enterprise and Related Information". Each standard is effective for financial
statements for fiscal years beginning after December 15, 1997.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses).
SFAS No. 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. The Company is evaluating this pronouncement and has not yet determined
the ultimate impact of this pronouncement on its future financial statements.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. This
statement defines business segments as components of an enterprise about which
separate financial information is available and used internally for evaluating
segment performance and decision making on resource allocation. SFAS No. 131
requires reporting a measure of segment profit or loss, certain specific revenue
and expense items, and segment assets;
32
<PAGE> 33
and other reporting about geographic and customer matters. The Company believes
that it operates as a single business segment.
UTILIZATION OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain prior year information has been reclassified
to conform with the current year presentation.
3. AFFILIATED ENTITY
During the first quarter of 1997 the Company participated in the
creation of a title insurance agency, Alliance Title Agency, that began
operating on April 1, 1997. The title insurance agency was formed to provide
title insurance to the Company's customers and third parties and to facilitate
the closing of the Company's homes. The Company owns 49.9% of the title
insurance agency and reports its investment using the equity method of
accounting. During the nine months of operations, the Company recognized
$242,000 as its share of the earnings from this investment.
4. LAND PURCHASE COMMITMENTS:
Unconditional purchase contracts for residential lots at December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1997
---- ----
<S> <C> <C>
Number of lots....................................................... 186 94
=== ==
Purchase price....................................................... $4,993,000 $2,639,000
Less deposits........................................................ (58,000) (6,000)
---------- ----------
Net land purchase commitments........................................ $4,935,000 $2,633,000
========== ==========
</TABLE>
In addition, at December 31, 1997, the Company had entered into
cancelable contracts to purchase residential lots and unimproved land in Central
Ohio. Included in the cancellable contracts are $1.3 million of purchase options
with BRC for 13 finished lots and for an estimated 47 lots that have not been
developed. The remaining future minimum obligations under cancelable contracts
are as follows:
33
<PAGE> 34
Minimum
Obligations
-----------
1998............................................. $14,694,000
1999............................................. 6,928,000
2000............................................. 3,386,000
2001............................................. 1,072,000
-----------
$26,080,000
===========
5. NOTES PAYABLE, BANKS:
Notes payable, banks at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revolving note payable to banks, principal due June 30, $52,687,000 $49,770,000
2000, with interest payable monthly
</TABLE>
The Company has also issued $6.6 million in irrevocable letters of
credit at December 31, 1997 to municipalities to secure performance and the
completion of certain land development activities.
On September 29, 1997 the Company executed a Loan Agreement with its
banks for a credit facility having a maturity date of June 30, 2000. The credit
facility provides for revolving loan and letters of credit (limited to $15
million in the aggregate) of up to $90 million in the aggregate, subject to
borrowing base limitations. The credit facility is not collateralized and no
collateral will be required as long as the Company's ratio of total liabilities
to tangible net worth ("leverage ratio") as of the end of each fiscal quarter
through December 31, 1999 does not exceed 2.75 to 1 and as long as the leverage
ratio does not exceed 2.50 to 1 for any two consecutive quarters thereafter. The
credit facility contains the following major provisions: (1) the Company has the
option to use any combination of the following methods to price the revolving
line of credit: (a) the lead bank's prime rate of interest that may be adjusted
based upon performance criteria; (b) a Eurodollar rate of interest plus a
variable margin based upon the Company's leverage ratio; or (c) a fixed rate of
interest as determined by the lead bank; (2) the Company has agreed to fix the
interest rate through the maturity date of the loan agreement on a minimum of
$10 million of the revolving line of credit by June 30, 1998 and a minimum
additional amount of $15 million by June 30, 1999; (3) the Company has agreed to
not exceed the following ratios: (a) a leverage ratio of not greater than 3.00
to 1.00 until December 31, 1998, not greater than 2.75 to 1.00 from January 1,
1999 until December 31, 1999 and not greater than 2.50 to 1.00 thereafter; and
(b) an uncommitted land holdings to tangible net worth ratio of not greater than
2.00 to 1.00 until December 31, 1998, not greater than 1.85 to 1.00 from January
1, 1999 until December 31, 1999 and not greater than 1.75 to 1.00 thereafter;
(4) uncommitted land holdings in Central Ohio are limited to $70 million; (5)
investments in new market areas outside of Central Ohio are limited to $7.5
million in the aggregate and $5 million in any one market; (6) the Company will
not permit
34
<PAGE> 35
the value of its model homes to exceed $6.5 million in the aggregate; (7) the
Company will not permit the value of its speculative homes and condominiums to
exceed $12.5 million in the aggregate and the value of its speculative
condominiums to exceed $3.0 million; (8) the Company must maintain a minimum
tangible net worth of $31 million plus 75% of net income for each fiscal year
after 1997 (but not less than $32 million during the period from December 31,
1997 through December 31, 1998); (9) the Company may not incur a loss during any
five consecutive quarters; and (10) the Company may not pay during any calendar
year dividends in excess of 25% of the Company"s net income after taxes for such
year.
As of December 31, 1997 the Company was in compliance with all credit
facility covenants and had $15.5 million available under the credit facility,
after adjustment for borrowing base limitations. However, the borrowing
availability under the credit facility could increase, depending on the
Company's utilization of the proceeds.
On October 14, 1997 and on January 12, 1998 the Company entered into
contracts to fix the interest rate on a total of $20.0 million of bank
borrowings. Each contract fixed the interest rate on $10.0 million of the
outstanding revolving line of credit for a term of three years. The interest
rate on the contract dated October 14, 1997 was fixed at a three month
Eurodollar rate of 6.13% plus a variable margin and the contract dated January
12, 1998 was fixed at a three month Eurodollar rate of 5.48% plus a variable
margin. The variable margin is determined quarterly, based upon the Company's
leverage ratio, and can range from 2.25% to 3.25%. Since the inception of the
credit facility, the variable margin paid by the Company has been 2.25%. At
December 31, 1997 the Company's overall effective borrowing rate was
approximately 8.1%.
Information regarding the bank borrowings is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Borrowings outstanding:
Maximum amount........................................... $70,814,000 $62,998,000 $80,836,000
Average amount........................................... $57,450,000 $58,739,000 $66,305,000
Weighted average daily interest rate
during the year.................................... 8.9% 8.8% 8.2%
Interest rate at December 31............................. 8.1% 8.3% 8.5%
</TABLE>
35
<PAGE> 36
6. TERM DEBT:
Term debt consisted of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
9.75% Mortgage note payable, paid in 1997......................... $2,763,000
Prime rate mortgage notes payable due in installments
through January 1999......................................... $ 678,000 1,070,000
8.00% Mortgage note payable due in installments
through February 2000........................................ 760,000 960,000
6.5% Mortgage note payable due installments
through August 2001.......................................... 3,638,000
---------- ----------
Total term debt................................................... $5,076,000 $4,793,000
========== ==========
</TABLE>
Aggregate maturities of note payable, banks and term debt in years
subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Note
Payable, Banks Term Debt Total
-------------- --------- -----
<S> <C> <C> <C>
1998............................................. $1,804,000 $1,804,000
1999............................................. 485,000 485,000
2000............................................. 52,687,000 1,573,000 54,260,000
2001............................................. 1,214,000 1,214,000
----------- ---------- -----------
$52,687,000 $5,076,000 $57,763,000
=========== ========== ===========
</TABLE>
7. LEASE COMMITMENTS:
Rent expense charged to operations is primarily for model homes,
vehicles, equipment and office facilities, including month-to-month leases and
noncancelable commitments. Rent expense amounted to $1,128,000, $1,127,000 and
$1,110,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
(See also Note 8 Related Party Transactions)
Minimum rental commitments due under noncancelable leases for model
homes, vehicles, equipment and office facilities are as follows:
Minimum
Rentals
-------
1998.................................... $1,488,000
1999.................................... 941,000
2000.................................... 727,000
2001.................................... 588,000
2002.................................... 460,000
----------
$4,204,000
==========
36
<PAGE> 37
8. RELATED PARTY TRANSACTIONS:
During 1997, the Affiliated Transaction Review Committee of the Board
of Directors of the Company (comprised of the three independent directors)
reviewed and approved the sale by the Company to BRC of the Company's corporate
office building and the contemporaneous execution by the Company of a long-term
lease with BRC for the corporate office building. The sale was closed and the
lease was executed on December 29, 1997. The purpose of the transaction from the
Company's perspective was to create additional liquidity with which to invest in
assets associated with the building process and to allow the Company to reduce
its financing costs and charges under its bank credit facility. The office
building was sold at a price of $3,950,000, less a credit of up to $200,000 for
roof repairs and sidewalk improvements, together with parking expansion. The
lease is for a term of twelve years at a rental rate of $12.00 per square foot
on a total net basis with two options to renew for periods of five years each at
then-current market rates. The gain on the sale of the office building was
$790,000 and it is being recognized over the lease term. Both the sale price and
rental rates were established by an MAI appraisal commissioned by the Committee,
and confirmed in a review for the Committee by a second MAI appraiser.
The Company purchased finished lots, pursuant to a Land Option
Agreement, in certain communities which were developed by BRC and other
homebuilders under various joint venture agreements. Such purchases totaled
$4,789,000, $8,155,000 and $6,485,000 for the years ended December 31, 1997,
1996 and 1995, respectively.
The Company also purchased from Wilcox Road Associates, additional lots
that amounted to $648,000 in 1996. Wilcox Road Associates is an Ohio joint
venture partnership of which BRC is the managing partner and in which it has a
50% interest.
The Company acquired printing services from a printing company
principally owned by members of the Borror family. Such services aggregated
$189,000, $177,000 and $166,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
Under the Model Home Lease Agreement dated January 20, 1994, effective
with the initial public offering, the Company leases model homes from BRC. Lease
expense for the years ended December 31, 1997, 1996 and 1995 was $39,000,
$89,000 and $168,000 respectively.
Under the Employee Lease Agreement dated January 20, 1994, effective
with the initial public offering, the Company leased to BRC the employees
necessary to operate BRC's business. The Employee Lease Agreement was terminated
December 31, 1995. During 1995, BRC reimbursed the Company $183,000 for the
costs associated with the leased employees. In addition BRC paid the Company
$21,400, $21,400 and $19,800 in 1997, 1996 and 1995, respectively for
miscellaneous services performed by Company personnel.
The Company and BRC have also entered into operating lease agreements
in which the Company leases space in a shopping center owned by BRC. Lease
expense for the years ended December 31, 1997, 1996 and 1995 was $70,000,
$69,000 and $84,000, respectively.
37
<PAGE> 38
The Company provides land development and management services to
certain joint ventures in which one of the partners in the joint venture is BRC.
Fees charged for the years ended December 31, 1997, 1996 and 1995 were $174,000,
$370,000 and $234,000, respectively.
9. RETIREMENT PLAN:
The Company maintains a defined contribution plan which provides a base
Company contribution of 2% of a qualified employee's compensation and a Company
matching contribution of one-quarter of the employee's voluntary deferral not to
exceed 1.5%. Substantially all employees are covered by the plan after one year
of service. The Company's contribution to the plan amounted to $334,000,
$279,000 and $281,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
10. INCENTIVE STOCK AND EXECUTIVE DEFERRED COMPENSATION PLANS:
In March 1994, the Company adopted the Dominion Homes, Inc. Incentive
Stock Plan. The Plan is administered by the Compensation Committee of the Board
of Directors, and provides for grants of performance awards of Common Shares,
restricted Common Shares, incentive stock options and non-qualified options for
the purpose of attracting, motivating, and retaining key employees and eligible
directors. A maximum of 850,000 Common Shares have been reserved for issuance
under the Plan. The Plan provides that grants shall include certain terms and
conditions and be subject to certain restrictions as provided for under
applicable provisions of the Internal Revenue Code and federal securities laws.
In general, grants of options are subject to vesting schedules at twenty percent
a year, set forth an exercise price that is equal to the fair market value on
the grant date (110% of the fair market value for 10% shareholders), and must be
exercised within ten years of the grant date (5 years for 10% shareholders).
In December 1994, the Company adopted a non-qualified Executive
Deferred Compensation Plan for directors and certain executives. Under the Plan,
participants may elect to defer a portion of their compensation (20% of total
base and bonus for employees and 100% of director fees). At December 31 of each
year, the Company provides a matching contribution of 25% of the amount deferred
in a given year by a participant, provided that the Company's matching
contribution will not exceed $2,500 in any year. The Company's contribution
vests in 20% increments over a five-year period. Under the plan as originally
adopted, contributions were to be converted into theoretical common shares and
adjusted in future periods based on the market value of the Common Shares,
similar to stock appreciation rights. On October 29, 1997, the Board of
Directors approved an Amended and Restated Executive Deferred Compensation Plan
under which contribution and match amounts are used by the trustee to acquire
Common Shares of the Company in the open market. These Common Shares are held
and voted by the trustee pursuant to a rabbi trust agreement.
The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its Incentive Stock Plan. The Company recognized expense for the Executive
Deferred Compensation Plan of $468,000 and $56,000 for the plan years ended
December 31, 1997 and 1996. The Company did not recognize expense for the plan
year ended December 31, 1995. Had compensation cost for the Company's
38
<PAGE> 39
Incentive Stock Plan been determined based on the fair value at the grant dates
for awards under that plan consistent with the method of SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) Pro forma $7,619,000 $3,977,000 $(3,534,000)
As Reported $7,705,000 $4,037,000 $(3,498,000)
Diluted earnings (loss) per share Pro forma $1.18 $0.63 $(0.57)
As Reported $1.20 $0.64 $(0.56)
Weighted-average fair value of options
granted during the year $1.94 $1.27 $1.99
</TABLE>
In determining the pro forma amount of stock-based compensation on a
basis consistent with SFAS No. 123, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: no dividend yield; expected
volatility of 27.0%; risk-free interest rate of 6.4%, 5.6% and 7.8% for the
1997, 1996 and 1995 Plan options, respectively; and expected life of 6 years for
the Plan options.
A summary of the status of the Company's Incentive Stock Plan as of
December 31, 1997, 1996 and 1995, respectively, and changes during the years
then ended is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Fixed Options Price Shares Price Shares Price Shares Price
- ------------------- ------ -------- ------ -------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 428,500 $3.77 204,000 $4.44 135,000 $ 11.50
Granted 85,000 $4.75 268,500 $3.27 315,000 $ 4.53
Expired (4,200) $4.14
Forfeited (11,000) $3.36 (39,800) $3.91 (111,000) $ 4.70
Canceled (135,000) $ 11.50
Exercised (12,000) $3.92
------- ------ --------
Outstanding at end of year 490,500 $3.95 428,500 $3.77 204,000 $ 4.44
Options exercisable at year-end 177,200 85,700
</TABLE>
39
<PAGE> 40
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Weighted
Year Range of Number Average Remaining Number
Issued Exercise Prices Outstanding Contractual Life Exercisable
- ------ --------------- ----------- ---------------- -----------
<C> <C> <C> <C> <C>
1995 $3.88 - $4.50 172,600 7 Years 72,040
1996 $3.25 - $4.13 232,900 8 Years 97,660
1997 $4.75 85,000 9 Years 7,500
------- ------
490,500 177,200
======= =======
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
On May 21, 1997, the United States District Court for the Southern
District of Ohio entered a final order approving the settlement of a class
action that had been filed on August 2, 1995 (Case No. C2-95-746), against the
Company, certain of its present and former directors and officers, and the lead
underwriters in it's initial public offering. The time frame in which to file an
appeal has expired without an appeal having been filed. The class action had
alleged that the registration statement for the initial public offering
contained false and misleading statements and asserted violations of Sections
11, 12(2) and 15 of the Securities Act of 1933. Under the settlement, the
defendants agreed to establish a fund of $2.3 million to pay certain costs,
expenses and attorney fees and to make a distribution to members of the
plaintiff-class. The Company's contribution to the settlement resulted in a
pre-tax charge to fourth quarter 1996 earnings of $850,000. In entering into the
settlement, neither the Company nor the other defendants admitted liability.
