<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ to __________
0-23270
Commission File Number
DOMINION HOMES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1393233
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5501 Frantz Road, Dublin, Ohio 43017-0766
-----------------------------------------
(Address of principal executive offices)
(614) 761-6000
--------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
--------------
(Former Name, Former Address and Formal Fiscal Year,
if Changed Since Last Report)
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
----- -----
Number of common shares outstanding as of August 7, 1998: 6,281,504
<PAGE> 2
DOMINION HOMES, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements..................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 10
PART II OTHER INFORMATION........................................ 19
SIGNATURES ......................................................... 21
INDEX TO EXHIBITS...................................................... 22
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMINION HOMES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
================================================================================
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
Unaudited
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2 $ 252
Notes and accounts receivable net:
Trade 256 201
Due from financial institutions for residential closings 1,316 340
Real estate inventories:
Land and land development costs 53,317 62,867
Homes under construction 56,412 47,959
Other 3,670 2,177
--------- ---------
Total real estate inventories 113,399 113,003
--------- ---------
Prepaid expenses and other 2,927 455
Deferred income taxes 2,000 2,110
Property and equipment, at cost: 4,999 4,325
Less accumulated depreciation (2,993) (2,891)
--------- ---------
Total property and equipment 2,006 1,434
--------- ---------
Total assets $ 121,906 $ 117,795
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 7,961 $ 6,770
Deposits on homes under contract 3,023 1,977
Accrued liabilities 9,444 10,625
Note payable, banks 52,775 52,687
Term debt 3,271 5,076
--------- ---------
Total liabilities 76,474 77,135
--------- ---------
Commitments and contingencies
Shareholders' equity
Common shares, without stated value, 12,000,000 shares authorized,
6,276,053 and 6,266,953 shares issued and outstanding, respectively 30,779 30,673
Less deferred compensation (168) (150)
Retained earnings 14,821 10,137
--------- ---------
Total shareholders' equity 45,432 40,660
--------- ---------
Total liabilities and shareholders' equity $ 121,906 $ 117,795
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
DOMINION HOMES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $68,031 $56,672 $122,489 $ 93,669
Cost of real estate sold 55,030 44,826 98,588 74,260
-------- --------- --------- --------
Gross profit 13,001 11,846 23,901 19,409
Selling, general and administrative 7,071 5,996 13,423 11,077
-------- --------- --------- --------
Income from operations 5,930 5,850 10,478 8,332
Interest expense 1,311 1,691 2,402 3,134
-------- --------- --------- --------
Income before income taxes 4,619 4,159 8,076 5,198
Provision for income taxes 1,940 1,747 3,392 2,183
-------- --------- --------- --------
Net income $2,679 $2,412 $4,684 $ 3,015
======== ========= ========= ========
Earnings per share
Basic $0.43 $0.39 $0.75 $0.48
======== ========= ======== ========
Diluted $0.41 $0.38 $0.71 $0.48
======== ========= ======== ========
Weighted average shares outstanding
Basic 6,272,646 6,241,230 6,270,435 6,240,197
========== ========== ========== =========
Diluted 6,608,399 6,318,882 6,594,730 6,319,036
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
DOMINION HOMES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
================================================================================
<TABLE> Common Shares
---------------------------------
<CAPTION>
Deferred Retained
Shares Amount Compensation Earnings Total
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 6,266,953 $30,673 $(150) $10,137 $40,660
Net Income 4,684 4,684
Shares issued - shares awarded 9,100 106 (65) 41
Deferred Compensation 47 47
- -----------------------------------------------------------------------------------------------
Balance, June 30, 1998 6,276,053 $30,779 $(168) $14,821 $45,432
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
DOMINION HOMES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,684 $ 3,015
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization 345 479
Disposal of property & equipment (7) 56
Issuance of common shares for compensation 106 13
Deferred income taxes 110 (200)
Changes in assets and liabilities:
Notes and accounts receivable (1,031) (1,303)
Real estate inventories (396) (13,773)
Prepaid expenses (1,020) 301
Accounts payable 1,191 2,646
Deposits on homes under contract 1,046 377
Accrued liabilities (1,203) 930
--------- --------
Net cash provided by (used in) operating activities 3,825 (7,459)
Cash flows from investing activities:
Proceeds from sale of property & equipment 17 14
Purchase of property & equipment (839) (164)
--------- --------
Net cash used in investing activities (822) (150)
Cash flows from financing activities:
Proceeds from note payable, banks
116,827 97,824
Payments on note payable, banks (116,739) (89,602)
Prepaid loan fees (1,536)
Payments on term debt (1,805) (613)
--------- --------
Net cash (used in) provided by financing activities (3,253)
7,609
--------- --------
Net change in cash and cash equivalents (250) 0
Cash and cash equivalents, beginning of period 252 252
--------- --------
Cash and cash equivalents, end of period $ 2 $ 252
========= ========
Supplemental disclosures of cash flow information:
Interest paid (net of amounts capitalized) $ 381 $ 1,147
========= ========
Income taxes paid $ 4,205 $ 2,023
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
DOMINION HOMES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements for Dominion Homes,
Inc, ("the Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
These financial statements should be read in conjunction with the December
31, 1997 audited annual financial statements of the Company contained in
its Annual Report to Shareholders or in the December 31, 1997 Form 10-K.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for interim
periods. The results of operations for the three months and six months
ended June 30, 1998 are not necessarily indicative of the results to be
expected for the full year.
2. RECLASSIFICATION
Certain prior period information has been reclassified to conform to
the current period presentation. Effective January 1, 1998 the Company made
a decision to reclassify certain indirect construction costs to cost of
real estate sold from selling, general and administrative expense.
Accordingly, the cost of real estate sold for the three months and six
months ended June 30, 1997 was increased by $1.9 million and $3.6 million
respectively. The reclassification had no impact on reported net income.
3. CAPITALIZED INTEREST
Interest is capitalized on land during the development period and on
housing construction costs during the construction period. As a lot is
transferred to homes under construction, the interest capitalized on the
lot during the land development period is included as a cost of the land
and it is expensed through cost of sales when the home is closed.
Capitalized interest related to housing construction costs is included in
interest expense in the period in which the home is closed. Capitalized
interest related to land under development and construction in progress was
$1.9 million and $2.0 million at June 30, 1998 and June 30, 1997,
respectively. The following table summarizes the activity with respect to
capitalized interest:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest incurred $ 1,269,000 $ 1,571,000 $ 2,454,000 $ 2,996,000
Interest capitalized (1,045,000) (928,000) (1,979,000) (1,863,000)
----------- ----------- ----------- -----------
Interest expensed directly 224,000 643,000 475,000 1,133,000
Previously capitalized interest
charged to interest expense 1,087,000 1,048,000 1,927,000 2,001,000
----------- ----------- ----------- -----------
Total interest expense $ 1,311,000 $ 1,691,000 $ 2,402,000 $ 3,134,000
=========== =========== =========== ===========
</TABLE>
7
<PAGE> 8
4. NOTE PAYABLE, BANKS
On May 29, 1998 the Company entered into a $125 million Senior Unsecured
Revolving Credit Facility ("the Facility"). Five lending banks are party to the
Facility, which was syndicated by Huntington Capital Corp. Huntington National
Bank is the Administrative Agent and Issuing Bank of the Facility. Proceeds from
the Facility were used to refinance the $90 million loan agreement dated
September 29, 1997 and will also be used for working capital, capital
expenditures, acquisition financing and financing for other general corporate
purposes.