Nevertheless, the Company believes that settlement of the class action was in
its best interests in order to avoid further costs of litigation.
The Company is also involved in various other legal proceedings, most
of which arise in the ordinary course of business and some of which are covered
by insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.
The Company has developed a long-term information systems strategy, one
aspect of which is to address exposure related to the impact on its computer
systems of the Year 2000 issues. Key financial, information and operations
systems have been assessed and plans developed in order to mitigate the Year
2000 issues. These plans include upgrades of purchased software and conversion
of in-house developed software. The Company is currently in various stages of
implementing the upgrades and expects to invest between $2.0 - $2.5 million in
this effort with the cost to be allocated over a five year period. Costs of
replacing computer software programs are expected to be primarily accounted for
and financed as operating leases. The costs of reprogramming computer programs
that are not replaced will be expensed as incurred and are not expected to be
material. All programs subject to Year 2000 concerns will be evaluated utilizing
internal and external resources to reprogram, replace and test. The Company
intends to initiate during 1998 a communication plan with significant suppliers
to determine the status of their Year
40
<PAGE> 41
2000 compliance programs. Management believes its plans will adequately address
the Year 2000 issues and does not currently anticipate a material impact on the
Company's operations and financial results. However, if such upgrades and
conversions are not made, or are not timely completed, the Year 2000 issues
could have a material impact on the operations and financial results of the
Company.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
1997...................... $ 36,997 $ 56,672 $ 58,723 $ 55,534
1996...................... $ 36,318 $ 41,524 $ 45,916 $ 51,821
Gross Profit:
1997...................... $ 9,280 $ 13,688 $ 14,036 $ 12,549
1996...................... $ 7,583 $ 9,317 $ 10,535 $ 11,646
Income before income taxes:
1997...................... $ 1,039 $ 4,159 $ 4,610 $ 3,466
1996...................... $ 252 $ 1,711 $ 2,308 $ 2,140
Net Income:
1997...................... $ 603 $ 2,412 $ 2,674 $ 2,016
1996...................... $ 152 $ 1,086 $ 1,418 $ 1,381
Diluted Earnings Per Share:
1997...................... $ 0.10 $ 0.38 $ 0.41 $ 0.31
1996...................... $ 0.02 $ 0.17 $ 0.23 $ 0.22
</TABLE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
41
<PAGE> 42
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G(3), the information contained
under the captions "BOARD OF DIRECTORS AND MANAGEMENT" and "SECTION 16
BENEFICIAL OWNERSHIP COMPLIANCE" in the Company's definitive Proxy Statement for
the Annual Meeting of Shareholders to be held on May 20, 1998, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934, is incorporated herein by reference.
ITEM 11 EXECUTIVE COMPENSATION
In accordance with General Instruction G(3), the information contained
under the captions "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" in the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, is incorporated herein by reference. Neither the report of
the Compensation Committee of the Company's Board of Directors on executive
compensation nor the performance graph included in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on May 20,
1998, shall be deemed to be incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
In accordance with General Instruction G(3), the information contained
under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" in the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 20, 1998, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with General Instruction G(3), the information contained
under the caption "CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on May 20, 1998, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A promulgated under the Securities Exchange Act of
1934, is incorporated herein by reference.
42
<PAGE> 43
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1) Financial Statements.
---------------------
The financial statements filed as part of this Annual Report on Form
10-K are the balance sheets of the Registrant as of December 31, 1997,
and 1996, and the related statements of operations, changes in
shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1997, together with the notes thereto.
(a) (2) Financial Statement Schedules.
------------------------------
There are no financial statement schedules required to be filed with
this Annual Report on Form 10-K.
(a) (3) Exhibits.
---------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits." The
following table provides certain information concerning executive
compensation plans and arrangements required to be filed as exhibits to
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Dominion Homes, Inc. Incentive Stock Plan, as amended
December 5, 1995 and May 7, 1997
10.9 Incentive Stock Option Agreement, dated January 4, 1995,
between Dominion Homes, Inc. and Richard R. Buechler
(which agreement is substantially the same as Incentive
Stock Option Agreements entered into between the Company
and other employees to whom options were granted
January 4, 1995 under the Company's Incentive Stock Plan)
10.10 Incentive Stock Option Agreement, dated July 1, 1997, between
Dominion Homes, Inc. and Richard R. Buechler (which agreement is
substantially the same as Incentive Stock Option Agreements
entered into between the Company and other employees to whom
options were granted on July 1, 1997 under the Company's
Incentive Stock Plan)
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
<S> <C>
10.11 Amended and Restated Dominion Homes, Inc. Deferred
Compensation Plan, effective November 15, 1997
10.12 Employment Agreement, dated May 17, 1996, between Dominion
Homes, Inc. and Richard R. Buechler
10.13 Employment Agreement, dated May 17, 1996, between Dominion
Homes, Inc. and Robert A. Meyer, Jr.
10.15 Employment Agreement, dated May 17, 1996, between Dominion
Homes, Inc. and Jon M. Donnell
10.16 First Amendment, dated November 6, 1996, to Employment
Agreement between Dominion Homes, Inc. and Jon M. Donnell
10.17 Restricted Stock Agreement, dated August 1, 1995, between
Dominion Homes, Inc. and Jon M. Donnell
10.18 Restricted Stock Agreement, dated November 6, 1996, between
Dominion Homes, Inc. and Jon M. Donnell
10.19 Restricted Stock Agreement, dated August 1, 1997, between
Dominion Homes, Inc. and Jon M. Donnell
</TABLE>
(b) Reports on Form 8-K.
--------------------
No reports on Form 8-K were filed by the Company in 1997.
(c) Exhibits.
---------
Exhibits filed with this Annual Report on Form 10-K are attached
hereto. For a list of such exhibits, see "Index to Exhibits" at page
45.
(d) Financial Statement Schedules.
------------------------------
There are no financial statement schedules required to be filed with
this Annual Report on Form 10-K.
44
<PAGE> 45
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
2.1 Corporate Exchange and Subscription Agreement, dated January 20, Incorporated by reference to
1994, between Borror Corporation and Borror Realty Company Exhibit 2.1 to the Company's
Registration Statement on Form S-1
(File No. 33-74298) as filed with the
Commission on January 21, 1994 and as
amended on March 2, 1994 (The "Form S-1").
2.2 Form of First Amendment to Corporate Exchange and Subscription Incorporated by reference to
Agreement Exhibit 2.2 to Form S-1.
3.1 Amended and Restated Articles of Incorporation of Dominion Homes, Incorporated by reference to
Inc., as amended May 7, 1997 Exhibit 4(a)(3) to the Company's
Registration Statement on Form S-8
(File No. 333-26817) filed with the
Commission on May 9, 1997.
3.2 Amended and Restated Code of Regulations of Borror Corporation Incorporated by reference to
Exhibit 3.2 to Form S-1.
4. Specimen of Stock Certificate of Dominion Homes, Inc. Incorporated by reference to
Exhibit 4 to the Company's March 31,
1997 Form 10-Q.
10.1 Dominion Homes, Inc. Incentive Stock Plan, as amended December 5, Incorporated by reference to
1995 and May 7, 1997 Exhibit 4(c) to the Company's
Registration Statement on Form S-8
(File No. 333-26817) as filed with
the Commission on May 9, 1997.
10.2 Shareholder Agreement, dated January 20, 1994, between Borror Incorporated by reference to Exhibit
Corporation and Borror Realty Company 10.4 to Form S-1.
10.3 Land Option Agreement, dated January 20, 1994, between Borror Incorporated by reference to
Corporation and Borror Realty Company Exhibit 10.5 to Form S-1.
10.4 Model Home Lease Agreement, dated January 20, 1994, between Borror Incorporated by reference to Exhibit
Corporation and Borror Realty Company 10.6 to Form S-1.
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
<S> <C> <C>
10.5 Architectural Department Lease Agreement, dated January 4, 1994, Incorporated by reference to
between Borror Corporation and Borror Realty Company Exhibit 10.9 to Form S-1.
10.6 Open Ended Mortgage and Security Agreement, dated December Incorporated by reference to
22, 1987, between The Borror Corporation and W. Lyman Exhibit 10.11 to Form S-1.
Case & Company
10.7 Decorating Center Lease Agreement, dated January 4, 1994, between Incorporated by reference to
Borror Corporation and Borror Realty Company, as amended by Exhibit 10.12 to the Company's
addendum No. 1, effective July 1, 1994 December 31, 1994 Form 10-K.
10.8 Loan Agreement ,dated September 29, 1997, among Dominion Homes, Incorporated by reference to Exhibit
Inc., the lenders listed therein, and The Huntington National 10.13 to the Company's Form 10-Q.
Bank, as agent
10.9 Incentive Stock Option Agreement, dated January 4, 1995, between Incorporated by reference to
Borror Corporation and Richard R. Buechler (which agreement is Exhibit 10.18 to the Company's
substantially the same as Incentive Stock Option Agreements December 31, 1995 Form 10-K.
entered into between the Company and other employees to whom
options were granted on January 4, 1995 under the Company's
Incentive Stock Plan)
10.10 Incentive Stock Option Agreement, dated July 1, 1997, between Incorporated by reference to Exhibit
Dominion Homes, Inc. and Richard R. Buechler (which agreement is 10.15 to the Company's September 30,
substantially the same as Incentive Stock Option Agreements 1997 Form 10-Q.
entered into between the Company and other employees to whom
options were granted on July 1, 1997 under the Company's
Incentive Stock Plan)
10.11 Amended and Restated Dominion Homes, Inc. Executive Deferred Incorporated by reference to Exhibit
Compensation Plan, effective November 15, 1997 4(a) to the Company's Registration
Statement on Form S-8 (file No.
333-40051) as filed with the
Commission on November 12, 1997.
10.12* Employment Agreement, dated May 17, 1996, between Dominion Homes, Filed herewith
Inc. and Richard R. Buechler
10.13* Employment Agreement, dated May 17, 1996, between Dominion Homes, Filed herewith
Inc. and Robert A. Meyer, Jr.
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
<S> <C> <C>
10.14 First Amendment to Lease Agreement, dated March 19, 1996, between Incorporated by reference to Exhibit
Borror Realty Company and Borror Corporation 10.21 to the Company's March 31, 1995
Form 10-Q.
10.15 Employment Agreement, dated May 17, 1996, between Borror Incorporated by reference to
Corporation and Jon M. Donnell Exhibit 10.22 to the Company's
September 30, 1996 Form 10-Q.
10.16 First Amendment, dated November 6, 1996, to Employment Agreement Incorporated by reference to
between Borror Corporation and Jon M. Donnell Exhibit 10.28 to the Company's
December 31, 1996 Form 10-K.
10.17 Restricted Stock Agreement, dated August 1, 1995, between Borror Incorporated by reference to Exhibit
Corporation and Jon M. Donnell 10.19 to the Company's December 31,
1995 Form 10-K.
10.18 Restricted Stock Agreement, dated November 6, 1996, between Borror Incorporated by reference to Exhibit
Corporation and Jon M. Donnell 10.30 to the Company's December 31,
1996 Form 10-K.
10.19 Restricted Stock Agreement, dated August 1, 1997, between Dominion Incorporated by reference to
Homes, Inc., and Jon M. Donnell Exhibit 10.24 to the Company's
September 30, 1997 Form 10-Q.
10.20* Real Estate Purchase Contract, dated December 18, 1997, between Filed herewith
Borror Realty Company and Dominion Homes, Inc.
10.21* Lease, dated December 29, 1997 as amended by Addendum dated Filed herewith
February 2, 1998, between Borror Realty Company and Dominion
Homes, Inc.
23* Consent of Coopers & Lybrand L.L.P. Independent Public Accountants Filed herewith
24* Powers of Attorney Filed herewith
27* Financial Data Schedule Filed herewith
</TABLE>
- -------------
* Filed herewith
47
<PAGE> 48
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 30, 1998 Dominion Homes, Inc.
*/s/ DOUGLAS G. BORROR
----------------------
By Douglas G. Borror,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacities Date
- --------- ---------- ----
<S> <C> <C>
*/s/ DONALD A. BORROR Director March 30, 1998
- ------------------------------
Donald A. Borror
*/s/ DOUGLAS G. BORROR Director and March 30, 1998
- ----------------------------- Principal Executive Officer
Douglas G. Borror
*/s/ JON M. DONNELL Director, March 30, 1998
- -------------------------------- Chief Operating Officer and
Jon M. Donnell Principal Financial Officer
*/s/ TAD E. LUGIBIHL Principal Accounting Officer March 30, 1998
- ---------------------------------
Tad E. Lugibihl
*/s/ DAVID S. BORROR Director March 30, 1998
- --------------------------------
David S. Borror
*/s/ PETE A. KLISARES Director March 30, 1998
- --------------------------------
Pete A. Klisares
*/s/ GERALD E. MAYO Director March 30, 1998
- -----------------------------
Gerald E. Mayo
*/s/ C. RONALD TILLEY Director March 30, 1998
- -------------------------------
C. Ronald Tilley
*By /s/ ROBERT A. MEYER, JR. Attorney-in-fact March 30, 1998
- -----------------------------
Robert A. Meyer, Jr.
</TABLE>
48
<PAGE> 1
Exhibit 10.12
EMPLOYMENT AGREEMENT
This Agreement is entered into this 17th day of May, 1996, by and
between Borror Corporation (hereinafter called the "Company") Richard R.
Buechler (hereinafter called the "Employee").
WHEREAS, the Employee has been employed by the Company since May 29,
1985, and currently serves as Executive Vice President and General Manager-Homes
Division; and
WHEREAS, the Employee desires to continue his employment with the
Company and to continue to serve the Company as Executive Vice President and
General Manager-Homes Division; and
WHEREAS, the Company desires to continue to retain the services of the
Employee as Executive Vice President and General Manager-Homes Division; and
WHEREAS, the Company and the Employee desire to enter into an
employment agreement to establish the rights and obligations of the Employee and
the Company in such employment relationship;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Employee hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby continues to employ the
Employee, and the Employee hereby accepts continued employment with the Company
upon the terms and conditions hereinafter set forth. The Employee shall continue
to serve the Company as Executive Vice President and General Manager-Homes
Division. In such capacity, the Employee shall have all powers, duties, and
obligations as are normally associated with such position. The Employee shall
further perform such other duties related to the business of the Company as may
from time to time be reasonably requested of him by the President/CEO. The
Employee shall devote all of his skills, time, and attention solely and
exclusively to said position and in furtherance of the business and interests of
the Company.
2. TERM OF EMPLOYMENT. This Agreement shall be effective upon execution
by both parties and approval by the Compensation Committee of the Company's
Board of Directors. The term of employment shall begin, or be deemed to have
begun, on January 1, 1996 (the "Effective Date"). It shall continue through the
three-year period ending on the day before the third anniversary date of the
Effective Date, subject, however, to prior termination or to extension, as
herein provided.