General provisions of the Facility include a maturity date of May 31, 2003
and combined cash advanced and Letters of Credit that are limited to the lesser
of $125 million or availability under a Borrowing Base. The Facility contains
the following other 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 bank's prime rate of interest that may be adjusted based upon the Company's
ratio of EBITDA to Interest Expense ("Interest Coverage Ratio"); or (b) a
Eurodollar rate of interest plus a variable margin based upon the Company's
Interest Coverage Ratio; (2) the Company has agreed to enter into interest rate
contracts in the amount of fifty percent of the outstanding borrowings in the
event the Eurodollar rate (without regard to the variable margin) becomes 8.50%
per anum or greater; (3) the Company has agreed to the following ratios: (a)
Interest Coverage Ratio of not less than 2.25 to 1.00 determined quarterly and
based upon the preceding four quarters; (b) total liabilities to tangible net
worth of not greater than 2.75 to 1.00 through December 31, 1999 and 2.50 to
1.00 from and after January 1, 2000; (4) the Company has agreed that uncommitted
land holdings in Central Ohio shall not exceed $73 million at the end of fiscal
1997 and shall not exceed $73 million plus fifty percent of the net income
earned by the Company thereafter, with an overall limit of $90 million; (5)
outside of Central Ohio the Company shall not, without all lender approval,
exceed the aggregate sum of $25 million for investments in uncommitted land
holdings, speculative homes, model homes and acquisitions of companies in the
homebuilding industry, except that the Company may invest up to $15 million of
such amount in one or more "start-up" operations involving uncommitted land
holdings, speculative homes and model homes not associated with an ongoing
business acquisition; (6) the Company must maintain a tangible net worth of not
less than $35 million plus seventy-five percent of net income for periods ending
on or after December 31, 1998; (7) the Company shall not exceed the aggregate
principal sum of $10 million for other borrowings, additional debt or capital
lease obligations, except that the Company may borrow an additional $5 million
of nonrecourse indebtedness from sellers of real estate, provided that such
additional non-recourse borrowings are fully reserved under the borrowing base;
(8) the Company shall not exceed $2 million of operating lease rentals and $1
million of model home rentals; (9) the Company shall not purchase, without
required lender approval, unzoned land in excess of $2.5 million; (10) the
Company will not permit the value of its inventory homes to exceed $12.5 million
and its model homes to exceed $6.5 million; (11) the Company may not incur a
loss during any five consecutive quarters; and (12) the Company may not pay
dividends during any calendar year in excess of twenty five percent of the
Company's net income after taxes for such year.
The Company has entered into interest rate swap contracts that fix the
interest rate on $30 million of borrowings. The interest rate swap contracts
mature between October 16, 2000 and May 6, 2003 and fix interest rates between
5.48% and 6.13%, plus a variable margin based on the Company's Interest Coverage
Ratio. The variable margin may range from 1.75% to 2.50% and is determined
quarterly. Since the inception of the Facility the variable margin has been
1.75%.
8
<PAGE> 9
The Company was in compliance with Facility covenants as of June 30,
1998 and the Company had $18.8 million available under its Facility, after
adjustment for borrowing base limitations. In addition, the Company has up
to $25.0 million available for acquisition financing. Borrowing
availability under the Facility could increase, depending on the Company's
utilization of the proceeds.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and supersedes APB Opinion No. 15 "Earnings Per
Share" ("Opinion 15"). SFAS No. 128 replaces the presentation of primary
EPS with a presentation of basic EPS, which excludes dilution and is
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during the period.
This statement also requires dual presentation of basic EPS and diluted EPS
on the face of the income statement for all periods presented. Diluted EPS
is computed as the weighted average shares outstanding adjusted for the
effect of common share equivalents. EPS data for the three months and six
months ended June 30, 1997 have been restated to conform with the
requirements of SFAS No. 128.
A reconciliation of the weighted average shares used in basic and diluted
EPS is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding
during the period 6,272,646 6,241,230 6,270,435 6,240,197
Assuming exercise of options 335,753 77,652 324,295 78,839
--------- --------- --------- ---------
Weighted average shares outstanding
adjusted for common share equivalents 6,608,399 6,318,882 6,594,730 6,319,036
========= ========= ========= =========
</TABLE>
6. 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.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company continued its record setting trend during second quarter 1998
when it closed a single quarter record 461 homes. These closings represented a
21% increase over the 380 homes closed during second quarter 1997. Revenues from
second quarter 1998 closings increased 20% to $68.0 million from $56.7 million
for second quarter 1997. Second quarter 1998 revenues increased over second
quarter 1997 revenues due to the closing of 81 additional homes and a higher
average home price, which increased to $147,278 from $145,658 during second
quarter 1997. The Company continued to show strength in sales by recording 402
sales contracts for second quarter 1998 compared to 333 sales contracts for
second quarter 1997. There were 944 contracts in backlog at June 30, 1998,
representing an aggregate sales value of $149.8 million, compared to 731 sales
contracts in backlog at June 30, 1997, representing an aggregate sales value of
$113.9 million. The average sales value of homes in backlog at June 30, 1998
increased to $158,733 from $155,777 at June 30, 1997. Net income for second
quarter 1998 increased to $2.7 million compared to $2.4 million for second
quarter 1997. The increase in net income from additional closings was partially
offset by increases in direct construction costs attributable to a near
full-capacity subcontractor market. In addition the Company sold and leased back
seven model homes on which all gross profit was deferred, pending recognition
against future model homes lease expense.
On May 29, 1998, the Company entered into a $125 million Senior Unsecured
Revolving Credit Facility with the Huntington National Bank which increased the
Company's revolving line of credit from $90 million and extended the maturity
date to May 31, 2003. The loan agreement also provides that up to $25 million of
the revolving line of credit may be used for expansion outside of Central Ohio.
See Note 4 to the Financial Statements for additional details.
The Company has made substantial progress toward the implementation of new
computer systems which will increase operating efficiencies, provide the
technology for growth both within and outside of Central Ohio and address the
Year 2000 issues. In addition the Company has undertaken an extensive remodeling
of its corporate office building ("Building") and a relocation and realignment
of many of its corporate staff. The remodeling of the Building was undertaken in
order to allow the Company's architectural department to return to the Building
and to provide leased space in the Building for Alliance Title Agency, Ltd.
Alliance Title Agency, Ltd. is a 49.9% Company owned title agency that provides
title insurance and closing services for most of the Company's homebuyers as
well as third parties. The Building was also enlarged and internally changed to
provide better workflow and additional meeting sites. The Company expects these
changes and other staff alignment changes to more fully integrate many of the
Company's processes, new computer systems and workflow. The Company undertook
these moves in an effort to improve internal efficiency and communication in
order to reduce overall building times and to improve customer satisfaction with
the homebuilding process. The Company also continued its exploration of
locations in which to expand its operation outside of Central Ohio.
10
<PAGE> 11
COMPANY OUTLOOK
The Company continues to expect its 1998 financial results to exceed those
reported for 1997. The Company has closed a record 831 homes through June 30,
1998 and maintains a strong backlog of 944 sales contracts at June 30, 1998. In
light of increasing subcontractor cost pressures, the Company is continuing to
focus on controlling construction expenses. The Company does not expect these
pressures to cause delays in the building process.
During the second half of 1998 the Company expects to complete the
implementation of its new computer systems and complete the corporate office
remodeling and personnel realignment that began earlier in the year. Provided
economic conditions remain favorable and new market opportunities continue to
look promising, the Company anticipates expanding to an area outside of Central
Ohio prior to the end of 1998. The Company does not expect this expansion to
significantly impact 1998 revenues or net income.
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 on Form 10-Q 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 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, subcontractors, 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, the problems that could arise from expansion to areas outside of Central
Ohio and the other risks described in the Company's December 31, 1997 Form 10-K.
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 homebuyers 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 Company is concentrating on mitigating these
seasonal variations whenever possible.
11
<PAGE> 12
The following table sets forth certain data for each of the last eight
quarters:
THREE SALES BACKLOG
MONTHS REVENUES CONTRACTS CLOSINGS (AT PERIOD END)
ENDED (IN THOUSANDS) (IN UNITS) (IN UNITS) (IN UNITS)
================================================================================
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
Mar. 31, 1998 $54,458 670 370 1,003
June 30, 1998 $68,031 402 461 944
At June 30, 1998 the aggregate sales value of homes in backlog was $149.8
million compared to $113.9 million at June 30, 1997. The average sales value of
homes in backlog at June 30, 1998 increased to $158,733 from $155,777 at June
30, 1997.
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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the statements of income expressed as percentages of total revenues:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of real estate sold 80.9 79.1 80.5 79.3
----- ----- ----- -----
Gross profit 19.1 20.9 19.5 20.7
Selling, general and
administrative expenses 10.4 10.6 11.0 11.8
----- ----- ----- -----
Income from operations 8.7 10.3 8.5 8.9
Interest expense 1.9 3.0 1.9 3.4
----- ----- ----- -----
Income before income taxes 6.8 7.3 6.6 5.5
Provision for income taxes 2.9 3.0 2.8 2.3
----- ----- ----- -----
Net income 3.9% 4.3% 3.8% 3.2%
===== ===== ===== =====
12
<PAGE> 13
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1997
REVENUES. Revenues for second quarter 1998 increased to a record $68.0
million from $56.7 million for second quarter 1997. The number of closings
during second quarter 1998 increased 21.3% or 81 closings, to a record 461 homes
from 380 homes during second quarter 1997. Included in the 81 additional homes
closed during second quarter 1998 are seven model homes sold and leased back to
use as sales models. The increase in revenues is attributable to the additional
closings and a higher average home price, which increased to $147,278 during
second quarter 1998 from $145,658 during second quarter 1997, an increase of
$1,620 or 1.1%. The increase in the average home price is primarily attributable
to the Company's customers purchasing larger homes and homes with more options.
Customers were able to purchase larger homes and homes with more options during
1998 because the Company has been offering a greater selection of larger homes
and because the FHA mortgage limits were increased, allowing customers to
finance larger homes. Included in revenues were other revenues, consisting of
the sale of land and building supplies to other builders, which were $180,000
for second quarter 1998 compared to $1.3 million for second quarter 1997.
GROSS PROFIT. Gross profit for second quarter 1998 increased to $13.0
million from $11.8 million for second quarter 1997, primarily as a result of
closing 81 additional homes in second quarter 1998. As a percentage of revenues,
the gross profit margin declined to 19.1% for second quarter 1998 from 20.9% for
second quarter 1997. The decrease in second quarter 1998 gross profit margin is
principally attributed to increased direct construction costs. In addition the
Company sold and leased back seven model homes on which all gross profit was
deferred, pending recognition against future model home lease expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for second quarter 1998 increased to $7.1 million from
$6.0 million for second quarter 1997. This $1.1 million increase in selling,
general and administrative expenses is a result of the increase in the number of
closings and additional selling and marketing expense. As a percentage of
revenues, selling, general and administrative expenses for second quarter 1998
decreased to 10.4% from 10.6% for second quarter 1997. This decrease primarily
reflects the effect of closing more homes without significantly impacting fixed
costs.
13
<PAGE> 14
INTEREST EXPENSE. Interest expense for second quarter 1998 decreased to
$1.3 million from $1.7 million for second quarter 1997. As a percentage of
revenues, interest expense for second quarter 1998 decreased to 1.9% from 3.0%
for second quarter 1997. The primary reasons for the decrease in interest
expense were lower average revolving line of credit borrowings combined with a
lower average interest rate. The average revolving line of credit borrowings
outstanding were $56.4 million and $64.9 million for the second quarter of 1998
and 1997, respectively. The lower average interest rate was the result of
alternative pricing methods allowed by the September 29, 1997 and May 29, 1998
loan agreements. The weighted average rate of interest under the Company's
revolving line of credit was 8.3% for the second quarter of 1998 compared to
8.9% for second quarter 1997. The Company recognized $78,000 less net
capitalized interest as interest expense during second quarter 1998 than second
quarter 1997.
PROVISION FOR INCOME TAXES. Income tax expense for second quarter 1998
increased to $1.9 million from $1.7 million for second quarter 1997. The
Company's estimated annual effective tax rate was 42.0% for second quarter 1998
and 1997, respectively.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1997
REVENUES. Revenues for the six months ended June 30, 1998 increased to a
record $122.5 million from $93.7 million for the six months ended June 30, 1997.
The number of closings during the first six months of 1998 increased 28.6% or
185 closings, to a record 831 homes from 646 homes during the same period in
1997. Included in the 185 additional homes closed during the first six months of
1998 are seven model homes sold and leased back to use as sales models. The
increase in revenues is attributable to the additional closings and higher
average home price, which increased to $147,117 during the first six months of
1998 from $142,639 during the first six months of 1997, an increase of $4,478 or
3.1%. The increase in the average home price is primarily attributable to the
Company's customers purchasing larger homes and homes with more options.
Customers were able to purchase larger homes and homes with more options during
1998 because the Company has been offering a greater selection of larger homes
and because the FHA mortgage limits were increased allowing customers to finance
larger homes. Included in revenues were other revenues, consisting of the sales
of land and building supplies to other builders, which were $280,000 for the
first six months of 1998 compared to $1.5 million for the first six months of
1997.
GROSS PROFIT. Gross profit for the first six months of 1998 increased to
$23.9 million from $19.4 million for the first six months of 1997, primarily as
a result of closing 185 additional homes in the first six months of 1998. As a
percentage of revenues, the gross profit margin declined to 19.5% for the first
six months of 1998 from 20.7% for the first six months of 1997. The decrease in
first half 1998 gross profit margin is principally attributed to increased
direct construction costs. In addition the Company sold and leased back seven
model homes on which all gross profit was deferred, pending recognition against
future model home lease expense.
14
<PAGE> 15
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first six months of 1998 increased to $13.4
million from $11.1 million for the first six months of 1997. This $2.3 million
increase in selling, general and administrative expenses is a result of the
increase in the number of closings and additional selling and marketing expense.
As a percentage of revenues, selling, general and administrative expenses for
the first six months of 1998 decreased to 11.0% from 11.8% for the first six
months of 1997. This decrease primarily reflects the effect of closing more
homes without significantly impacting fixed costs.
INTEREST EXPENSE. Interest expense for the first six months of 1998
decreased to $2.4 million from $3.1 million for the first six months of 1997. As
a percentage of revenues, interest expense for the first six months of 1998
decreased to 1.9% from 3.4% for the first six months of 1997. The primary
reasons for the decrease in interest expense were lower average revolving line
of credit borrowings combined with a lower average interest rate. The average
revolving line of credit borrowings outstanding were $54.7 million and $62.5
million for the first six months of 1998 and 1997, respectively. The lower
average interest rate was the result of alternative pricing methods allowed by
the September 29, 1997 and May 29, 1998 loan agreements. The weighted average
rate of interest under the Company's revolving line of credit was 8.4% for the
first six months of 1998 compared to 8.9% for the first six months of 1997. The
Company capitalized $52,000 more interest than it recognized as interest expense
during the first six months of 1998 compared to recognizing $138,000 more
previously capitalized interest as interest expense during the first six months
of 1997.
PROVISION FOR INCOME TAXES. Income tax expense for the first six months of
1998 increased to $3.4 million from $2.2 million for the first six months of
1997. The Company's estimated annual effective tax rate was 42.0% for the first
six months of 1998 and 1997, respectively.
15
<PAGE> 16
SOURCES AND USES OF CASH
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net cash provided by operating activities for the first six months of 1998
was $3.8 million compared to $7.5 million used in operating activities for the
first six months of 1997. Net income for the first half of 1998 provided cash
flow of $4.7 million compared to $3.0 million for the first half of 1997. Cash
from operating activities increased $11.3 million between the two periods
principally because the Company invested $13.4 million more in real estate
inventories during the first half of 1997 compared with the first half of 1998.