3. COMPENSATION. For such services, the Employee shall receive an
initial annual base salary of One Hundred Fifty Thousand Dollars ($150,000.00),
which may be increased, but not decreased, by the Company during the term of
this Agreement. In the event that the Company increases the Employee's initial
base salary, the amount of the initial base salary, together with any
increase(s), shall be his base salary. Said base salary
<PAGE> 2
shall be payable in equal installments in accordance with the Company's regular
payroll practices. In addition, the Employee shall be included in the bonus
program, as described in Appendix A which is attached hereto and made a part
hereof. Notwithstanding the provisions of Paragraph 19, Appendix A may be
amended, on a calendar year basis, during the term of this Agreement (and any
extensions thereof), by the Board of Directors of the Company.
4. FRINGE BENEFITS. The Company shall further provide the Employee with
all health and life insurance coverages, sick leave and disability programs,
tax-qualified retirement plans, stock option plans, paid holidays and vacations,
perquisites, and such other fringe benefits of employment as the Company may
provide from time to time to actively employed executives of the Company who are
similarly situated. Notwithstanding the preceding provisions of this Paragraph
4, during the term of this Agreement (including extensions thereof), the
Employee shall be entitled to a minimum of three (3) weeks of vacation per year.
5. EXTENSION OF TERM OF AGREEMENT. The Company and the Employee agree
that the Company's Board of Directors shall, based upon recommendations of the
Company's President/CEO, review the Employee's performance with the intent that,
if the Employee's performance so warrants, the Board may extend the term of this
Agreement for additional three-year periods. By the day preceding the first
anniversary date of the Effective Date, the Board shall notify the Employee of
its decision whether to grant an extension of this Agreement for an additional
three-year period. To the extent that the Board fails to notify the Employee, on
or before the date described in the preceding sentence, of the extension of the
term of this Agreement, the term of this Agreement shall be automatically
extended for an additional three-year period. By way of illustration of this
Paragraph 5, if, by December 31, 1996, the Board notifies the Employee that it
intends to grant an extension of the term of this Agreement (or, if by such
date, the Board fails to notify the Employee that it does not intend to grant
such an extension), the term of this Agreement shall be extended for an
additional three-year period beginning on January 1, 1997 and ending on December
31, 2000. This Agreement shall be subject to extension in the manner set forth
in this paragraph for additional three-year periods on the first anniversary
date of the Effective Date of the immediately preceding extension.
6. TERMINATION OF EMPLOYMENT.
a. Termination of Employment Other Than by Employee. The
Employee's employment hereunder may be terminated by the
Company. However, the Company shall be deemed to have
terminated the employment for "cause" only upon the following:
i. Any unauthorized material disclosure by the
Employee of the Company's business practices
or accounts to a competitor which results in
serious damage to the Company.
-2-
<PAGE> 3
ii. Willful and wrongful misappropriation by the
Employee of funds, property, or rights of
the Company which results in serious damage
to the Company.
iii. Willful and wrongful destruction of business
records or other property by the Employee,
which results in serious damage to the
Company.
iv. Conviction of the Employee of a felony
involving moral turpitude, or, as the result
of a plea bargain, conviction of the
Employee of a misdemeanor; provided, the
Employee was originally charged (prior to
the plea bargain) with a felony involving
moral turpitude.
v. Gross and willful misconduct by the Employee
which results in serious damage to the
Company.
vi. The Employee's material breach of, or
inability to perform his obligations under,
this Agreement other than by reason of
Disability.
b. Termination of Employment by Employee. The Employee may
terminate his employment at any time. However, he shall be
deemed to have terminated his employment for "Good Reason"
only if he terminates his employment by giving Notice of
Termination pursuant to Paragraphs 6(d) and 6(e)(iii) within
ninety (90) days after the occurrence of any of the following
events (provided the Company does not cure such event within
ten (10) days following its receipt of the Employee's Notice
of Termination):
i. The Employee's base salary is reduced for
any reason other than in connection with the
termination of his employment.
ii. For any reason other than in connection with
the termination of the Employee's
employment, the Company materially reduces
any fringe benefit provided to the Employee
under Paragraph 4 below the level of such
fringe benefit provided generally to other
actively employed similarly situated
executives of the Company, unless the
Company agrees to fully compensate the
Employee for any such material reduction.
iii. The Company assigns the Employee to duties
inconsistent in any respect with his
position (including, without limitation, his
status, office, and title), authority,
duties or responsibilities as set forth by
Paragraph 1, or takes any other action that
results in a material diminution in such
position, authority, duties, or
responsibilities.
-3-
<PAGE> 4
iv. The Company otherwise materially breaches,
or is unable to perform its obligations
under this Agreement.
c. Termination of Employment Upon Death or Disability of the
Employee. The Employee's employment hereunder shall terminate
upon his death, and may be terminated by the Company in the
event of his Disability. For purposes of this Agreement,
"Disability" means the inability of the Employee due to
illness, accident, or otherwise, to perform his duties for the
period of time during which benefits are payable to the
Employee under the Company's Short-Term Disability Plan, as
determined by an independent physician selected by the Company
and reasonably acceptable to the Employee (or his legal
representative), provided that the Employee does not return to
work on a substantially full-time basis within thirty (30)
days after Notice of Termination is given by the Company
pursuant to the provisions of Paragraphs 6(d) and 6(e)(ii).
d. Notice of Termination. Any termination of the Employee's
employment by the Company hereunder, or by the Employee other
than termination upon the Employee's death, shall be
communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of
Termination" means a notice that shall indicate the specific
termination provision in this Agreement relied upon, and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
e. Date of Termination. "Date of Termination" means:
i. If the Employee's employment is terminated
by his death, the date of his death.
ii. If the Employee's employment is terminated
by the Company as a result of Disability
pursuant to Paragraph 6(c), the date that is
thirty (30) days after Notice of Termination
is given; provided the Employee shall not
have returned to the performance of his
duties on a full-time basis during such
thirty- (30-) day period.
iii. If the Employee terminates his employment
for Good Reason pursuant to Paragraph 6(b),
the date that is ten (10) days after Notice
of Termination is given (provided that the
Company does not cure such event during that
ten- (10-) day period).
iv. If the Employee terminates his employment
other than for Good Reason, the date that is
two (2) weeks after Notice of Termination is
given; provided, in the sole discretion of
the Company, such date may be any earlier
date after Notice of Termination is given.
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<PAGE> 5
v. If the Employee's employment is terminated
by the Company either for Cause pursuant to
Paragraph 6(a) or other than for Cause, the
date on which the Notice of Termination is
given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING DISABILITY.
a. Death. If the Employee's employment is terminated by his
death, the Employee's beneficiary (as designated by the
Employee in writing with the Company prior to his death) shall
be entitled to the following payments and benefits: (i) any
base salary that is accrued but unpaid, any vacation that is
accrued but unused, and any business expenses that are
unreimbursed -- all, as of the Date of Termination; (ii) a pro
rata award under the bonus program described in Appendix A
which is applicable to the Employee at the time of his death,
with proration based on service completed during the calendar
year for which the award is determined, and payable when the
award would have been paid had the Employee's employment not
terminated; and (iii) any benefit following termination of
employment which may be provided under the fringe benefit
plans, policies and programs described in Paragraph 4. In the
absence of a beneficiary designation by the Employee, or, if
the Employee's designated beneficiary does not survive the
Employee, benefits described in this Paragraph 7(a) shall be
paid to the Employee's estate.
b. Disability.
i. During any period that the Employee fails to
perform his duties hereunder as a result of
incapacity due to physical or mental illness
("Disability Period"), the Employee shall
continue to receive his base salary at the
rate then in effect for such period until
his employment is terminated pursuant to
Paragraph 6(c); provided, however, that
payments of base salary so made to the
Employee shall be reduced by the sum of the
amounts, if any, that were payable to the
Employee at or before the time of any such
salary payment under any disability benefit
plan or plans of the Company and that were
not previously applied to reduce any payment
of base salary.
ii. Upon his termination of employment because
of Disability [as described in Paragraph
6(c)], the Employee shall be entitled to the
payments and benefits described in Paragraph
7(a) as if the Employee had died on his Date
of Termination. In the event of the
Employee's death prior to the time that all
payments described in Paragraph 7(a) have
been completed, such payments and benefits
shall be paid to the Employee's beneficiary
[as designated pursuant to Paragraph 7(a)],
or, in the absence of a beneficiary
designation or if the designated beneficiary
does not survive the Employee, to the
Employee's estate.
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<PAGE> 6
c. Termination by Company Without Cause, or Termination by
Employee for Good Reason. In the event that the Company
terminates the Employee's employment without Cause or the
Employee terminates his employment for Good Reason before the
expiration of the term of this Agreement, including any
extension thereof, the Employee shall be entitled to the
following payments and benefits:
i. Those described in Paragraph 7(a) as if the
Employee had died on his Date of Termination
ii. Within thirty (30) days after the Date of
Termination, a lump sum cash payment equal
to one (1) year of the base salary
applicable to the Employee on the Date of
Termination.
iii. Within thirty (30) days after the Date of
Termination, a lump sum cash payment equal
to eighteen (18) months of the premium
applicable to the Employee on the Date of
Termination for the Employee and his family
(provided the Employee had family coverage
on the Date of Termination) under the
Company's group health plan.
d. Termination by Employee Other Than for Good Reason, or
Termination by Company for Cause. In the event that the
Employee terminates his employment other than for Good Reason
or the Company terminates his employment for Cause, the
Employee shall not be entitled to any compensation except as
set forth below:
i. Any base salary (but not bonus) that is
accrued but unpaid, any vacation that is
accrued but unused, and any business
expenses that are unreimbursed -- all, as of
the Date of Termination.
ii. Any other rights and benefits (if any)
provided under plans and programs of the
Company (excluding any bonus program),
determined in accordance with the applicable
terms and provisions of such plans and
programs.
e. No Duty to Mitigate Damages. After any Date of Termination,
the Employee shall have no obligation to seek other
employment, but shall have the right to be otherwise employed,
and any compensation of any type whatsoever received by the
Employee in connection with such employment shall not be
offset by the Company against any of the obligations of the
Company under this Agreement.
8. CHANGE IN CONTROL.
a. Occurrence of Change in Control. Immediately upon the
occurrence of a "Change in Control," the Employee shall become
fully vested in all employee
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<PAGE> 7
benefit programs (other than any tax qualified retirement
plan, the Employee's interest in which shall vest in
accordance with such plan's terms), including without
limitation, all stock options in which he was a participant at
the time of the Change in Control. For purposes of this
Agreement, the term "Change in Control" shall mean the
occurrence of any event which results in either (a) Borror
Realty Company's failing to own at least thirty percent (30%)
of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors, or (b) both Don Borror and Doug Borror
ceasing to be directors and officers of the Company.
b. Termination of Employment. If, at any time within two (2)
years following a Change in Control, the Company terminates
the Employee's employment without Cause or the Employee
terminates his employment for Good Reason, the provisions of
this Paragraph 8(b) shall be applicable, instead of the
provisions of Paragraph 7(c). To the extent that the
provisions of this Paragraph 8(b) are applicable, the Employee
shall be entitled to the following payments and benefits:
i. Those described in Paragraph 7(a) as if the
Employee had died on his Date of
Termination; provided all cash payments
required under such paragraph shall be made
within five (5) calendar days of the Date of
Termination;
ii. The lump sum payment, as described in
Paragraph 7(c)(iii); provided, such cash
payment shall be made within five (5)
calendar days of the Date of Termination;
iii. A single lump sum payment, payable within
five (5) calendar days of the Date of
Termination, equal to two (2) times the
Employee's annual base salary in effect upon
the Date of Termination; and
iv. Reimbursement of all expenses incurred by
the Employee through the use of any
executive out-placement services to assist
him to seek other employment, which shall
include, but not be limited to (A)
secretarial services, use of an office,
phone, office supplies and office services
comparable to the level of such services and
supplies available to the Employee prior to
the Date of Termination and (B) all
unreimbursed travel expenses incurred by the
Employee to seek other employment up to a
maximum amount of Five Thousand Dollars
($5,000).
9. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any incentive, fringe
benefit, deferred compensation, or other plan or program provided by the Company
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the
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<PAGE> 8
Employee may have under any other agreements with the Company. Amounts that are
vested benefits or that the Employee is otherwise entitled to receive under any
plan or program of the Company at or after the Date of Termination, shall be
payable in accordance with such plan or program.
10. NONCOMPETITION COVENANT. The Employee agrees that, during the term
of this Agreement, including any extension thereof, and for a period of one (1)
year thereafter, he shall not:
a. Anywhere in the State of Ohio or in any other state in which
the Company is then conducting business, without the written
consent of the Company, provide advice with respect to, engage
in or directly or indirectly supervise or assist the provision
of any service or sale of any product which competes with any
service or product of the Company; or
b. Anywhere in any state, accept employment with, provide advice
to, or engage in or directly or indirectly supervise or assist
the provision of any service or sale of any product by any
person, company, partnership, corporation or other entity
which builds homes, develops land, or otherwise competes with
the Company in any market, city or area in which the Company
then conducts business.
Any breach of these Covenants shall be treated the same as a
termination by the Company for Cause.
The restrictions on competition provided herein may be enforced by the
Company and/or any successor thereto, by an action to recover payments made
under this Agreement, an action for injunction, and/or an action for damages.
The provisions of this Paragraph 10 constitute an essential element of this
Agreement, without which the Company would not have entered into this Agreement.
Notwithstanding any other remedy available to the Company at law or at equity,
the parties hereto agree that the Company or any successor thereto, shall have
the right, at any and all times, to seek injunctive relief in order to enforce
the terms and conditions of this Paragraph 10.
If the scope of any restriction contained in this Paragraph 10 is too
broad to permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
11. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity, for the benefit of the Company, all secret or confidential
information, knowledge, and data relating to the Company, that shall have been
obtained by the Employee during his employment with the Company and that is not
public knowledge (other than by acts by the Employee or his representatives in
violation of this Agreement). During and after termination of the Employee's
employment with the Company, the Employee shall not,
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<PAGE> 9
without the prior written consent of the Company, communicate or divulge any
such information, knowledge, or data to anyone other than the Company or those
designated by it, unless the communication of such information, knowledge or
data is required pursuant to a compulsory proceeding in which the Employee's
failure to provide such information, knowledge, or data would subject the
Employee to criminal or civil sanctions.
12. INTELLECTUAL PROPERTY. The Employee agrees to communicate to the
Company, promptly and fully, and to assign to the Company all intellectual
property developed or conceived solely by the Employee, or jointly with others,
during the term of his employment, which are within the scope of the Company's
business, or which utilized Company materials or information. For purposes of
this Agreement, "intellectual property" means inventions, discoveries, business
or technical innovations, creative or professional work product, or works of
authorship. The Employee further agrees to execute all necessary papers and
otherwise to assist the Company, at the Company's sole expense, to obtain
patents, copyrights or other legal protection as the Company deems fit. Any such
intellectual property is to be the property of the Company whether or not
patented, copyrighted or published.
13. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall at
any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall be binding upon and inure
to the benefit of the company resulting from such merger or consolidation or to
which such assets have been transferred, and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.
14. NOTICES. Any notice given to either party to this Agreement shall
be in writing, and shall be deemed to have been given when delivered personally
or sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: Borror Corporation
5501 Frantz Road
Dublin, Ohio 43017
Attn: President/CEO
If to the Employee: Richard R. Buechler
6815 Lake Trail Drive
Westerville, Ohio 43081
15. INDEMNIFICATION. The Employee shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Regulations, to the maximum extent permitted under applicable
law.