The increased real estate inventory investment made during the first six months
of 1997 reflected the large increase in the number of homes under construction
and favorable weather conditions compared to the first half of 1996. During the
first six months of 1998 the Company invested $800,000 in property and
equipment, compared to $150,000 during the first six months of 1997. The
$800,000 investment in property and equipment was principally the construction
of a lumber division warehouse and leasehold improvements to the corporate
office building. Net cash used in financing activities during the first six
months of 1998 was $3.3 million and resulted from prepayment of loan fees and
repayment of term debt. During the first six months of 1997 the Company funded
increased real estate inventories with $8.2 million of additional borrowing and
reduced term debt by $600,000.
REAL ESTATE INVENTORIES
The Company's practice is to develop most of the lots upon which it builds
its homes. Generally, the Company attempts to maintain a land inventory that
will be sufficient to meet its anticipated lot needs for the next three to five
years. At June 30, 1998, the Company either owned or was under contract to
purchase lots or land that could be developed into approximately 4,500 lots and
the Company controlled through option agreements, an additional 5,400 lots.
During the second quarter of 1998 the Company exercised options to purchase 294
controlled lots. Option agreements expire at varying dates through August 31,
2003. 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.
Homes under construction at June 30, 1998 increased from year-end as a
result of seasonal construction activity. The number of inventory homes under
construction is lower at June 30, 1998 compared to June 30, 1997. On June 30,
1998, the Company had 58 inventory homes in various stages of construction,
which represented an aggregate investment of $3.5 million compared to 75
inventory homes, including 11 condominiums, in various stages of construction,
which represented an aggregate investment of $5.9 million at June 30, 1997.
Inventory at the Company's lumber division increased to $3.7 million at June 30,
1998 from $2.2 million at June 30, 1997. The inventory increase was a result of
increased sales and construction activity and the Company's decision to
warehouse and distribute Andersen(R) wood windows for use in its construction
activities.
SELLER-PROVIDED DEBT
The Company had $3.3 million and $1.4 million of seller-provided term debt
outstanding at June 30, 1998 and 1997 respectively. The Company did not assume
any additional seller-provided term debt during the first half of 1998. The
seller-provided term debt outstanding at June 30, 1998 had interest rates
between 6.5% and 8.5% and maturities that ranged from one to three years.
16
<PAGE> 17
LAND PURCHASE COMMITMENTS
At June 30, 1998, the Company had commitments to purchase 44 residential
lots and unimproved land at an aggregate cost of $1.4 million, net of deposits.
All commitments are expected to be funded prior to December 31, 1998. In
addition, at June 30, 1998, the Company had $51.4 million of cancelable
obligations to purchase residential lots and unimproved land in which $880,000
in good faith deposits had been invested by the Company. The majority of the
land subject to cancelable obligations is for post 1998 development activities.
The Company expects to fund its 1998 capital requirements for land acquisition
and development and its obligations under purchase contracts and mortgage notes
from internally generated cash and from the borrowing capacity available under
its bank credit facility.
CREDIT FACILITIES
On May 29, 1998 the Company entered into a $125 million Senior Unsecured
Revolving Credit Facility ("the Facility"). Five lending banks are party to the
Facility, which was syndicated by Huntington Capital Corp. Huntington National
Bank is the Administrative Agent and Issuing Bank of the Facility. Proceeds from
the Facility were used to refinance the $90 million loan agreement dated
September 29, 1997 and will also be used for working capital, capital
expenditures, acquisition financing and financing for other general corporate
purposes. See Note 4 to the Financial Statements for additional details.
The Company has entered into interest rate swap contracts that fix the
interest rate on $30 million of borrowings. The interest rate swap contracts
mature between October 16, 2000 and May 6, 2003 and fix interest rates between
5.48% and 6.13%, plus a variable margin based on the Company's Interest Coverage
Ratio. The variable margin may range from 1.75% to 2.50% and is determined
quarterly. Since the inception of the Facility the variable margin has been
1.75%.
The Company was in compliance with all facility covenants as of June 30,
1998 and the Company had $18.8 million available under its facility, after
adjustment for borrowing base limitations. In addition, the Company had
approximately $25.0 million available for acquisition financing. Borrowing
availability under the facility could increase, depending on the Company's
utilization of the proceeds.
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 million and $2.5 million in this effort with the
cost to be allocated over a five year period. All programs subject to Year 2000
concerns are being 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 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.
17
<PAGE> 18
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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
NOT APPLICABLE
18
<PAGE> 19
DOMINION HOMES, INC.
PART II - OTHER INFORMATION
Item 1. 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 2. Change in Securities and Use of Proceeds. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 20, 1998, the Company held its Annual Meeting of
Shareholders. At the Annual Meeting, the shareholders ratified the
selection of PricewaterhouseCoopers LLP (formerly Coopers and
Lybrand L.L.P.) as independent public accountants for the Company
in 1998 by the following vote:
Shares For Shares Against Shares Abstaining/Withheld
---------- -------------- --------------------------
5,540,833 2,800 1,200
The shareholders elected as Class II Directors the four nominees
of the Board of Directors by the following vote:
Shares For Shares Abstaining/Withheld
---------- --------------------------
Donald A. Borror 5,541,838 2,995
David S. Borror 5,541,838 2,995
Pete A. Klisares 5,541,838 2,995
Gerald E. Mayo 5,541,838 2,995
The term of office of the Class I Directors, Douglas G. Borror,
Jon M. Donnell and C. Ronald Tilley continued after the meeting.
The Shareholders approved the Amended and Restated Dominion Homes,
Inc. Executive Deferred Compensation Plan by the following vote:
Shares For Shares Against Shares Abstaining/Withheld
---------- -------------- --------------------------
5,497,091 36,642 2,600
19
<PAGE> 20
Item 5. Other Information.
Any qualified shareholder of the Company who intends to submit a
proposal to the Company at the 1999 Annual Meeting of Shareholders
(the "1999 Annual Meeting") must submit such proposal to the
Company not later than December 18, 1998 to be considered for
inclusion in the Company's Proxy Statement and form of Proxy (the
"Proxy Materials") relating to that meeting. If a shareholder
intends to present a proposal at the 1999 Annual Meeting of
Shareholders, but has not sought the inclusion of such proposal in
the Company's Proxy Materials, such proposal must be received by
the Company prior to March 3, 1999 or the Company's management
proxies for the 1999 Annual Meeting will be entitled to use their
discretionary voting authority should such proposal then be
raised, without any discussion of the matter in the Company's
Proxy Materials.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: See attached index (following the signature page).
(b) Reports on Form 8-K. Not applicable.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOMINION HOMES, INC.
(Registrant)
Date: August 12, 1998 By: /s/DOUGLAS G. BORROR
------------------------------
Douglas G. Borror
Chief Executive Officer,
President
Date: August 12, 1998 By: /s/JON M. DONNELL
------------------------------
Jon M. Donnell
Chief Operating Officer
Date: August 12, 1998 By: /s/PETER J. O'HANLON
------------------------------
Peter J. O'Hanlon
Chief Financial Officer
21
<PAGE> 22
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C>
Exhibit No. Description Location
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.
10.22* Stock Option Agreement dated May 21, 1998 between Dominion Homes, Filed herewith
Inc. and Pete A. Klisares (which Agreement is the same as Stock
Option Agreements entered into between the Company and its other
outside, independent directors, Gerold E. Mayo and C. Ronald Tilley)
10.23* Loan Agreement, dated May 29, 1998, among Dominion Homes, Inc., Filed herewith
Huntington Capital Corp. as syndicating agent, Huntington National
Bank as administrative and Issuing Agent and the lenders listed
therein
10.24* Employment Agreement, dated June 1, 1998, between Dominion Homes, Filed herewith
Inc. and Peter J. O'Hanlon
10.25* Restricted Stock Agreement, dated June 1, 1998, between Dominion Filed herewith
Homes, Inc. and Peter J. O'Hanlon
10.26* Incentive Stock Option Agreement, dated June 1, 1998, Between Filed herewith
Dominion Homes, Inc. and Peter J. O'Hanlon
10.27* Restricted Stock Agreement, dated August 1, 1998, between Dominion Filed herewith
Homes, Inc. and Jon M. Donnell
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
10.28* Incentive Stock Option Agreement dated July 1, 1998, between Filed herewith
Dominion Homes, Inc. and Jon M. Donnell
10.29* Amendment to Dominion Homes, Inc. Incentive Stock Option Plan, Filed herewith
dated July 29, 1998
10.30* Amendment to Dominion Homes, Inc. Amended and Restated Executive Filed herewith
Deferred Compensation Plan, dated July 29, 1998
10.31* Office Sublease Agreement, dated July 31, 1998, between Dominion Filed herewith
Homes, Inc. and Alliance Title Agency, LTD.
27* Financial Data Schedule Filed herewith
</TABLE>
* Filed Herewith
23
<PAGE> 1
Exhibit 10.22
STOCK OPTION AGREEMENT
(Eligible Director Option)
--------------------------
THIS AGREEMENT is made to be effective as of May 21, 1998 (the "GRANT
DATE"), by and between Dominion Homes, Inc., an Ohio corporation (the
"COMPANY"), and Pete A. Klisares (the "OPTIONEE").
WITNESSETH:
-----------
WHEREAS, the Board of Directors of the COMPANY adopted the Borror
Corporation Incentive Stock Plan (the "PLAN") on February 28, 1994;
WHEREAS, the shareholders of the COMPANY, upon the recommendation of
the COMPANY's Board of Directors, approved the PLAN on March 3, 1994; and
WHEREAS, pursuant to the terms of the PLAN, a Director Option (as that
term is defined in the PLAN) to acquire two thousand five hundred (2,500) common
shares, without par value, of the COMPANY (the "SHARES") is to be granted to
each Eligible Director (as that term is defined in the PLAN), including the
OPTIONEE, on the first business day after each annual meeting of shareholders of
the COMPANY, provided that the Eligible Director is serving as a member of the
Board of Directors of the COMPANY on such date, upon the terms and conditions
set forth in the PLAN and in this Agreement;
NOW, THEREFORE, in consideration of the premises, the parties hereto
make the following agreement, intending to be legally bound thereby:
1. PLAN AS CONTROLLING. All terms and conditions of the PLAN, as it may be
amended from time to time, applicable to Director Options granted thereunder
shall be deemed incorporated herein by reference. A copy of the PLAN as in
effect on the date of this Agreement is attached hereto as Annex A. In the event
that any provision in this Agreement conflicts with any term in the PLAN, the
term in the PLAN shall be deemed controlling.
2.
3. GRANT OF OPTION. Subject to the terms and conditions of both the PLAN and
this Agreement, the COMPANY hereby grants to the OPTIONEE a Director Option (the
"OPTION") to purchase 2,500 SHARES. The OPTION is not intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended (the "CODE").
4.
5. TERMS AND CONDITIONS OF THE OPTION.
6. (A) EXERCISE PRICE. The purchase price (the "EXERCISE PRICE") to be paid by
the OPTIONEE to the COMPANY upon the exercise of the OPTION shall be Thirteen
and no/100 Dollars ($13.00) per SHARE, being 100% of the Fair Market Value (as
that term is defined in the PLAN) of the SHARES on the GRANT DATE.
<PAGE> 2
(A) EXERCISE OF THE OPTION. Subject to the provisions of the PLAN and the other
provisions of this Agreement, the OPTION shall remain exercisable on the GRANT
DATE and shall remain exercisable until the date of expiration of the OPTION
term.
(B)
(C) The grant of this OPTION shall not confer upon the OPTIONEE any right
to continue as a Director of the COMPANY nor limit in any way the right of the
shareholders of the COMPANY to terminate the services of the OPTIONEE at any
time.
(D)
(E) (C) OPTION TERM. The OPTION shall in no event be exercisable after
the expiration of ten (10) years from the GRANT DATE.
(F)
(G) (E) METHOD OF EXERCISE. The OPTION may be exercised by giving written
notice of exercise to the COMMITTEE in care of the Treasurer of the COMPANY
stating the number of SHARES subject to the OPTION in respect of which it is
being exercised. The OPTIONEE shall be required, as a condition precedent to the
OPTIONEE's right to exercise the OPTION and at the OPTIONEE's expense, to supply
the COMMITTEE with such evidence, representations and agreements as the
COMMITTEE may deem necessary or desirable to establish the OPTIONEE's right to
exercise the OPTION and the propriety of the sale of the SHARES by reason of
such exercise under the Securities Act of 1933, as amended from time to time
(the "Securities Act"), and any other laws or requirements of any governmental
authority. Without limiting the generality of the foregoing, the OPTION shall
not be exercisable unless the sale of the SHARES by reason of such exercise has
been registered under the Securities Act and all other applicable securities
laws of any jurisdiction or unless such sale is exempt from such registration
requirements.
(H)
(I) Payment of the EXERCISE PRICE for all such SHARES shall be
made to the COMPANY at the time the OPTION is exercised in such form as
authorized by Section 6(d) of the PLAN. After payment in full for the SHARES
purchased under the OPTION has been made, the COMPANY shall take all such action
as is necessary to deliver appropriate stock certificates evidencing the SHARES
purchased upon the exercise of the OPTION as promptly thereafter as is
reasonably practicable.
(J)
2
<PAGE> 3
(F) SATISFACTION OF TAXES AND TAX WITHHOLDING REQUIREMENTS. The COMPANY
or a Subsidiary shall be entitled and is authorized, if the COMMITTEE deems it
necessary or desirable, to withhold (or secure payment from the OPTIONEE in lieu
of withholding) as provided in Section 10(e) of the PLAN. The COMPANY may defer
delivery of any SHARES pursuant to the exercise of the OPTION unless indemnified
to its satisfaction in this regard.
1. ADJUSTMENTS AND CHANGES IN THE SHARES SUBJECT TO THE OPTION.
2.
In the event that any dividend or other distribution (whether in the
form of SHARES, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of SHARES or other securities of
the COMPANY, issuance of warrants or other rights to purchase SHARES or other
securities of the COMPANY, or other similar corporate transaction or event
affects the SHARES such that an adjustment is necessary in regard to outstanding
Options (as that term is defined in the PLAN) held by Participants (as that
terms is defined in the PLAN) and such adjustment is made by the COMMITTEE
pursuant to the first sentence of Section 4(b) of the PLAN in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the PLAN, the COMMITTEE shall make a corresponding
adjustment to the OPTION.
1. NON-ASSIGNABILITY OF THE OPTION.
2.
3. (A) During the lifetime of the OPTIONEE, the OPTION shall not be
assignable or transferable and may be exercised only by the OPTIONEE, or, if
permissible under applicable law, by the OPTIONEE's guardian or legal
representative or a transferee receiving the OPTION pursuant to a qualified
domestic relations order ("QDRO"), as determined by the COMMITTEE.
4.
5. (B) The OPTION may not be assigned, alienated, pledged, attached, sold
or otherwise transferred or encumbered by the OPTIONEE otherwise than by will or
the laws of descent and distribution or pursuant to a QDRO, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the COMPANY or any
Subsidiary.
6.
7. EXERCISE AFTER TERMINATION OF EMPLOYMENT.
8. (A) Except as otherwise provided in this Agreement or in the PLAN, the OPTION
is exercisable only by the OPTIONEE.
(B)
(C) Except as otherwise provided in this Section 6, if the OPTIONEE ceases
to be a member of the Board of Directors of the COMPANY, the OPTION must be
exercised on or before the earlier of three months after the date the OPTIONEE
ceases to be a member of the Board of Directors of the COMPANY or the fixed
expiration date of the OPTION, after which period the OPTION shall expire;
provided, however, that if the OPTIONEE ceases to be a member of the Board of
Directors of the COMPANY after having been convicted of, or pled guilty or nolo
contendere to, a felony, the
3
<PAGE> 4
OPTION shall be cancelled on the date the OPTIONEE ceases to be a member of
the Board of Directors of the COMPANY.