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<PAGE> 10
16. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Employee shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
17. ARBITRATION; ENFORCEMENT OF RIGHTS. Any controversy or claim
arising out of, or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in the city of Columbus, Ohio, in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
All legal and other fees and expenses, including, without limitation,
any arbitration expenses, incurred by the Employee in connection with seeking to
obtain or enforce any right or benefit provided for in this Agreement, or in
otherwise pursuing any right or claim, shall be paid by the Company, to the
extent permitted by law, provided that the Employee is successful in whole or in
part as to such claims as the result of litigation, arbitration, or settlement.
In the event that the Company refuses or otherwise fails to make a
payment when due and is ultimately decided that the Employee is entitled to such
payment, such payment shall be increased to reflect an interest equivalent for
the period of delay, compounded annually, equal to the prime or base lending
rate used by The Huntington National Bank, and in effect as of the date the
payment was first due.
18. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Ohio. The captions
of this Agreement shall not be part of the provisions hereof, and shall have no
force or effect. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. Except as otherwise specifically provided in this paragraph,
the failure of either party to insist in any instance on the strict performance
of any provision of this Agreement or to exercise any right hereunder shall not
constitute a waiver of such provision or right in any other instance.
19. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. Upon execution of this
Agreement, the Employment Agreement entered into between the parties on February
28, 1995, shall be terminated and superseded by this Agreement. This Agreement
may be amended at any time by written agreement of both parties, but it shall
not be amended by oral agreement.
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BORROR CORPORATION
By: */s/ ROBERT A. MEYER, JR.
--------------------------------
Robert A. Meyer, Jr.
Senior Vice President
*/s/ RICHARD R. BUECHLER
-----------------------------------
Richard R. Buechler
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<PAGE> 12
APPENDIX A
----------
The target bonus will be an amount within a range from $0 to
$150,000.00. The determination of the amount of bonus to be awarded will be
based upon the performance of the Company in terms of achievement of its net
income goal, and the Employee's positive and meaningful impact upon it.
The determination of the amount of the bonus shall be made by the
Compensation Committee of the Board of Directors with respect to those employees
whose compensation must be specifically reported for securities law purposes,
and otherwise by the Chief Executive Officer.
<PAGE> 1
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Agreement is entered into this 17th day of May, 1996, by and
between Borror Corporation (hereinafter called the "Company") and Robert A.
Meyer, Jr. (hereinafter called the "Employee").
WHEREAS, the Employee has been employed by the Company since January 1,
1994, and currently serves as Senior Vice President, General Counsel and
Secretary; and
WHEREAS, the Employee desires to continue his employment with the
Company and to continue to serve the Company as Senior Vice President, General
Counsel and Secretary; and
WHEREAS, the Company desires to continue to retain the services of the
Employee as Senior Vice President, General Counsel and Secretary; and
WHEREAS, the Company and the Employee desire to enter into an
employment agreement to establish the rights and obligations of the Employee and
the Company in such employment relationship;
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained, the Company and the Employee hereby mutually agree as follows:
1. EMPLOYMENT AND DUTIES. The Company hereby continues to employ the
Employee, and the Employee hereby accepts continued employment with the Company
upon the terms and conditions hereinafter set forth. The Employee shall continue
to serve the Company as Senior Vice President, General Counsel and Secretary. In
such capacity, the Employee shall have all powers, duties, and obligations as
are normally associated with such position. The Employee shall further perform
such other duties related to the business of the Company as may from time to
time be reasonably requested of him by the President/CEO. The Employee shall
devote all of his skills, time, and attention solely and exclusively to said
position and in furtherance of the business and interests of the Company.
2. TERM OF EMPLOYMENT. This Agreement shall be effective upon execution
by both parties and approval by the Compensation Committee of the Company's
Board of Directors. The term of employment shall begin, or be deemed to have
begun, on January 1, 1996 (the "Effective Date"). It shall continue through the
three-year period ending on the day before the third anniversary date of the
Effective Date, subject, however, to prior termination or to extension, as
herein provided.
3. COMPENSATION. For such services, the Employee shall receive an
initial annual base salary of One Hundred Thirty-five Thousand Dollars
($135,000.00), which may be increased, but not decreased, by the Company during
the term of this Agreement. In the event that the Company increases the
Employee's initial base salary, the amount of the initial base salary, together
with any increase(s), shall be his base salary. Said base salary shall be
payable in equal installments in accordance with the Company's regular payroll
practices. In addition, the Employee shall be included in the bonus program, as
described
<PAGE> 2
in Appendix A which is attached hereto and made a part hereof. Notwithstanding
the provisions of Paragraph 19, Appendix A may be amended, on a calendar year
basis, during the term of this Agreement (and any extensions thereof), by the
Board of Directors of the Company.
4. FRINGE BENEFITS. The Company shall further provide the Employee with
all health and life insurance coverages, sick leave and disability programs,
tax-qualified retirement plans, stock option plans, paid holidays and vacations,
perquisites, and such other fringe benefits of employment as the Company may
provide from time to time to actively employed executives of the Company who are
similarly situated. Notwithstanding the preceding provisions of this Paragraph
4, during the term of this Agreement (including extensions thereof), the
Employee shall be entitled to a minimum of three (3) weeks of vacation per year.
5. EXTENSION OF TERM OF AGREEMENT. The Company and the Employee agree
that the Company's Board of Directors shall, based upon recommendations of the
Company's President/CEO, review the Employee's performance with the intent that,
if the Employee's performance so warrants, the Board may extend the term of this
Agreement for additional three-year periods. By the day preceding the first
anniversary date of the Effective Date, the Board shall notify the Employee of
its decision whether to grant an extension of this Agreement for an additional
three-year period. To the extent that the Board fails to notify the Employee, on
or before the date described in the preceding sentence, of the extension of the
term of this Agreement, the term of this Agreement shall be automatically
extended for an additional three-year period. By way of illustration of this
Paragraph 5, if, by December 31, 1996, the Board notifies the Employee that it
intends to grant an extension of the term of this Agreement (or, if by such
date, the Board fails to notify the Employee that it does not intend to grant
such an extension), the term of this Agreement shall be extended for an
additional three-year period beginning on January 1, 1997 and ending on December
31, 2000. This Agreement shall be subject to extension in the manner set forth
in this paragraph for additional three-year periods on the first anniversary
date of the Effective Date of the immediately preceding extension.
6. TERMINATION OF EMPLOYMENT.
a. Termination of Employment Other Than by Employee. The
Employee's employment hereunder may be terminated by the
Company. However, the Company shall be deemed to have
terminated the employment for "cause" only upon the following:
i. Any unauthorized material disclosure by the
Employee of the Company's business practices
or accounts to a competitor which results in
serious damage to the Company.
ii. Willful and wrongful misappropriation by the
Employee of funds, property, or rights of
the Company which results in serious damage
to the Company.
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<PAGE> 3
iii. Willful and wrongful destruction of business
records or other property by the Employee,
which results in serious damage to the
Company.
iv. Conviction of the Employee of a felony
involving moral turpitude, or, as the result
of a plea bargain, conviction of the
Employee of a misdemeanor; provided, the
Employee was originally charged (prior to
the plea bargain) with a felony involving
moral turpitude.
v. Gross and willful misconduct by the Employee
which results in serious damage to the
Company.
vi. The Employee's material breach of, or
inability to perform his obligations under,
this Agreement other than by reason of
Disability.
b. Termination of Employment by Employee. The Employee may
terminate his employment at any time. However, he shall be
deemed to have terminated his employment for "Good Reason"
only if he terminates his employment by giving Notice of
Termination pursuant to Paragraphs 6(d) and 6(e)(iii) within
ninety (90) days after the occurrence of any of the following
events (provided the Company does not cure such event within
ten (10) days following its receipt of the Employee's Notice
of Termination):
i. The Employee's base salary is reduced for
any reason other than in connection with the
termination of his employment.
ii. For any reason other than in connection with
the termination of the Employee's
employment, the Company materially reduces
any fringe benefit provided to the Employee
under Paragraph 4 below the level of such
fringe benefit provided generally to other
actively employed similarly situated
executives of the Company, unless the
Company agrees to fully compensate the
Employee for any such material reduction.
iii. The Company assigns the Employee to duties
inconsistent in any respect with his
position (including, without limitation, his
status, office, and title), authority,
duties or responsibilities as set forth by
Paragraph 1, or takes any other action that
results in a material diminution in such
position, authority, duties, or
responsibilities.
iv. The Company otherwise materially breaches,
or is unable to perform its obligations
under this Agreement.
c. Termination of Employment Upon Death or Disability of the
Employee. The Employee's employment hereunder shall terminate
upon his death, and may
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<PAGE> 4
be terminated by the Company in the event of his Disability.
For purposes of this Agreement, "Disability" means the
inability of the Employee due to illness, accident, or
otherwise, to perform his duties for the period of time during
which benefits are payable to the Employee under the Company's
Short-Term Disability Plan, as determined by an independent
physician selected by the Company and reasonably acceptable to
the Employee (or his legal representative), provided that the
Employee does not return to work on a substantially full-time
basis within thirty (30) days after Notice of Termination is
given by the Company pursuant to the provisions of Paragraphs
6(d) and 6(e)(ii).
d. Notice of Termination. Any termination of the Employee's
employment by the Company hereunder, or by the Employee other
than termination upon the Employee's death, shall be
communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of
Termination" means a notice that shall indicate the specific
termination provision in this Agreement relied upon, and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment under the provision so indicated.
e. Date of Termination. "Date of Termination" means:
i. If the Employee's employment is terminated
by his death, the date of his death.
ii. If the Employee's employment is terminated
by the Company as a result of Disability
pursuant to Paragraph 6(c), the date that is
thirty (30) days after Notice of Termination
is given; provided the Employee shall not
have returned to the performance of his
duties on a full-time basis during such
thirty- (30-) day period.
iii. If the Employee terminates his employment
for Good Reason pursuant to Paragraph 6(b),
the date that is ten (10) days after Notice
of Termination is given (provided that the
Company does not cure such event during that
ten- (10-) day period).
iv. If the Employee terminates his employment
other than for Good Reason, the date that is
two (2) weeks after Notice of Termination is
given; provided, in the sole discretion of
the Company, such date may be any earlier
date after Notice of Termination is given.
v. If the Employee's employment is terminated
by the Company either for Cause pursuant to
Paragraph 6(a) or other than for Cause, the
date on which the Notice of Termination is
given.
7. AMOUNTS PAYABLE UPON TERMINATION OF EMPLOYMENT OR DURING DISABILITY.
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<PAGE> 5
a. Death. If the Employee's employment is terminated by his
death, the Employee's beneficiary (as designated by the
Employee in writing with the Company prior to his death) shall
be entitled to the following payments and benefits: (i) any
base salary that is accrued but unpaid, any vacation that is
accrued but unused, and any business expenses that are
unreimbursed -- all, as of the Date of Termination; (ii) a pro
rata award under the bonus program described in Appendix A
which is applicable to the Employee at the time of his death,
with proration based on service completed during the calendar
year for which the award is determined, and payable when the
award would have been paid had the Employee's employment not
terminated; and (iii) any benefit following termination of
employment which may be provided under the fringe benefit
plans, policies and programs described in Paragraph 4. In the
absence of a beneficiary designation by the Employee, or, if
the Employee's designated beneficiary does not survive the
Employee, benefits described in this Paragraph 7(a) shall be
paid to the Employee's estate.
b. Disability.
i. During any period that the Employee fails to
perform his duties hereunder as a result of
incapacity due to physical or mental illness
("Disability Period"), the Employee shall
continue to receive his base salary at the
rate then in effect for such period until
his employment is terminated pursuant to
Paragraph 6(c); provided, however, that
payments of base salary so made to the
Employee shall be reduced by the sum of the
amounts, if any, that were payable to the
Employee at or before the time of any such
salary payment under any disability benefit
plan or plans of the Company and that were
not previously applied to reduce any payment
of base salary.
ii. Upon his termination of employment because
of Disability [as described in Paragraph
6(c)], the Employee shall be entitled to the
payments and benefits described in Paragraph
7(a) as if the Employee had died on his Date
of Termination. In the event of the
Employee's death prior to the time that all
payments described in Paragraph 7(a) have
been completed, such payments and benefits
shall be paid to the Employee's beneficiary
[as designated pursuant to Paragraph 7(a)],
or, in the absence of a beneficiary
designation or if the designated beneficiary
does not survive the Employee, to the
Employee's estate.
c. Termination by Company Without Cause, or Termination by
Employee for Good Reason. In the event that the Company
terminates the Employee's employment without Cause or the
Employee terminates his employment for Good Reason before the
expiration of the term of this Agreement, including any
extension thereof, the Employee shall be entitled to the
following payments and benefits:
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<PAGE> 6
i. Those described in Paragraph 7(a) as if the
Employee had died on his Date of Termination
ii. Within thirty (30) days after the Date of
Termination, a lump sum cash payment equal
to one (1) year of the base salary
applicable to the Employee on the Date of
Termination.
iii. Within thirty (30) days after the Date of
Termination, a lump sum cash payment equal
to eighteen (18) months of the premium
applicable to the Employee on the Date of
Termination for the Employee and his family
(provided the Employee had family coverage
on the Date of Termination) under the
Company's group health plan.
d. Termination by Employee Other Than for Good Reason, or
Termination by Company for Cause. In the event that the
Employee terminates his employment other than for Good Reason
or the Company terminates his employment for Cause, the
Employee shall not be entitled to any compensation except as
set forth below:
i. Any base salary (but not bonus) that is
accrued but unpaid, any vacation that is
accrued but unused, and any business
expenses that are unreimbursed -- all, as of
the Date of Termination.
ii. Any other rights and benefits (if any)
provided under plans and programs of the
Company (excluding any bonus program),
determined in accordance with the applicable
terms and provisions of such plans and
programs.
e. No Duty to Mitigate Damages. After any Date of Termination,
the Employee shall have no obligation to seek other
employment, but shall have the right to be otherwise employed,
and any compensation of any type whatsoever received by the
Employee in connection with such employment shall not be
offset by the Company against any of the obligations of the
Company under this Agreement.
8. CHANGE IN CONTROL.
a. Occurrence of Change in Control. Immediately upon the
occurrence of a "Change in Control," the Employee shall become
fully vested in all employee benefit programs (other than any
tax qualified retirement plan, the Employee's interest in
which shall vest in accordance with such plan's terms),
including without limitation, all stock options in which he
was a participant at the time of the Change in Control. For
purposes of this Agreement, the term "Change in Control" shall
mean the occurrence of any event which results in either (a)
Borror Realty Company's failing to own at least thirty percent
(30%) of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in
the
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<PAGE> 7
election of directors, or (b) both Don Borror and Doug Borror
ceasing to be directors and officers of the Company.
b. Termination of Employment. If, at any time within two (2)
years following a Change in Control, the Company terminates
the Employee's employment without Cause or the Employee
terminates his employment for Good Reason, the provisions of
this Paragraph 8(b) shall be applicable, instead of the
provisions of Paragraph 7(c). To the extent that the
provisions of this Paragraph 8(b) are applicable, the Employee
shall be entitled to the following payments and benefits:
i. Those described in Paragraph 7(a) as if the
Employee had died on his Date of
Termination; provided all cash payments
required under such paragraph shall be made
within five (5) calendar days of the Date of
Termination;
ii. The lump sum payment, as described in
Paragraph 7(c)(iii); provided, such cash
payment shall be made within five (5)
calendar days of the Date of Termination;
iii. A single lump sum payment, payable within
five (5) calendar days of the Date of
Termination, equal to two (2) times the
Employee's annual base salary in effect upon
the Date of Termination; and
iv. Reimbursement of all expenses incurred by
the Employee through the use of any
executive out-placement services to assist
him to seek other employment, which shall
include, but not be limited to (A)
secretarial services, use of an office,
phone, office supplies and office services
comparable to the level of such services and
supplies available to the Employee prior to
the Date of Termination and (B) all
unreimbursed travel expenses incurred by the
Employee to seek other employment up to a
maximum amount of Five Thousand Dollars
($5,000).
9. NONEXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any incentive, fringe
benefit, deferred compensation, or other plan or program provided by the Company
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the Employee may have under any other agreements
with the Company. Amounts that are vested benefits or that the Employee is
otherwise entitled to receive under any plan or program of the Company at or
after the Date of Termination, shall be payable in accordance with such plan or
program.
10. NONCOMPETITION COVENANT. The Employee agrees that, during the term
of this Agreement, including any extension thereof, and for a period of one (1)
year thereafter, he shall not:
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<PAGE> 8
a. Anywhere in the State of Ohio or in any other state in which
the Company is then conducting business, without the written
consent of the Company, provide advice with respect to, engage
in or directly or indirectly supervise or assist the provision
of any service or sale of any product which competes with any
service or product of the Company; or
b. Anywhere in any state, accept employment with, provide advice
to, or engage in or directly or indirectly supervise or assist
the provision of any service or sale of any product by any
person, company, partnership, corporation or other entity
which builds homes, develops land, or otherwise competes with
the Company in any market, city or area in which the Company
then conducts business.
Notwithstanding any provision contained in this Paragraph 10, following
his termination of employment with the Company, the Employee shall not be
precluded (for any period of time following such termination) from engaging, in
any capacity, in the general practice of law.
The restrictions on competition provided herein may be enforced by the
Company and/or any successor thereto, by an action to recover payments made
under this Agreement, an action for injunction, and/or an action for damages.
The provisions of this Paragraph 10 constitute an essential element of this
Agreement, without which the Company would not have entered into this Agreement.
Notwithstanding any other remedy available to the Company at law or at equity,
the parties hereto agree that the Company or any successor thereto, shall have
the right, at any and all times, to seek injunctive relief in order to enforce
the terms and conditions of this Paragraph 10.
If the scope of any restriction contained in this Paragraph 10 is too
broad to permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
11. CONFIDENTIAL INFORMATION. The Employee shall hold in a fiduciary
capacity, for the benefit of the Company, all secret or confidential
information, knowledge, and data relating to the Company, that shall have been
obtained by the Employee during his employment with the Company and that is not
public knowledge (other than by acts by the Employee or his representatives in
violation of this Agreement). During and after termination of the Employee's
employment with the Company, the Employee shall not, without the prior written
consent of the Company, communicate or divulge any such information, knowledge,
or data to anyone other than the Company or those designated by it, unless the
communication of such information, knowledge or data is required pursuant to a
compulsory proceeding in which the Employee's failure to provide such
information, knowledge, or data would subject the Employee to criminal or civil
sanctions.
12. INTELLECTUAL PROPERTY. The Employee agrees to communicate to the
Company, promptly and fully, and to assign to the Company all intellectual
property
-8-
<PAGE> 9
developed or conceived solely by the Employee, or jointly with others, during
the term of his employment, which are within the scope of the Company's
business, or which utilized Company materials or information. For purposes of
this Agreement, "intellectual property" means inventions, discoveries, business
or technical innovations, creative or professional work product, or works of
authorship. The Employee further agrees to execute all necessary papers and
otherwise to assist the Company, at the Company's sole expense, to obtain
patents, copyrights or other legal protection as the Company deems fit. Any such
intellectual property is to be the property of the Company whether or not
patented, copyrighted or published.
13. ASSIGNMENT AND SURVIVORSHIP OF BENEFITS. The rights and obligations
of the Company under this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and assigns of the Company. If the Company shall at
any time be merged or consolidated into, or with, any other company, or if
substantially all of the assets of the Company are transferred to another
company, then the provisions of this Agreement shall be binding upon and inure
to the benefit of the company resulting from such merger or consolidation or to
which such assets have been transferred, and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.
14. NOTICES. Any notice given to either party to this Agreement shall
be in writing, and shall be deemed to have been given when delivered personally
or sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, at the address indicated below or to such
changed address as such party may subsequently give notice of:
If to the Company: Borror Corporation
5501 Frantz Road
Dublin, Ohio 43017
Attn: President/CEO
-9-
<PAGE> 10
If to the Employee: Robert A. Meyer, Jr.
3584 Dockside Court
Hilliard, Ohio 43026
15. INDEMNIFICATION. The Employee shall be indemnified by the Company,
to the extent provided in the case of officers under the Company's Articles of
Incorporation or Regulations, to the maximum extent permitted under applicable
law.
16. TAXES. Anything in this Agreement to the contrary notwithstanding,
all payments required to be made hereunder by the Company to the Employee shall
be subject to withholding of such amounts relating to taxes as the Company may
reasonably determine that it should withhold pursuant to any applicable law or
regulations. In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole discretion, accept other provision for payment of
taxes, provided that it is satisfied that all requirements of the law affecting
its responsibilities to withhold such taxes have been satisfied.
17. ARBITRATION; ENFORCEMENT OF RIGHTS. Any controversy or claim
arising out of, or relating to this Agreement, or the breach thereof, shall be
settled by arbitration in the city of Columbus, Ohio, in accordance with the
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof.
All legal and other fees and expenses, including, without limitation,
any arbitration expenses, incurred by the Employee in connection with seeking to
obtain or enforce any right or benefit provided for in this Agreement, or in
otherwise pursuing any right or claim, shall be paid by the Company, to the
extent permitted by law, provided that the Employee is successful in whole or in
part as to such claims as the result of litigation, arbitration, or settlement.
In the event that the Company refuses or otherwise fails to make a
payment when due and is ultimately decided that the Employee is entitled to such
payment, such payment shall be increased to reflect an interest equivalent for
the period of delay, compounded annually, equal to the prime or base lending
rate used by The Huntington National Bank, and in effect as of the date the
payment was first due.
18. GOVERNING LAW/CAPTIONS/SEVERANCE. This Agreement shall be construed
in accordance with, and pursuant to, the laws of the State of Ohio. The captions
of this Agreement shall not be part of the provisions hereof, and shall have no
force or effect. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. Except as otherwise specifically provided in this paragraph,
the failure of either party to insist in any instance on the strict performance
of any provision of this Agreement or to exercise any right hereunder shall not
constitute a waiver of such provision or right in any other instance.
-10-
<PAGE> 11
19. ENTIRE AGREEMENT/AMENDMENT. This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and the parties
have made no agreement, representations, or warranties relating to the subject
matter of this Agreement that are not set forth herein. Upon execution of this
Agreement, the Employment Agreement entered into between the parties on February
28, 1995, shall be terminated and superseded by this Agreement. This Agreement
may be amended at any time by written agreement of both parties, but it shall
not be amended by oral agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BORROR CORPORATION
By:*/s/ DOUGLAS G. BORROR
--------------------------------
Douglas G. Borror
President
* /s/ ROBERT A. MEYER, JR.
-----------------------------------
Robert A. Meyer, Jr.
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<PAGE> 12
APPENDIX A
----------
The target bonus will be an amount within a range from $0 to
$100,000.00. The determination of the amount of bonus to be awarded will be
based upon:
1. The quality of the Employee's performance of job elements and
business objectives as set forth on the attached summary,
together with any additional job elements and business
objectives that may be assigned to the Employee by the Chief
Executive Officer (40% of bonus); and
2. The performance of the Company in terms of achievement of its
net income goal, and the Employee's positive and meaningful
impact upon it (60% of bonus).
The determination shall be made by the Compensation Committee of the Board of
Directors with respect to those employees whose compensation must be
specifically reported for securities law purposes, and otherwise by the Chief
Executive Officer.
<PAGE> 13
SUMMARY
-------
1. Legal support to financial reporting.
2. Board of Directors and Board committee support.
3. Oversight of outside counsel.
4. Human Resources department.
5. Governmental affairs/political matters.
6. Legal support to land development and homes division.
<PAGE> 1
Exhibit 10.20
Real Estate Purchase Contract
Industrial - Investment - Commercial
Adopted by the Columbus Board of REALTORS
It is recommended that all parties
be represented by legal counsel and a Realtor.
December 18 , 1997
1. PROPERTY DESCRIPTION: the undersigned Buyer offers to purchase from the
Seller through Broker(s), the following described real estate including,
without limitation, all improvements, fixtures, appurtenant rights
privileges, and easements located in the County of Franklin , the State of
Ohio known as: 5501 Frantz Road, Dublin, Ohio 43017 -- a 5.766 acre site
improved with a three-story office building of approximately 39,500 square
feet.
2. PRICE AND TERMS: The purchase price is See Addendum attached hereto for
purchase price, Buyer's contingencies and additional terms. Dollars
($________) payable as follows: _____________________________________.
3. CONTINGINCIES:
(A) Environmental Inspection: (This paragraph 3 (a) not applicable in
number of days not inserted.) Within ________ days after the
acceptance hereof, Seller agrees to permit the Buyer, Buyer's lender
and the qualified, professional environmental consultant of either of
them to enter the premises to conduct, at the expense of the Buyer, an
environmental site assessment. Buyer agrees to indemnify and hold
Seller harmless from any injury or damage caused by such inspection.
If such assessment if obtained and the consultant recommends further
inspection to determine the extent of suspected contamination or
recommends remedial action, the Buyer, at Buyer's option, may notify
the Seller in writing, within the above specified period, that the
contract is null and void.
(B) Property Inspection: (This paragraph 3 (b) not applicable if number of
days not inserted.) Buyer, at Buyer's expense, shall have ________
days after the acceptance hereof to have the property and all
improvements, fixtures and equipment inspected. Seller shall cooperate
in making the property reasonably available for such inspection(s).
Buyer agrees to indemnify and hold Seller harmless from any injury or
damage caused by such inspection(s). If Buyer is not, in good faith,
satisfied with the condition of the property as disclosed by such
inspection(s), Buyer may terminate this contract by delivering written
notice of such termination to Seller, along with a written copy of
such inspection report(s), within the time period specified above,
such notice and report(s) shall specify the unsatisfactory conditions.
Failure of Buyer to so deliver written notice and copy of inspection
report(s) within such time period shall constitute a waiver of Buyer's
right to terminate pursuant to this provision.
(C) Other contingincies: See Addendum attached hereto for purchase price,
Buyer's contingencies and additional terms.
4. POSSESSION: Possession shall be given, subject to tenants' rights as
tenants, upon closing.
5. RENTALS AND OTHER PRORATIONS AND SECURITY DEPOSITS: SEE ADDENDUM ATTACHED
HERETO.
6. FIXTURES AND EQUIPMENT: The consideration shall include all fixtures owned
by Seller including, but not limited to: built-in appliances, heating,
ventilating, air conditioning (HVAC) and humidifying equipment and their
control apparatus; stationary tubs; pumps; water softening equipment; roof
antennae; attached wall-to-wall carpeting and attached floor coverings,
curtain rods and window coverings including draperies and curtains;
attached mirrors; light, bathroom and lavatory fixtures; storm and screen
doors and windows, awnings, blinds and window air conditioners, whether now
in or on the premises or in storage; garage door openers and controls;
attached fireplace equipment; security systems and controls; smoke alarms;
satellite TV reception system and components; all exterior plants and
trees; and the following: (None if left blank)
_______________________________________.
7. DAMAGE OR DESTRUCTION OF PROPERTY: Risk of physical loss to the real estate
and improvements shall be borne by Seller until closing, provided that if
any property covered by this contract shall be substantially damaged or
destroyed before this transaction is closed, Buyer may (a) proceed with the
transaction and be entitled to all insurance money, if any, payable to
Seller under all policies covering the property, or (b) rescind the
contract and thereby release all parties from liability hereunder by giving
written notice to Seller and Broker within ten (10) days after Buyer has
written notice of such damage or destruction. Failure by Buyer to so notify
Seller and Broker shall constitute an election to proceed with the
transaction.
8. CONDITION OF IMPROVEMENTS: Seller agrees that upon delivery of deed, the
improvements constituting part of the real estate shall be in the same
condition as they are on the date of this offer, reasonable wear and tear
expected.
9. EVIDENCE OF TITLE: Seller shall furnish and pay for an owner's title
insurance commitment and policy [ALTA Form B (1992 REV. 10-17-92)] in the
amount of the purchase price. The title evidence shall be certified to
within thirty (30) days prior to closing with endorsement not before 8 a.m.
on the business day prior to the date of closing, all in accordance with
the standards of the Columbus Bar Association, and shall show in Seller
marketable title in fee simple free and clear of all liens and encumbrances
except: (a) those created by or assumed by Buyer; (b) those specifically
set forth in this contract; (c) zoning ordinances; (d) legal highway; and
(e) covenants, restrictions, conditions and easements of record that do not
unreasonably interfere with present lawful use. Buyer shall pay any
additional costs incurred in connection with mortgage title insurance
issued for the protection of Buyer's lender. If Buyer desires a survey,
Buyer shall pay the cost thereof. If title to all or part of real estate in
unmarketable, as determined by Ohio law with reference to the Ohio State
Bar Association's Standards of Title Examination, or is subject to liens,
encumbrances, easements, conditions, restrictions or encroachments other
than those excepted in this contract, Seller shall, within thirty (30) days
after a written notice thereof, remedy or remove any such defect, lien,
encumbrance, easement, condition, restriction or encroachment or obtain
title insurance without exception thereof. In the event Seller is unable to
remedy to insure against the defect within the thirty (30) day period, the
Buyer may declare this contract null and void. At closing, Seller shall
sign an affidavit with respect to off-record title matters in accordance
with the community custom.
10. CONVEYANCE AND CLOSING: At closing, Seller shall pay transfer taxes and
deed preparation and shall convey, at closing, marketable title (as
described in paragraph 9) to the real estate by deed of general warranty
(or appropriate fiduciary deed if Seller is a fiduciary) in fee simple,
with release of dower, if any. The date of closing shall be: December 29,
1997.
11. TAXES AND ASSESSMENTS: With regard to further assessments, Seller warrants
that, as of the acceptance hereof, no improvements or services to the site
or area have been installed or furnished that would result in the costs
being assessed against the real estate, and no written notification has
been received by Seller from public authority or owner's association of
future improvements that would result in costs being assessed against the
real estate. Real estate taxes and assessments are subject to retroactive
change by governmental authority. The real estate taxes for the property
for the current tax year may changes as a result of the transfer or as a
result of a change in the tax rate. SEE ADDENDUM ATTACHED HERETO.
12. BUYER'S EXAMINATION: BUYER IS RELYING SOLEY UPON HIS OWN EXAMINATION OF THE
REAL ESTATE AND INSPECTIONS HEREIN REQUIRED, IF ANY, FOR ITS PHYSICAL
CONDITION, CHARACTER, AND SUITABILITY FOR BUYER'S INTENDED USE AND IS NOT
RELYING UPON ANY REPRESENTATIONS BY THE BROKER(S), EXCEPT FOR THOSE MADE BY
BROKER(S) DIRECTLY TO THE BUYER IN WRITING.
<PAGE> 2
13. INDEMNITY: Seller agrees to defend, indemnify and hold harmless Broker(s),
and their agents and employees for any cost or liability that may be
incurred by or imposed on Broker(s) for any breach by Seller of any
representation of warranty or for any misrepresentation or concealment of
fact by Seller in connection with the property.