(D)
(E) In the event of the death of the OPTIONEE while a member of the Board
of Directors of the COMPANY, the OPTION shall be exercisable by his estate for a
period ending on the earlier of the fixed expiration date of the OPTION or
twelve months after the date of death, after which period the OPTION shall
expire. For purposes hereof, the estate of the OPTIONEE shall be defined to
include the legal representative thereof or any person who has acquired the
right to exercise the OPTION by reason of the death of the OPTIONEE.
(F)
(G) In the event the OPTIONEE ceases to be a member of the Board of
Directors of the COMPANY by reason of the "disability" of the OPTIONEE, the
OPTION shall be exercisable by the OPTIONEE or his guardian or legal
representative for a period ending on the earlier of twelve months after the
OPTIONEE ceases to be a member of the Board of Directors of the COMPANY or the
fixed expiration date of the OPTION. For purposes hereof, "disability" shall
have the same meaning as that set forth for that term in Section 22(e)(3) of the
CODE, or any successor provision as in effect from time to time.
(H)
9. RESTRICTIONS ON TRANSFERS OF SHARES. Anything contained in this
Agreement or elsewhere to the contrary notwithstanding, the OPTION may not be
exercised if the COMMITTEE determines that the sale of SHARES upon exercise of
the OPTION may violate the Securities Act or any other law or requirement of any
governmental authority. An appropriate restrictive legend shall be placed on
certificates representing SHARES acquired upon the exercise of the OPTION,
unless the COMMITTEE determines, upon the advice of counsel to the COMPANY, that
such legend is not required because of the existence of an effective
registration statement registering the SHARES under the Securities Act or
because all applicable federal and state legal requirements have been satisfied.
10.
11. NO RIGHTS OF THE OPTIONEE AS A SHAREHOLDER. The OPTIONEE shall have no
rights as a shareholder of the COMPANY with respect to any SHARES covered by the
OPTION until the date of issuance of a certificate to the OPTIONEE evidencing
such SHARES.
12.
13. GOVERNING LAW. The rights and obligations of the OPTIONEE and the
COMPANY under this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws principles thereof) in all respects, including, without limitation, matters
relating to the validity, construction, interpretation, administration, effect,
enforcement, and remedies provisions of the PLAN and its rules and regulations,
except to the extent preempted by applicable federal law.
14.
15. RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies of the
COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed by law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
4
<PAGE> 5
16.
17. CAPTIONS. The captions contained in this Agreement are included
only for convenience of reference and do not define, limit, explain or modify
this Agreement or its interpretation, construction or meaning and are in no way
to be construed as a part of this Agreement.
18.
19. SEVERABILITY. If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined to
be invalid or unenforceable, then such determination shall not affect any other
provision of this Agreement or the application of said provision to any other
person or circumstance, all of which other provisions shall remain in full force
and effect, and it is the intention of each party to this Agreement that if any
provision of this Agreement is susceptible of two or more constructions, one of
which would render the provision enforceable and the other or others of which
would render the provision unenforceable, then the provision shall have the
meaning which renders it enforceable.
20.
21. NUMBER AND GENDER. When used in this Agreement, the number and gender
of each pronoun shall be construed to be such number and gender as the context,
circumstances or its antecedent may require.
22.
23. AMENDMENT, ETC. OF OPTION. The COMMITTEE may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, the OPTION, prospectively or retroactively; provided that any such
waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of the OPTIONEE or any holder or
beneficiary of the OPTION shall not to that extent be effective without the
consent of the OPTIONEE, holder or beneficiary.
24.
25. ENTIRE AGREEMENT. This Agreement, including the PLAN as amended
from time to time incorporated by reference herein, constitutes the entire
agreement between the COMPANY and the OPTIONEE in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement. No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.
26.
27. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first above written.
28.
29. COMPANY:
30.
31. DOMINION HOMES, INC.
32.
33.
34. By:*/s/ Robert A. Meyer
35 --------------------
36. Robert A. Meyer, Jr.
37. Senior Vice President
38.
5
<PAGE> 6
39.
40. OPTIONEE:
41.
42.
43. */s/Pete A. Klisares
--------------------
Pete A. Klisares
6
<PAGE> 1
EXHIBIT 10.23
CREDIT AGREEMENT
DATED AS OF MAY 29, 1998
AMONG
DOMINION HOMES, INC., AS THE COMPANY
THE INSTITUTIONS FROM TIME TO TIME PARTY HERETO, AS LENDERS
HUNTINGTON CAPITAL CORP., AS SYNDICATION AGENT
THE HUNTINGTON NATIONAL BANK, AS ADMINISTRATIVE AGENT
AND
THE HUNTINGTON NATIONAL BANK, AS ISSUING BANK
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
<PAGE> 2
TABLE OF CONTENTS
-----------------
SECTION HEADING PAGE #
SECTION 1 AMOUNT AND TERMS OF EXTENSIONS OF CREDIT 1
1.1 The Revolving Credit Facility. 1
1.2 Letters of Credit. 3
1.3 Potential Defaults. 6
SECTION 2 BORROWING BASE DEFINITIONS 6
2.1 Borrowing Base. 6
2.2 Available Cash. 7
2.3 Developed Lots. 7
2.4 Eligible Accounts Receivable. 8
2.5 Eligible Acquisition Assets. 8
2.6 Eligible Lumber Inventory. 9
2.7 Eligible Real Estate. 9
2.8 Investments in Joint Ventures. 9
2.9 Lots Under Development. 9
2.10 Model Homes. 10
2.11 Real Estate Held for Development. 10
2.12 Home Work-in-Process. 10
2.13 Speculative Homes. 10
2.14 Mutual Exclusivity. 10
SECTION 3 INTEREST RATES, FEES, ADDITIONAL COSTS AND PAYMENTS 10
3.1 Interest Rates. 11
3.2 Prepayment. 11
3.3 Eurodollar Rate. 11
3.4 Interest on Advances for the Eligible Acquisition Assets. 12
3.5 Conversions of Advances. 12
3.6 Additional Costs. 12
3.7 Limitation on Requests and Elections. 13
3.8 Illegality and Impossibility. 13
3.9 Compensation. 14
3.10 Survival of Obligations. 14
3.11 Interest Rate Protection. 14
3.12 Default Interest Rate. 15
3.13 Fees. 15
3.14 Capital Adequacy and Removal of Affected Lender. 16
3.15 Mandatory Reduction. 17
SECTION 4 EVIDENCE OF INDEBTEDNESS 17
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SECTION 5 COSTS AND EXPENSES. 18
SECTION 6 CONDITIONS PRECEDENT. 18
6.1 Effectiveness and Initial Advance. 18
6.2 Conditions Precedent to Subsequent Advances. 19
SECTION 7 WARRANTIES AND REPRESENTATIONS 19
7.1 Organization and Authority. 20
7.2 Borrowing is Legal and Authorized. 20
7.3 Taxes. 20
7.4 Corporate Information. 21
7.5 Compliance with Law. 21
7.6 Financial Statements; Full Disclosure. 21
7.7 Litigation: Adverse Effects. 22
7.8 No Insolvency. 22
7.9 Government Consent. 22
7.10 Title to Properties. 22
7.11 No Defaults. 23
7.12 Environmental Protection. 23
7.13 Margin Loans. 23
7.14 Real Estate Ownership. 23
SECTION 8 COMPANY BUSINESS COVENANTS 25
8.1 Payment of Taxes and Claims. 25
8.2 Maintenance of Properties and Corporate Existence. 26
8.3 Sale of Assets. 26
8.4 Liens and Encumbrances (Negative Pledge). 27
8.5 Indebtedness 27
8.6 Contingent Liabilities. 28
8.7 Operating Lease Rentals. 28
8.8 Acquisition of Capital Stock. 29
8.9 Restrictions on Dividends. 29
8.10 Management. 29
8.11 Investments, Loans and Advances. 29
8.12 ERISA. 30
8.13 Tangible Net Worth. 31
8.14 Leverage Ratio. 31
8.15 No Losses. 31
8.16 Ratio of Uncommitted Land Holdings to Consolidated
Tangible Net Worth. 31
8.17 Interest Coverage Ratio. 31
8.18 Land Held for Development (Unzoned). 31
8.19 Maintenance of Deposits. 32
8.20 Model Homes Inventory. 32
8.21 Speculative Homes. 32
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8.22 Further Real Estate Acquisition Limitations, New
Market Investment Amoun. 32
8.23 Conduct of Business, Subsidiaries. 33
8.24 Permitted Acquisitions. 33
8.25 Restriction on Fundamental Changes. 33
SECTION 9 INFORMATION AS TO COMPANY AND SUBSIDIARIES. 34
SECTION 10 EVENTS OF DEFAULT 36
10.1 Nature of Events. 36
10.2 Default Remedies. 37
SECTION 11 THE ADMINISTRATIVE AGENT AND SYNDICATION AGENT 38
11.1 Appointment. 38
11.2 Powers. 39
11.3 General Immunity. 39
11.4 No Responsibility for Loans, Recitals. 39
11.5 Action on Instructions of Lenders. 40
11.6 Employment of Administrative Agents and Counsel. 40
11.7 Reliance on Documents, Counsel. 40
11.8 Reimbursement and Indemnification. 40
11.9 Rights as a Lender. 41
11.10 Lender Credit Decision. 41
11.11 Successor Administrative Agent. 41
11.12 Ratable Payments. 42
SECTION 12 BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 3
12.1 Successors and Assigns. 43
12.2 Participations. 43
12.3 Assignments. 44
12.4 Dissemination of Information. 45
12.5 Tax Treatment. 45
SECTION 13 NOTICES 45
13.1 Notices. 46
13.2 Reproduction of Documents. 46
13.3 Survival. 46
13.4 Amendments. 46
13.5 Duplicate Originals. 47
13.6 Enforceability and Governing Law. 47
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13.7 Fiscal Year. 48
13.8 Consent to Jurisdiction and Waiver of Objection to Venue. 48
13.9 Waiver of Jury Trial. 48
13.10 Confidentiality. 49
SECTION 14 DEFINITIONS 49
14.1 Accounting Terms. 49
14.2 Other Definitional Provisions. 49
14.3 Defined Terms. 49
EXHIBITS
A - Form of Revolving Credit Note
B - Form of Standby Letter of Credit Reimbursement Agreement
C - Form of Notice of Borrowing or Continuation/Conversion
D - Form of Officer's Certificate to Accompany Reports
E - Form of Assignment and Acceptance
F - Form of Subsidiary Guaranty
SCHEDULES
Schedule 6.1(a) - Conditions Precedent to Initial Disbursement (Closing
Memorandum)
Schedule 7.4 - Corporate Information
Schedule 7.10 - Schedule of Permitted Encumbrances
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CREDIT AGREEMENT
This Credit Agreement (the "Agreement") dated as of May 29, 1998, is
entered into among Dominion Homes, Inc., an Ohio corporation (the "Company"),
the institutions from time to time party hereto as lenders, whether by execution
of this Agreement or an Assignment and Acceptance (individually, a "Lender" and
collectively, the "Lenders"), The Huntington National Bank ("Huntington") as
issuing bank and as a Lender, Huntington Capital Corp. ("Huntington Capital") in
its capacity as syndication agent for the Lenders (the "Syndication Agent"), and
Huntington, in its separate capacity as administrative agent for the Lenders and
the issuing bank (with its successors in such capacity, "Administrative Agent").
1 SECTION AMOUNT AND TERMS OF EXTENSIONS OF CREDIT
2
2.1 The Revolving Credit Facility.
2.2
2.3 (a) Subject to the terms and conditions hereof, each Lender hereby
severally (and not jointly) agrees to make revolving loans, in U.S. dollars
(each individually a "Revolving Loan" and collectively the "Revolving Loans") to
the Company from time to time during the period from the initial advance
hereunder to the Business Day prior to the Revolving Credit Termination Date, in
an amount not to exceed at any time outstanding such Lender's Revolving Credit
Commitment at such time; provided, that (i) the aggregate amount of the
Revolving Loans made to the Company by each Lender at any time shall not exceed
such Lender's Pro Rata Share of the Revolving Credit Availability on such date.
All Revolving Loans hereunder shall be made by such Lenders simultaneously and
proportionately to their then respective Revolving Credit Commitments.
2.4
2.5 (b) Borrowing Base Availability. In addition to the foregoing
limitation, the Revolving Credit Obligations shall at no time exceed the
Borrowing Base Availability.
2.6
2.7 (c) Frequency and Amount of Advances. Subject to the provisions hereof,
the Company may borrow and repay any outstanding advance under the Revolving
Loans on any Business Day, and any amounts so repaid may be reborrowed.
2.8
2.9 (d) Notices of Borrowing. When the Company desires to borrow or convert
an advance hereunder, it shall deliver to the Administrative Agent an
irrevocable notice of borrowing, in form attached hereto as Exhibit C ("Notice
of Borrowing") or such other form satisfactory to the Administrative Agent, no
later than 12:00 noon (Columbus, Ohio time) (i) at least one Business Day in
advance of the proposed funding or conversion date in the case of a Prime Rate
Advance, and (ii) at least three (3) Business Days in advance of the proposed
funding or conversion date in the case of a Eurodollar Advance. The Notice of
Borrowing shall specify (i) the proposed funding or conversion date, (ii) the
amount of the proposed advance, (iii) whether the proposed advance will be a
Eurodollar Advance or a Prime Rate Advance and if a Eurodollar Advance the
Interest Period therefor, and (iv) instructions for the disbursement of the
proceeds of the advance.
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2.10
2.11 (e) Making of Revolving Loans. (i) Promptly after receipt of a Notice of
Borrowing, the Administrative Agent shall notify each Lender by telecopy or
other similar form of notice of the proposed borrowing. Each Lender shall
deposit with the Administrative Agent an amount equal to its Pro Rata Share of
the amount requested by the Company to be made as Revolving Loans in immediately
available funds on the funding date specified in the applicable Notice of
Borrowing, subject to the fulfillment of the conditions precedent set forth
below. The Administrative Agent shall make the proceeds of such amounts received
by it available to the Company at the office of the Administrative Agent on such
funding date and shall disburse such proceeds in accordance with the Company's
disbursement instructions set forth in the applicable Notice of Borrowing. The
failure of any Lender to deposit the amount described with the Administrative
Agent on the applicable funding date shall not relieve any other Lender of its
obligations hereunder to make its Revolving Loan on such funding date. No Lender
shall be responsible for any failure by any other Lender to perform its
obligation to make a Revolving Loan hereunder, nor shall the Revolving Credit
Commitment of any Lender be increased or decreased as a result of such failure.
2.12
2.13 (ii) Unless the Administrative Agent shall have been notified by any
Lender on the Business Day immediately preceding the applicable funding date in
respect of any borrowing of Revolving Loans that such Lender does not intend to
fund its Revolving Loan requested to be made on such funding date, the
Administrative Agent may assume that such Lender has funded its Revolving Loan
and is depositing the proceeds thereof with the Administrative Agent, on such
funding date, and the Administrative Agent, in its sole discretion may, but
shall not be obligated to, disburse a corresponding amount to the Company on
such funding date. If the Revolving Loan proceeds corresponding to that amount
are advanced to the Company by the Administrative Agent, but are not in fact
deposited with the Administrative Agent by such Lender on or prior to the
applicable funding date, such Lender agrees to pay, and in addition the Company
agrees to repay, to the Administrative Agent, forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
such amount is disbursed to or for the benefit of the Company until the date
such amount is paid or repaid to the Administrative Agent, (A) in the case of
the Company, at the interest rate applicable to such borrowing and (B) in the
case of such Lender, at the Federal Funds Rate for the first Business Day, and
thereafter at the interest rate applicable to such borrowing. If such Lender
shall pay to the Administrative Agent, the corresponding amount, the amount so
paid shall constitute such Lender's Revolving Loan, and if both such Lender and
the Company shall pay and repay such corresponding amount, the Administrative
Agent shall promptly pay to the Company such corresponding amount. This Section
1.1(e) does not relieve any Lender of its obligation to make its Revolving Loan
on any funding date.