14. ENVIRONMENTAL DISCLAIMER BY BROKER: Buyer and Seller acknowledge that
Broker(s) have made no independent investigation to determine whether
hazardous materials exist in, on or about the property. Buyer and Seller
understand that any such determination requires the expertise of a
specialist in hazardous materials, the retaining of which is the
responsibility of Buyer and/or Seller and not that of the Broker.
15. DEPOSIT: Buyer has deposited with the Broker the sum receipted for below,
which shall be returned to Buyer, upon Buyer's request, if no contract
shall have been entered into. Upon acceptance of this contract by both
parties, Broker shall deposit such amount in its non-interest-bearing trust
account to be disbursed, subject to collection by Broker's depository, as
follows: (a) deposit shall be applied on purchase price or returned to
Buyer when transaction is closed; (b) if Seller fails or refuses to
perform, or any contingency is not satisfied or waived, the deposit shall
be returned; (c) if Buyer fails or refuses to perform, this deposit shall
be paid to Seller. If the parties are unable to agree upon the disposition
of the deposit, then upon the request of either Buyer or Seller for the
return or payment of the deposit, the Broker holding the deposit shall give
written notice to the other party of such request, and shall advise the
other party that such deposit shall be returned or paid in accordance with
such request unless the other party delivers written objection thereto
within 20 days after receipt of such notice. If the Broker does not receive
any written objection within such 20-day period, then the Broker shall
return or pay such deposit in accordance with such request. If the other
party objects in writing within such 20-day period, Broker shall retain the
deposit until (i) Buyer and Seller have settled the dispute; (ii)
disposition has been ordered by a final court order; or (iii) Broker
deposits said amount with a court pursuant to applicable court procedures.
The return or payment of such deposit shall not in any way prejudice the
rights of Seller, Buyer or Broker(s) in any action for damages or specific
performance.
16. MISCELLANEOUS: This contract constitutes the entire agreement and no oral
or implied agreement exists. Any amendments to this contract shall be in
writing, signed by Buyer(s) and Seller(s) and copies provided to them. This
contract shall be binding upon the parties, their heirs, administrators,
executors, successors and assigns. If this contract involves seller
financing, it may not be assigned. Time is of the essence of all provisions
of this contract. All provisions of this contract shall survive the
closing. In compliance with fair housing laws, no party shall in any manner
discriminate against any Buyer or Buyers because of race, color, religion,
sex, familial status, handicap or national origin. Paragraph captions are
for identification only and are not part of this contract.
17. EXPIRATION AND ACCEPTANCE: This offer shall remain open for acceptance
until 6:00 p.m. Columbus, Ohio time on December 19, 1997, and a signed copy
shall be returned to all parties upon acceptance.
18. BROKER'S FEE: Seller shall pay a brokerage fee of $0.00 of the purchase
price in connection with this transaction, payable at closing. Seller and
Broker acknowledge that there are no other Broker(s) involved in this
transaction except as follows:
Buyer hereby makes the foregoing offer this 18th day of December 1997.
BORROR REALTY COMPANY
By: */S/ Randolph B. Robert
-------------------------------- --------------------------------
Buyer Buyer
Address: 5501 Frantz Road Phone
Dublin, Ohio 43017 ---------------------------
Deed to: Borror Realty Company
- --------------------------------------------------------------------------------
Name of Buyer's Attorney
Seller agrees to and accepts the foregoing offer this 18th day of December 1997.
DOMINON HOMES, INC.
By: */S/ Robert A. Meyer, Jr.
-------------------------------- --------------------------------
Seller Seller
Address: 5501 Frantz Road Phone
Dublin, Ohio 43017 ---------------------------
- --------------------------------------------------------------------------------
Name of Seller's Attorney
NOTE: AGENCY DISCLOSURE STATEMENT: Buyer and Seller acknowledge having reviewed
and signed the attached Agency Disclosure Statement as required by Ohio law.
ALL PARTIES TO THIS CONTRACT MUST BE PROVIDED WITH A COPY.
Broker acknowledges receipt of the sum $0.00 by cash/check, which shall be held,
deposited and disbursed pursuant to paragraph 15 above.
By:
----------------------------------------------------------------------------
<PAGE> 3
ADDENDUM TO SALE CONTRACT
DOMINION HOMES, INC. CORPORATE OFFICE BUILDING
This Addendum is made to the sale contract between Borror Realty Company
("Buyer") and Dominion Homes, Inc. ("Seller"). Buyer and Seller agree as
follows:
1. Price and Terms. The purchase price is Three Million Nine Hundred Fifty
Thousand Dollars ($3,950,000.00), less the current principal amount of the
existing first mortgage to State Farm Insurance Company, which Buyer will
assume, and less a closing credit of Two Hundred Thousand Dollars ($200,000.00)
for repairs to the roof and sidewalks, and for expansion of the parking lot to
be performed by and paid for by Buyer. If the actual cost of repairs and parking
lot expansion is less than the $200,000.00 credit, the difference shall be
returned to Seller. The referenced repairs and actual cost of repairs and
parking lot expansion and the $200,000.00 credit shall be returned to the Seller
by not later than May 1, 1998. The net purchase price shall be paid in cash at
closing.
2. Rentals and Other Prorations and Security Deposit. Existing rents,
future rents from current tenants other than Seller, and security deposits shall
be retained by Seller. Accordingly, there will be no prorations, including other
expenses between the parties at closing.
3. Taxes and Assessments. Seller as future tenant shall be solely
responsible for payment of all recurring property taxes, special taxes, and
assessments against the property. Accordingly, there shall be no proration of
taxes and assessments between the parties at closing.
BORROR REALTY COMPANY DOMINION HOMES, INC.
By: */s/ RANDOLPH B. ROBERT By: */s/ ROBERT A. MEYER, JR.
---------------------------- ----------------------------
Randolph B. Robert Robert A. Meyer, Jr.
Vice President Senior Vice President
<PAGE> 1
Exhibit 10.21
LEASE
-----
THIS LEASE, executed at Columbus, Ohio, this 29th day of December,
1997, by and between BORROR REALTY COMPANY, an Ohio corporation, hereinafter
referred to as "Landlord," and DOMINION HOMES, INC., an Ohio corporation,
hereinafter referred to as "Tenant."
1. In consideration of the mutual covenants and agreements herein set
forth, and other good and valuable consideration, Landlord does hereby demise
and lease to Tenant, and Tenant does hereby lease from Landlord, upon the terms
and provisions hereinafter set forth, the following property (the "Leased
Premises"): (a) the real property (the "Land") located at 5501 Frantz Road,
Columbus, Ohio and described in Exhibit A attached to this Lease, (b) the
building containing approximately 39504 gross square feet (37557 net rentable
square feet) located in the Land and all related fixtures and appurtenances (the
"Building"), (e) all other improvements now or in the future located in the
Land, and (d) all other rights and easements appurtenant to the Land, the
Building and other improvements.
2. TERM
The term of this Lease Agreement shall be for a period of fifteen (15)
years, commencing on January 1, 1998 (the "Commencement Date"), and expiring on
December 31, 2013 (the "Primary Term").
3. RENT
Tenant agrees to pay to Landlord as fixed rent (the "Fixed Rent")
during the term hereof, the sum of SIX MILLION SEVEN HUNDRED SIXTY THOUSAND TWO
HUNDRED SIXTY AND 00/100 DOLLARS ($6,760,260.00) payable in monthly installments
of THIRTY SEVEN THOUSAND FIVE HUNDRED FIFTY-SEVEN AND 00/100 DOLLARS
($37,557.00) on or before the first day of each and every month in advance
without off-set. The first rent payment shall be due on the Commencement Date.
4. USE
The Leased Premises shall be used as commercial offices and for related
uses, and for no other business or purpose without the express written consent
of Landlord, which shall not be unreasonably withheld. No use shall be made or
permitted to be made of the Leased Premises nor acts done which will increase
the rate established for insurance of the Leased Premises or cause a
cancellation of any insurance policy covering the Building or any part thereof,
nor shall Tenant keep, use or sell or permit to be kept, used or sold in or
about the Leased Premises, any articles which may be prohibited by the standard
form of fire insurance policies. Further, Tenant shall, at its sole cost and
expense, comply with any and all requirements of any insurance organization or
company which said insurance organization or company deems necessary for the
maintenance of reasonable fire and
<PAGE> 2
public liability insurance covering the building and appurtenances thereto that
are required by Tenant's use of the Leased Premises only.
5. INSURANCE
(a) Tenant shall procure and maintain public liability insurance for
the Leased Premises with policy limits of not less than $1,000,000.00 for
personal injury to one person, $2,000,000.00 for personal injury to any group of
persons as a result of one accident or occurrence, and $1,000,000.00 property
damage. In addition to the foregoing, Tenant shall procure and maintain an
umbrella public liability insurance policy with limits of not less than
$5,000,000.00. Tenant shall name Landlord and any mortgagee as additional
insureds under these policies.
(b) Tenant shall keep the Building insured against loss by fire and all
of the risks and perils usually covered by an "all risk of physical loss"
endorsement to a policy of fire insurance upon property comparable to the Leased
Premises, in an amount equal to not less than the replacement cost of the
Building (but in no event less than $3,500,000.00), and with deductible amounts
approved by Landlord. Landlord shall be the insured party under this policy,
with Tenant and the holder of any mortgage on the Leased Premises as additional
insureds as their interests may appear.
(c) The policies required by Sections 5(a) and 5(b) shall contain an
agreement by the insurer that it will not cancel the policy except after thirty
days' prior written notice to Landlord and Tenant and that any loss otherwise
payable under the policy shall be payable notwithstanding any act or negligence
of Landlord or Tenant that might, absent such agreement, result in a forfeiture
of all or a part of the insurance payment.
At the Commencement Date, Tenant shall deliver to Landlord certificates
of the insurance required to be maintained under this Section. Tenant shall also
deliver to Landlord at least 10 days prior to the expiration date of any such
policy (or of any renewal policy), certificates for the renewal policy of this
insurance.
6. SUBROGATION AND WAIVER OF LIABILITY
Neither Landlord nor Tenant shall be liable for any damage to property
of the other found or located within the Leased Premises or for any damage to
the Leased Premises or the Building or other improvements caused by fire or
other peril usually covered by a policy of insurance of the type described in
Section 5 and each party releases the other from all liability for damage from
those causes, including any subrogation claims of any insurer. This provision
shall apply regardless of the negligence of either party and shall not be
limited by the amount of insurance coverage. This Section 6 shall override any
inconsistent provisions of this Lease. However, this provision shall not apply
to the extent that it would render void the insurance coverage obtained by
Landlord or Tenant, but only if that party (a) makes reasonable efforts to
obtain insurance coverage that would not be voided by this waiver of liability
and (b) notifies the other party in writing that this waiver will not apply.
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7. MAINTENANCE AND REPAIRS
During the term of this Lease, Tenant, at its sole expense, shall
maintain the Leased Premises in good condition and repair, and shall make all
repairs, replacements and renewals, whether structural or non-structural,
foreseen or unforeseen, ordinary or extraordinary, interior or exterior,
necessary to put or maintain the Leased Premises in that state of repair and
condition. Tenant's obligations include, but are not limited to, keeping the
sidewalks, parking areas and drives on or about the Leased Premises paved and
striped and in a clean, sightly, and sanitary condition, free of ice and snow;
and keeping all lawns mowed, shrubbery trimmed and yards free of excessive weed
growth so that the laws and yards shall at all times be maintained in a neat and
presentable condition.
Subject to reimbursement as provided for in this Section, Landlord
shall perform "Major Replacement" to the roof and structural elements of the
Leased Premises and to the heating, ventilating and air conditioning system
serving the Leased Premises occurring during the last five years of the term of
this Lease. A "Major Replacement" means the replacement of a structural item,
system or component costing $50,000.00 or more. If Landlord performs a Major
Replacement pursuant to this Section, Tenant shall pay to Landlord, as an
addition to the rent, an amount which will amortize the cost of the Major
Replacement together with interest at the rate of 9% per annum in 120 equal
monthly installments. The first monthly installment shall be due and payable on
the first day of the month following the date that the Major Replacement is
completed. Installments in the same amount shall continue to be due and payable
on the first day of each month for the remainder of the term of this Lease,
including any option term exercised by Tenant, until the cost of the Major
Replacement has been fully reimbursed. However, if the term of this Lease
expires before the cost of the Major Replacement is fully reimbursed, Tenant
shall not be responsible for the unamortized balance remaining at the expiration
of this Lease.
8. UTILITY USE AND INTERRUPTION OF SERVICE
Tenant shall pay for all utilities, furnished to or consumed on the
Leased Premises. Landlord shall not be liable for any stoppage or interruption
of any of said services caused by energy shortages, breakdown of equipment,
riot, labor dispute, accident or necessary repairs or other causes beyond
Landlord's control.
9. TAXES
Tenant shall pay and fully discharge all real property taxes and
special assessments which may be levied or assessed against the land and
improvements of which the Leased Premises are a part which become due and
payable during the term of this Lease. Tenant shall pay and fully discharge all
taxes and assessments on its personal property which may become due and payable
during the term of this Lease.
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10. ALTERATIONS AND LIENS
Tenant shall not make or suffer to be made any alterations of the
Leased Premises or any part thereof exceeding TEN THOUSAND DOLLARS ($10,000.00)
without first obtaining the written consent of Landlord, which consent shall not
be unreasonably withheld. Any additions to or alterations of the Leased
Premises, except movable furniture and trade fixtures, shall at once become a
part of the realty and thereafter belong to Landlord. Tenant shall keep the
Leased Premises free from any liens arising out of any work performed, materials
furnished, or obligations incurred by the Tenant.
11. SIGNS
Tenant shall erect signs on any portion of the exterior of the Leased
Premises, including, but not limited to the exterior walls, windows and doors,
only with written approval of Landlord, which will not be unreasonably withheld.
12. ABANDONMENT
Tenant shall assume the risk of, be responsible for, have the
obligation to insure against, and indemnify Landlord and hold it harmless from
any and all liability for any loss, damage or injury to person or property
occurring in, on or about the Leased Premises, regardless of cause, except for
that caused by the negligence or intentional tortious acts of Landlord and its
employees, agents, and invitees; and Tenant hereby releases Landlord from any
and all liability for the same. Tenant's obligation to indemnify Landlord
hereunder shall include the duty to defend against any claims asserted by reason
of such loss, damage or injury and to pay any judgments, settlements, costs,
fees, and expenses, including attorney's fees, incurred in connection therewith.
13. INDEMNIFICATION
Except to the extent liability is waived under Section 6, Tenant shall
indemnify and hold Landlord harmless against any and all claims, liabilities,
damages or losses resulting from injury or death of any person or damage to
property occurring on or about the Leased Premises or in any manner in
conjunction with the use and occupancy of the Leased Premises in whole or in
part, unless the death, injury or damage was sustained as a result of any
tortious or negligent act of Landlord, Landlord's agents or employees. In
addition, Tenant shall indemnify and hold Landlord harmless against any claims,
liabilities, damages, losses or expenses resulting from the release of hazardous
substances, hazardous wastes or petroleum products on or from the Leased
Premises or other violations of applicable environmental laws occurring during
the term of this Lease.
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14. PERSONAL PROPERTY
All personal property of Tenant in or upon the Leased Premises shall be
at the risk of Tenant only, and Landlord shall not be liable for any damage
thereto or disappearance or theft thereof, unless due to the negligent acts of
Landlord, its employees, agents, and invitees, and Landlord shall not be liable
to Tenant or any person or persons claiming by, through, or under Tenant for any
loss of property or for any damage or injury to persons or property resulting
from plumbing, gas, water, steam, sewer, or other pipes or tanks, or electric,
telegraph or telephone wires or equipment, or due to the happening of any
accident to or about said premises, unless due to the negligent acts of Landlord
and its employees, agents, and invitees or unless such damage to Tenant's
personal property results from Landlord's failure to comply with its covenants
and obligations under the Lease.
15. QUIET ENJOYMENT
Landlord covenants that Landlord is lawfully seized of and in
possession of the Leased Premises and agrees that if Tenant shall promptly pay
the rent and perform all of the covenants and agreements herein stipulated to be
performed on Tenant's part, Tenant shall have the peaceable and quiet enjoyment
and possession of the Leased Premises during the term hereof, without any manner
of hindrance from Landlord or any other person lawfully claiming through
Landlord, subject to the conditions herein set forth.
16. FIRE AND CASUALTY DAMAGE
If at any time after the execution hereof, the Leased Premises shall be
wholly or substantially destroyed or damaged by fire, the elements, or casualty,
Tenant shall give immediate written notice thereof to Landlord.
If the Leased Premises are totally or substantially destroyed, then
either party hereto may, at its option, terminate this Lease by giving written
notice thereof to the other party within thirty (30) days after the date of such
casualty. Following a partial destruction or injury [less than fifty percent
(50%) of the Leased Premises] whereby the Tenant shall be deprived of the
occupancy of only a portion of the Leased Premises, and if the function of
Tenant's business is not substantially impaired, this Lease shall not terminate;
but a proportionate allowance shall be made from the Fixed Rent during such
period in the proportion which the number of square feet of the Leased Premises
which the Tenant is deprived of by such damage and the making of repairs bears
to the total square feet of the Leased Premises; and the Landlord shall repair
such damage with due diligence. In the event, however, that the Leased Premises
cannot be replaced, repaired or restored within one hundred twenty (120) days
from the fire or casualty, or if Landlord elects not to make and complete said
replacement, repairs, and restoration within said one hundred twenty (120) day
period, Tenant, upon notice in writing to Landlord, may terminate this Lease and
surrender possession of said premises to Landlord and thereupon this Lease shall
terminate and be void and Tenant shall not be required to pay or be liable for
any rent from the date of said fire or casualty.
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17. CONDEMNATION
If the whole or any substantial part of the Leased Premises shall be
taken or condemned by any competent authority for any public use or purpose, the
term of this Lease shall end upon the date when the possession of the part so
taken shall be required for such use or purpose. Current rent shall be
apportioned as of the date of such termination. If part of the Leased Premises
or the access to the same is taken without substantially interfering with the
use of the Leased Premises by Tenant, this Lease shall not terminate. In that
event, Landlord shall promptly restore any damage to the Leased Premises caused
by the taking in a manner reasonably suitable to Tenant, and if the size of the
Building or Tenant's use of the Leased Premises has been diminished, the rent
for the Leased Premises shall be equitably reduced commencing on the date when
possession of the part taken is surrendered by Tenant. In the event of any
taking, Landlord shall be entitled to the entire condemnation award, regardless
of whether this Lease is terminated in accordance with this Section 17, except
that Tenant shall be entitled to any separate award allocated by the condemning
authority to Tenant's trade fixtures, personalty and moving expenses. If this
Lease is terminated pursuant to this Section 17, Landlord shall refund to Tenant
any rent prepaid beyond the effective date of termination.
18. INSPECTION BY LANDLORD
Upon twenty-four (24) hours prior written notice, except in an
emergency, Tenant shall permit the Landlord or his agents to enter into and upon
the Leased Premises, accompanied by an employee of Tenant, except in the case of
emergency, at all reasonable times for the purpose of inspecting the same or for
the purpose of placing upon the property in which the Leased Premises are
located, any usual or ordinary "For Sale" signs without any rebate of rent and
without any liability to Tenant for the loss of occupation or quiet enjoyment of
the Leased Premises occasioned thereby; and shall permit Landlord at any time
within three (3) months prior to the expiration of this Lease to put upon the
Leased Premises any usual or ordinary "to let" or "to lease" signs, provided,
however, that Landlord shall have 24 hour a day access without notice and
without Tenant's employee being there to perform ordinary janitorial and
maintenance services.
19. OFFSET STATEMENT ATTORNMENT AND SUBORDINATION
(a) OFFSET STATEMENT. Tenant agrees within ten (10) days after
request therefor by Landlord to execute in recordable form and deliver
to Landlord a statement, in writing, certifying:
(i) that this Lease is in full force and effect;
(ii) the date of commencement of the term of this
Lease;
(iii) that rent is paid currently without any
offset;
(iv) the amount of rent, if any, paid in advance;
and
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(v) that there are no uncured defaults by
Landlord, or stating those claimed by
Tenant, providing that, if any, such facts
are accurate and ascertainable.
(vi) Tenant's obligation to provide the above
statements are contingent upon each such
statement being true.
(b) ATTORNMENT. Tenant shall, in the event any proceedings are
brought for the foreclosure of, or in the event of any exercise of the
power of sale under any mortgage made by Landlord covering the Leased
Premises, attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as the Landlord under this Lease.
(c) SUBORDINATION. Tenant agrees that this Lease shall, at the
request of the Landlord, be subordinate to any mortgages or deeds of
trust that may hereafter be placed on the Leased Premises by Landlord
and to any and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements, and extensions thereof,
provided that the mortgagee or trustee named in said mortgages or trust
deeds shall agree to recognize the Lease of Tenant in the event of
foreclosure if Tenant is not then in default. Tenant also agrees that
any mortgagee or trustee may elect to have this Lease a prior lien to
its mortgage or deed of trust, and in the event of such election and
upon notification by such mortgagee or trustee to Tenant to that
effect, this Lease should be deemed prior in lien to the said mortgage
or deed of trust, whether this Lease is dated prior or subsequent to
the date of said mortgage or deed of trust. Tenant agrees, that upon
the request of Landlord, any mortgagee or trustee, it shall execute
whatever instruments may be required to carry out the intent of this
Section.
(d) REMEDIES. Failure of Tenant to execute any of the above
instruments within fifteen (15) days after written request to do so by
Landlord shall constitute a breach of this Lease, and Landlord may, at
its option, cancel this Lease and terminate Tenant's interest therein
if Tenant shall fail to cure such failure to execute the requested
instruments within an additional fifteen (15) days after written notice
by Landlord to Tenant of such breach.
20. ASSIGNMENT AND SUBLEASE
Tenant shall not assign this Lease or any interest therein, and shall
not sublet the Leased Premises or any part thereof, or any right or privilege
appurtenant thereto or suffer any other person to occupy or use the Leased
Premises or any portion thereof without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld, except that Tenant
shall have the right to assign the Lease to a wholly-owned subsidiary or
affiliate without Landlord's consent or enter into time sharing agreements for
the use of its space for the purposes set forth in Section Four (4). It is
understood and agreed that a consent to one assignment or subletting or
occupation or use by any other person shall not be deemed to be a consent to any
subsequent assignment, subletting, occupation or use by any other person. Any
such assignment or subletting
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without the consent provided for herein shall be void and shall, at the option
of the Landlord, terminate this Lease.
21. DEFAULT
Tenant agrees that the violation of any of the foregoing covenants and
conditions shall, at the option of Landlord, void this Lease and render the same
null and void, and shall constitute a ground of forfeiture and ejection under
the provisions for that purpose hereinafter contained if such violation is not
cured within the applicable time period after written notice of the violation to
Tenant, if such written notice is expressly required hereunder.
Provided, however, and this Lease is made upon this condition, that if
Fixed Rent, any part thereof or any other sum due and payable to Landlord
hereunder shall remain unpaid for thirty (30) days after written notice by
Landlord of such default in payment (but Landlord shall only be required to give
notice of a monetary default two times during the term of this Lease and
thereafter default is automatic), or if Tenant shall assign this Lease or sublet
the Leased Premises, or any part thereof, or any interest therein, without the
written consent of Landlord, or if Tenant shall use the Leased Premises for any
purpose other than herein agreed, or if Tenant shall apply for relief under the
Federal Bankruptcy Code, or any similar state or Federal laws providing relief
to debtors, or if an involuntary petition is filed against Tenant under the
Federal Bankruptcy Code or any such similar state or Federal laws, or if Tenant
shall make an assignment for the benefit of creditors, or if a receiver or
receivers be appointed for Tenant, or if the interest of Tenant in the Leased
Premises shall be sold under execution, foreclosure, or legal process, or if any
judicial sale of the interest of Tenant be had, or if a voluntary or involuntary
sale, transfer, or assignment of this Lease of any kind or character whatsoever
shall be made, or if Tenant shall fail to perform, keep, fulfill, or observe any
of the terms, agreements, covenants, and conditions contained in this Lease on
the part of Tenant to be kept, performed, fulfilled, or observed, it shall be
lawful for Landlord at its option to re-enter into the Leased Premises and the
same to have again, repossess and enjoy, as in its first and former estate, and
that without notice to or demand upon Tenant or any other person, and thereupon,
at its option, this Lease and everything herein contained on the Landlord's
behalf to be done and performed, shall cease, determine, and be utterly void and
that without prejudice to any remedies or proceedings for arrearages of rent,
breach of covenant, or collection of debt, or alternatively this Lease shall
remain in full force and effect. Tenant hereby expressly waives any and all
claims or demands for injuries or damages occasioned by and an account of any
such re-entry by Landlord. If Tenant abandons the Leased Premises, or otherwise
defaults in performance of this Lease and thereby entitles Landlord to terminate
Tenant's possession of the Leased Premises, and Landlord elects to terminate
Tenant's right to possession only without termination of the Lease, Landlord
may, at Landlord's option, enter into the Leased Premises, remove Tenant's signs
and other evidences of tenancy, and take and hold possession thereof, without
such entry and possession terminating the Lease or releasing Tenant, in whole or
in part, from Tenant's obligations to pay all rent due hereunder for all the
full term, and in any such case Tenant shall pay forthwith to Landlord, if
Landlord so elects, a sum equal to the entire amount of all rent due under this
Lease for the residue of the stated term, plus any other sums then due Landlord
hereunder, including, without limitation, Landlord's expenses incurred in
connection
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with the default (such as Landlord's legal, broker/realtor and accounting fees).
Upon and after entry into possession without termination of the Lease, Landlord
shall use reasonable efforts to re-rent the Leased Premises (or such part
thereof as Landlord deems proper) for the account of Tenant, to any persons,
firm or corporation other than Tenant, for such rent and for such time and upon
such terms as Landlord, in Landlord's sole discretion, shall determine, and
Landlord shall not be required to obtain consent of Tenant for such rerenting,
nor to accept any tenant offered by Tenant, or to observe any instructions given
by Tenant about such re-renting. Tenant expressly agrees that, in the event
Landlord shall enter into possession without terminating this Lease, Landlord
need not attempt to relet said Leased Premises to any person, firm or
corporation whom Landlord believes might rent other space in the Building or any
other building of Landlord . In any case, Landlord may make repairs,
alterations, and additions in or to the Leased Premises, and redecorate the same
to the extent deemed by Landlord as necessary or desirable, and Tenant shall,
upon demand, pay the cost thereof, together with Landlord's expense of the
re-renting. If the consideration collected by Landlord upon any such re-renting
for Tenant's account is not sufficient to pay the full amount of Tenant's rent
reserved in this Lease, together with the costs of repairs, alterations,
additions, redecorating and all of Landlord's other expenses incurred in
connection with the default (including, without limitation, Landlord's legal,
broker/realtor and accounting fees), Tenant shall pay to Landlord the amount of
the deficiency upon demand; and if the consideration so collected from any such
reletting is more than sufficient to pay the full amount of the rent reserved
herein, together with the costs and expenses of Landlord , Landlord may retain
the surplus without any duty to pay the surplus to Tenant.
Any and all property which may be removed from the Leased Premises by
Landlord pursuant to the authority of this Lease or of law, to which Tenant is
or may be entitled, may be handled, removed or stored by Landlord at the risk,
cost and expense of Tenant, and Landlord shall in no event be responsible for
the value, preservation or safekeeping thereof. Tenant shall pay to Landlord
upon demand, any and all expenses incurred in such removal, and all storage,
sale and disposition charges against such property so long as the same shall be
in Landlord's possession or under Landlord's control. Any such property of
Tenant not removed from the Leased Premises or retaken from storage by Tenant
within ten (10) days after removal shall be presumed, at the option of Landlord,
to have been conveyed by Tenant to Landlord under this Lease as a bill of sale
without further payment or credit by Landlord to Tenant, and Landlord shall
thereafter be free to use such property for its own benefit, or otherwise sell
or dispose of such property, as Landlord deems appropriate in its sole
discretion.
If Tenant shall default in the observance or performance of any term or
covenant on its part to be observed or performed under or by virtue of any of
the terms and provisions in any section of this Lease, Landlord, without being
under any obligation to do so and without thereby waiving such default, may
remedy such default for the account of and at the expense of Tenant, immediately
and without notice in case of emergency or in any other case.
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If Landlord shall default in the observance or performance of any term
or covenant on its part to be observed or performed under or by virtue of any of
the terms and provisions in any section of this Lease or any term implied in
fact or in law on the part of Landlord to be performed or observed, Tenant
agrees that Tenant shall look solely to Landlord's interest in the Leased
Premises, and no other assets of Landlord shall be subject to levy, execution or
other judicial process or award for the satisfaction of Tenant's claim.
22. TERMINATION AND SURRENDER
Upon the termination of this Lease, whether by lapse of time or
otherwise, Tenant will at once, upon five (5) working days written notice from
Landlord, surrender possession of the Leased Premises to Landlord and remove all
effects therefrom, and if such possession be not immediately surrendered,
Landlord may forthwith re-enter the Leased Premises and repossess itself
thereof, as of its first and former estate, and remove all the effects therefrom
without being deemed guilty of any manner of trespass or forcible entry or
detainer. No receipt of money by Landlord from Tenant after the termination in
any way of this Lease, or after the giving of notice shall reinstate, continue,
or extend the term of this Lease or affect any notice given to Tenant prior to
the receipt of such money. If Tenant shall not remove all effects from the
Leased Premises as above agreed, Landlord may, at its option, remove the same or
any of the same in any reasonable manner that Landlord shall choose and store
the same without liability to Tenant for loss thereof or damage thereto, and
Tenant will pay Landlord on request any and all expenses reasonably incurred in
such removal and also storage on said effects for any length of time during
which the same shall be in Landlord's possession, or Landlord may, at its
option, after notice, sell said effects or any of the same at public or private
sale for such price as Landlord may deem best, and apply the proceeds of such
sale upon any amounts due under this Lease from Tenant to Landlord, including
the expenses of the removal and sale.
23. ENVIRONMENTAL CONDITIONS
(a) DEFINITIONS. "Environmental Laws" shall mean any federal,
state, or local law, rule, regulation, or ordinance relating to
environmental, health, or safety matters.
"Environmental Damages" shall mean all liabilities,
obligations, responsibilities, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including,
without limitation, attorney, expert and consulting fees, and costs of
investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present, or future.
"Governmental Authority" shall mean any federal, state, or
local entity exercising executive, legislative, judicial, regulatory,
or administrative functions of or pertaining to government.
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"Hazardous Materials" shall mean any waste, pollutant,
hazardous substance, toxic substance, hazardous waste, special waste,
petroleum or petroleum-derived substance or waste, or any constituent
of any such substance or waste which is governed by any Environmental
Law.
"Release" shall mean any actual or threatened spill, emission,
leak, escape, injection, deposit, or migration of Hazardous Materials.
(b) COVENANTS. Tenant shall not cause or permit, or allow its
respective agents, employees, contractors, or invitees to cause or
permit, any Hazardous Materials to be treated, stored, generated, or
disposed of, on or about the Leased Premises, except in compliance with
applicable Environmental Laws.
If there is a Release of Hazardous Materials at the Leased
Premises caused or permitted by Tenant, Tenant shall cleanup, remove,
or remediate the Release in compliance with all applicable
Environmental Laws. Tenant shall obtain Landlord's approval prior to
undertaking any such removal or remedial activities which are not
urgent and Landlord's approval shall not be unreasonably withheld or
delayed.
If there is a Release of Hazardous Materials at the Leased
Premises caused or permitted by Landlord, any previous Tenant of
Landlord's, any previous owner or previous owners' Tenants, Landlord
shall cleanup, remove, or remediate the Release in compliance with
applicable Environmental Laws.
(c) INDEMNIFICATIONS. Landlord shall indemnify, defend, and
hold harmless Tenant, its officers, directors, employees, and agents
from and against any and all Environmental Damages which arise from:
(i) the presence in, upon, about, or beneath the Leased Premises of any
Hazardous Materials requiring remediation under applicable
Environmental Laws and brought upon the Leased Premises by Landlord,
any previous Tenant of Landlord's, any previous owner or previous
owners' Tenants, or a third party; (ii) the breach of this Lease by
Landlord or any third party as a result of the acts or omissions of
Landlord's agents, employees, contractors, or invitees.
Tenant shall indemnify, defend, and hold harmless Landlord,
its officers, directors, employees, and agents from and against any and
all Environmental Damages which arise from: (i) the presence upon,
about, or beneath the Leased Premises of any Hazardous Materials
requiring remediation under applicable Environmental Laws and brought
upon the Leased Premises by Tenant, or its agents, contractors,
employees, patients and business invitees, or (ii) the breach of this
Lease by Tenant, its agents or contractors, or as a result of the acts
or omissions of Tenant's agents, employees, contractors, or invitees.
These indemnification obligations shall survive the
termination or expiration of this Lease.
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(d) PERMITTED USE. Tenant will use the Leased Premises in
compliance with all applicable Environmental Laws.
(e) TERMINATION. If there is a Release of Hazardous Materials
at the Leased Premises for which Landlord is responsible under this
Section and which interferes with Tenant's use of the Leased Premises,
Tenant shall have the right to terminate this Lease or require Landlord
to remedy the condition giving rise to the breach to Tenant's
reasonable satisfaction.
(f) NOTICE. The parties agree to provide each other with
written notice; (i) upon obtaining knowledge of any potential or known
Release of Hazardous Materials in, on, or from the Leased Premises, or
(ii) upon receipt of any notice of any such potential or known Release.
24. NOTICE
All notices to be given to the Tenant may be given personally or in
writing and sent by the United States registered or certified mail, postage paid
and addressed to the
Landlord: Borror Realty Company
5501 Frantz Road
Columbus, Ohio 43017
Attention:____________
Tenant: Dominion Homes, Inc.
5501 Frantz Road
Columbus, Ohio 43017
Attention:____________
The effective date of notice shall be the date of receipt of said
notice.
25. WAIVERS
The waiver by Landlord of any breach of any term, covenant or condition
herein contained, shall not be deemed to be a waiver of any other term,
covenant, or condition or waiver of any subsequent breach of the same or any
other term, covenant, or condition herein contained. The subsequent acceptance
of rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant, or condition of this Lease
including a breach by virtue of the failure of Tenant to pay the particular rent
so accepted regardless of Landlord's knowledge of such preceding breach at the
time of the acceptance of such rent.
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26. HOLDING OVER
Any holding over after the expiration of the original or renewal term
of this Lease with the consent of Landlord shall be construed to be a tenancy
from month to month at one hundred twenty-five percent (125%) of the latest rent
sum and shall otherwise be on the terms and conditions herein specified insofar
as applicable.
27. PARTIES BOUND
The covenants and conditions herein contained shall apply to and bind
the heirs, successors, administrators, and assigns of the parties hereto.
28. OHIO LAW
This Lease shall be construed under and in accordance with the laws of
the State of Ohio, and all obligations of the parties created hereunder are
performable and enforceable in Franklin County, Ohio.
29. LEGAL CONSTRUCTION
In case any one or more of the provisions contained in this Lease
shall, for any reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision hereof, and this Lease shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
30. SOLE AGREEMENT OF THE PARTIES
This Lease constitutes the sole and only agreement of the parties
hereto and supersedes any prior understandings or written or oral agreements
between the parties respecting the within subject matter.
31. AMENDMENT
No amendment, modification, or alteration of the terms hereof shall be
binding, unless the same be in writing, dated subsequent to the date hereof, and
duly executed by the parties hereof.
32. TOPIC HEADINGS
Headings and captions in this Lease are inserted for convenience in
reference only and in no way define, limit, or describe the scope or intent of
this Lease, do not constitute any part of this Lease, and are not to be
considered in the construction of this Lease.
13
<PAGE> 14
33. TIME IS OF THE ESSENCE
Time is of the essence in this Lease.
34. OPTION TO RENEW
Tenant shall have the right to renew this Lease for 2 successive
additional 5 year term(s) ("Renewal Terms") upon the same terms, covenants, and
provisions as in this Lease, by giving Landlord one hundred twenty (120) days
written notice prior to the term of intent to do so. The rent for the extension
term shall be at the fair market rental for the locale and payable monthly
during this extension term.
35. COMPLIANCE WITH LAWS
During the Lease term, Tenant, at its expense, shall comply with all
present and future laws and regulations applicable to its use and occupancy of
the Leased Premises, and shall make any repairs, modifications or additions to
the Leased Premises as may be required by any such laws or regulations. Tenant
agrees to hold Landlord harmless from any cost, expense or liability that may be
imposed or assessed against Landlord in connection with Tenant's noncompliance
with any such law or regulation. Notwithstanding the above, Tenant shall not be
obligated to make, and Landlord shall be solely responsible for, any structural
repairs, modifications or additions to the Leased Premises that (a) are not
necessitated by negligent or wrongful actions of Tenant or Tenant's agents,
employees, contractors, licensees or invitees and (b) Landlord would be required
to make as the owner of the Building regardless of the specific nature of
Tenant's use or any hazards associated with Tenant's use.
36. OTHER LEASES
It is understood by the parties hereto that a portion of the Leased
Premises is currently leased to third parties pursuant to the following two
leases (as amended, the "Other Leases"): (1) lease with David S. Blaugrund dated
as of February 25, 1991 and modified by lease amendments dated May 10, 1993 and
July 5, 1995; and (ii) lease with Robert W. Southworth and Robert W. Siekmann,
Jr. dated April 6, 1996 and that, therefore, this Lease is subject to the Other
Leases. Landlord hereby assigns to Tenant all of its right, title and interest
under the Other Leases, including, without limitation, the right to receive rent
and Tenant hereby accepts such assignment and agrees to assume all of the
obligations of the Landlord thereunder. Tenant shall have the full right and
authority to modify, amend and terminate such Other Leases with the consent of
Landlord, which consent shall not be unreasonably withheld.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have signed this Lease on the
day and date aforementioned.
Signed and acknowledged LANDLORD:
in the presence of:
- ------------------------------------ BORROR REALTY COMPANY, an Ohio
Print Name: Corporation
-------------------------
- ------------------------------------ By:*/s/ RANDOLPH B. ROBERT
Print Name: ---------------------------
------------------------- Its: VICE PRESIDENT
-----------------------
TENANT:
- ------------------------------------ DOMINION HOMES, INC., a OHIO
Print Name: Corporation -------
-------------------------
- ------------------------------------ By:*/s/ ROBERT A. MEYER, JR.
Print Name: ---------------------------
------------------------- Its: SR. VICE PRESIDENT
-----------------------
STATE OF OHIO
COUNTY OF FRANKLIN, SS.
BEFORE ME, the undersigned, a Notary Public, personally appeared the
above named Borror Realty Company, an Ohio corporation, by
________________________________, its _________________________, who
acknowledged 'the signing of the foregoing instrument to be free act and deed
and the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Columbus, Ohio, this ____ day of ________________________, 1997.
--------------------------------
NOTARY PUBLIC
15
<PAGE> 16
STATE OF OHIO
COUNTY OF FRANKLIN, SS.
BEFORE ME, the undersigned, a Notary Public, personally appeared the
above named Dominion Homes, Inc., a ____________________ corporation, by
________________, its ________________, who acknowledged the signing of the
foregoing instrument to be free act and deed and the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Columbus, Ohio, this ____ day of _________________________, 1997.
--------------------------------
NOTARY PUBLIC
16
<PAGE> 17
ADDENDUM TO LEASE
-----------------
WHEREAS, a certain Lease was executed December 29, 1997, by and between
Borror Realty Company, an Ohio corporation, hereinafter referred to as
"Landlord," and Dominion Homes, Inc., an Ohio corporation, hereinafter referred
to as "Tenant," pursuant to which Tenant leased 37,557 net rentable square feet
of office space identified as 5501 Frantz Road, Dublin, Ohio;
WHEREAS, Landlord and Tenant desire to change the term of the lease;
NOW THEREFORE, Landlord and Tenant agree that Section 2 of the Lease,
captioned "TERM," as executed on December 29, 1997, is deleted and the following
is substituted in its place:
2. TERM.
The term of this Lease Agreement shall be for a period of
twelve (12) years, commencing on January 1, 1998 (the "Commencement
Date"), and expiring on December 31, 2009 (the "Primary Term").
Except as modified above, the Lease shall remain in full force and
effect as originally written, including but not limited to Tenant's option to
renew the Lease for two successive additional five-year terms as set forth in
Section 34 of the Lease.
IN WITNESS WHEREOF, the parties hereto have signed this Addendum to
Lease on the day of February, 1998.
Signed and acknowledged LANDLORD:
in the presence of:
BORROR REALTY COMPANY, an Ohio
corporation
By:*/s/ RANDOLPH B. ROBERT
- ------------------------------- -------------------------------
Print Name: Randolph B. Robert
-------------------- Vice President
- -------------------------------
Print Name:
--------------------
<PAGE> 18
TENANT:
DOMINION HOMES, INC., an Ohio
corporation
By:*/s/ ROBERT A. MEYER, JR.
- ------------------------------- -------------------------------
Print Name: Robert A. Meyer, Jr.
-------------------- Senior Vice President
- -------------------------------
Print Name:
--------------------
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
BEFORE ME, the undersigned, a Notary Public, personally appeared the
above-named Borror Realty Company, an Ohio corporation, by Randolph B. Robert,
its Vice President, who acknowledged the signing of the foregoing instrument to
be his free act and deed and the free act and deed of said corporation.
-------------------------------
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
BEFORE ME, the undersigned, a Notary Public, personally appeared the
above-named Dominion Homes, Inc., an Ohio corporation, by Robert A. Meyer, Jr.,
its Senior Vice President, who acknowledged the signing of the foregoing
instrument to be his free act and deed and the free act and deed of said
corporation.
-------------------------------
Notary Public
-2-
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Dominion Homes, Inc. on Form S-8 (File Nos. 333-26817 and 333-40051) of our
report dated February 2, 1998, on our audits of the financial statements of
Dominion Homes, Inc. as of December 31, 1997, and 1996 and for the years ended
December 31, 1997, 1996 and 1995, which report is included in the Annual Report
on Form 10-K.
Coopers & Lybrand L.L.P.
Columbus, Ohio
March 30, 1998
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of March, 1998.
*/s/ DOUGLAS G. BORROR
---------------------------
Douglas G. Borror
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of March, 1998.
*/s/ DAVID S. BORROR
---------------------------
David S. Borror
<PAGE> 3
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
4th day of March, 1998.
*/s/ DONALD A. BORROR
---------------------------
Donald A. Borror
<PAGE> 4
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
12th day of March, 1998.
*/s/ PETE A. KLISARES
---------------------------
Pete A. Klisares
<PAGE> 5
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
4th day of March, 1998.
*/s/ GERALD E. MAYO
---------------------------
Gerald E. Mayo
<PAGE> 6
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
6th day of March, 1998.
*/s/ C. RONALD TILLEY
---------------------------
C. Ronald Tilley
<PAGE> 7
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Borror Corporation, an Ohio corporation, which is about to file with
the Securities and Exchange Commission, Washington, D.C., under the provisions
of the Securities Exchange Act of 1934, as amended, the Annual Report on Form
10-K for the fiscal year ended December 31, 1997, hereby constitutes and
appoints Robert A. Meyer, Jr. and/or David S. Borror his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign
both the Annual Report on Form 10-K and any and all amendments and documents
related thereto, and to file the same and any and all exhibits, financial
statements and schedules related thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agent, and substitute or substitutes, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all things that
said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do and seek to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
16th day of March, 1998.
*/s/ JON M. DONNEL
---------------------------
Jon M. Donnell
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1997, AND STATEMENT OF INCOME FOR THE TWELVE MONTHS
ENDING DECEMBER 31, 1997, OF DOMINION HOMES, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 252
<SECURITIES> 0
<RECEIVABLES> 1,878
<ALLOWANCES> 95
<INVENTORY> 111,761
<CURRENT-ASSETS> 0
<PP&E> 4,325
<DEPRECIATION> 2,891
<TOTAL-ASSETS> 117,795
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 30,673
<OTHER-SE> 9,987
<TOTAL-LIABILITY-AND-EQUITY> 117,795
<SALES> 207,926
<TOTAL-REVENUES> 207,926
<CGS> 158,373
<TOTAL-COSTS> 189,007
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,645
<INCOME-PRETAX> 13,274
<INCOME-TAX> 5,569
<INCOME-CONTINUING> 7,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,705
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1996, AND STATEMENT OF INCOME FOR THE TWELVE MONTHS
ENDING DECEMBER 31, 1996, OF BORROR CORPORATION AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 252
<SECURITIES> 0
<RECEIVABLES> 2,001
<ALLOWANCES> 320
<INVENTORY> 95,390
<CURRENT-ASSETS> 0
<PP&E> 8,948
<DEPRECIATION> 4,241
<TOTAL-ASSETS> 103,826
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 30,526
<OTHER-SE> 2,325
<TOTAL-LIABILITY-AND-EQUITY> 103,826
<SALES> 175,579
<TOTAL-REVENUES> 175,579
<CGS> 136,498
<TOTAL-COSTS> 161,973
<OTHER-EXPENSES> 850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,345
<INCOME-PRETAX> 6,411
<INCOME-TAX> 2,374
<INCOME-CONTINUING> 4,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,037
<EPS-PRIMARY> .65
<EPS-DILUTED> .64
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS FOR DECEMBER 31, 1995, AND STATEMENT OF INCOME FOR THE TWELVE MONTHS
ENDING DECEMBER 31, 1998, OF DOMINION HOMES, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 207
<SECURITIES> 0
<RECEIVABLES> 2,231
<ALLOWANCES> 341
<INVENTORY> 94,938
<CURRENT-ASSETS> 0
<PP&E> 9,197
<DEPRECIATION> 3,781
<TOTAL-ASSETS> 105,031
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 30,146
<OTHER-SE> (1,641)
<TOTAL-LIABILITY-AND-EQUITY> 105,031
<SALES> 178,112
<TOTAL-REVENUES> 178,112
<CGS> 151,010
<TOTAL-COSTS> 177,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,069
<INCOME-PRETAX> (5,182)
<INCOME-TAX> (1,684)
<INCOME-CONTINUING> (3,498)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,498)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