2.14
2.15 (f) Use of Proceeds of Revolving Loans. The proceeds of the Revolving
Loans may be used (i) to pay the purchase price of any Permitted Acquisition and
other related transaction costs and expenses and to fund any refinancing of
Indebtedness in connection with a Permitted Acquisition as set forth and
certified in the Notice of Borrowing pertaining thereto, (ii) to fund working
capital in the ordinary course of the business of the Company and its
Subsidiaries, (iii) to refinance existing Indebtedness under the Prior Loan
Agreement, (iv) to make Investments permitted by Section 8.11 of this Agreement,
and (v) for other lawful general corporate purposes
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not prohibited hereunder. Notwithstanding anything herein to the contrary, no
proceeds of Revolving Loans may be used to fund payments not permitted by this
Agreement.
2.16
2.17 (g) Revolving Credit Termination Date. The Revolving Credit
Commitments shall terminate, and all outstanding Revolving Credit Obligations
shall be paid in full (or, in the case of unmatured Letter of Credit
Obligations, provision for payment of cash collateral shall be made to the
satisfaction of Huntington and the Administrative Agent), on the Revolving
Credit Termination Date. Each Lender's obligation to make Revolving Loans shall
terminate at the close of business of the Administrative Agent on the Business
Day next preceding the Revolving Credit Termination Date.
2.18
2.19 (h) Interest. Accrued interest under the Revolving Loans shall be due
and payable on each Interest Payment Date.
2.20
2.21 Letters of Credit.
(a) Issuance. Subject to the terms and conditions set forth herein,
Huntington hereby agrees to issue for the account of the Company, a Restricted
Subsidiary, or an Approved Joint Venture, one or more letters of credit in U.S.
dollars (each individually a "Letter of Credit" and collectively the "Letters of
Credit") from time to time during the period from the date hereof to the
Revolving Credit Termination Date, provided that the Letter of Credit
Obligations shall at no time exceed the sum of $20,000,000, provided that the
Revolving Credit Obligations shall at no time exceed the Maximum Revolving
Credit Amount; and provided further, however, that the Revolving Credit
Obligations shall not exceed the Borrowing Base Availability.
(b) Expiry Dates. The Company, a Restricted Subsidiary or an Approved
Joint Venture, as applicable, shall have no right to obtain issuance of Letters
of Credit which have an expiration date later than the earlier of (i) the
Revolving Credit Termination Date or (ii) 24 months from issuance of such Letter
of Credit.
(c) Participations. (i) Immediately upon issuance by Huntington of any
Letter of Credit in accordance with the procedures set forth in this Section
1.2, each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from Huntington, without recourse or warranty, an
undivided interest and participation in such Letter of Credit to the extent of
such Lender's Pro Rata Share.
(ii) If Huntington makes any payment under any Letter of Credit, and
such amount is not repaid to Huntington within two Business Days, Huntington
shall promptly notify the Administrative Agent, which shall promptly notify each
Lender, and each such Lender shall promptly and unconditionally pay to the
Administrative Agent for the account of Huntington, in immediately available
funds, the amount of such Lender's Pro Rata Share of such payment, and the
Administrative Agent shall promptly pay to Huntington such amounts received by
it, and any other amounts received by the Administrative Agent for Huntington's
account, pursuant to this Section 1.2. All such payments shall constitute
Revolving Loans made to the Company (irrespective of the satisfaction of the
conditions in Section 6 or the requirement to deliver a Notice of Borrowing,
which conditions and requirement, for the purpose of refunding any
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Reimbursement Obligation owing to Huntington, the Lenders irrevocably waive) and
shall thereupon cease to be unpaid Reimbursement Obligations. Such Revolving
Loans shall be Prime Rate Advances. If a Lender does not make its Pro Rata Share
of the amount of such payment available to the Administrative Agent, such Lender
agrees to pay to the Administrative Agent for the account of Huntington,
forthwith on demand, such amount together with interest thereon, for the first
Business Day after the date such payment was first due at the Federal Funds
Rate, and thereafter at the interest rate then applicable to Prime Rate
Advances. The failure of any such Lender to make available to the Administrative
Agent for the account of Huntington its Pro Rata Share of any such payment shall
neither relieve any other Lender of its obligation hereunder to make available
to the Administrative Agent for the account of Huntington such other Lender's
Pro Rata Share of any payment on the date such payment is to be made nor
increase the obligation of any other Lender to make such payment to the
Administrative Agent. This Section does not relieve any Lender of its obligation
to purchase Pro Rata Share participations in Letters of Credit; nor does this
Section relieve the Company of its obligation to pay or repay Huntington's
funding of such payment pursuant to this Section or interest on the amount of
such payment from such date such payment is to be made until the date on which
payment is repaid in full.
(iii) In the event that any draw occurs under any of the
Letters of Credit, and such draw is not reimbursed within two Business Days
after demand to the Company or the Company has insufficient ability to obtain
Revolving Loans to pay such draw, the Administrative Agent is hereby authorized
to repay such draw by charging any or all of the Company's accounts or checking
accounts in such order as it deems appropriate, in its sole discretion.
(iv) Whenever Huntington receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which any Lender
has made a Revolving Loan pursuant to clause (ii) of this Section, Huntington
shall promptly pay to the Administrative Agent such payment. Each such payment
shall be made by Huntington or the Administrative Agent, as the case may be, on
the Business Day on which such Person receives the funds paid to such Person, if
received prior to 11:00 a.m. (Columbus time) on such Business Day, and otherwise
on the next succeeding Business Day.
(v) Upon the request of any Lender to the Administrative
Agent, Huntington shall furnish such Lender copies of any Letter of Credit or
Letter of Credit Application to which Huntington is party and such other
documentation as reasonably may be requested by such Lender.
(vi) The obligations of a Lender to make payments to the
Administrative Agent for the account of Huntington with respect to a Letter of
Credit, shall be irrevocable, shall not be subject to any qualification or
exception whatsoever, except willful misconduct or gross negligence of
Huntington as such issuing bank as determined in a final, non-appealable
judgment by a court of competent jurisdiction, and shall be honored in
accordance with this Section (irrespective of the satisfaction of the conditions
described in Section 6, as applicable which conditions, for the purposes of the
repayment of Letters of Credit to Huntington, such Lenders irrevocably waive)
under all circumstances, including, without limitation, any of the following
circumstances: (A) any lack of validity or enforceability hereof or of any of
the other Loan
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<PAGE> 10
Documents; (B) the existence of any claim, setoff, defense or other right which
the Company may have at any time against a beneficiary named in a Letter of
Credit or any transferee of a beneficiary named in a Letter of Credit (or any
Person for whom any such transferee may be acting), the Administrative Agent,
the Syndication Agent, any issuing bank, any Lender, or any other Person,
whether in connection herewith, with any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any underlying
transactions between the account party and beneficiary named in any Letter of
Credit); (C) any draft, certificate or any other document presented under the
Letter of Credit having been determined to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; (D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents; (E)
any failure by Huntington to make any reports required pursuant to this Section
1.2 or the inaccuracy of any such report; or (F) the occurrence of any Event of
Default or Potential Default.
(d) Requirements for Issuance of Letters of Credit.
(i) The Company may request Huntington to issue or cause the
issuance of a Letter of Credit by delivering to the Administrative Agent
Huntington's standard form of Letter of Credit Application and Agreement for
Standby Letter of Credit and/or Reimbursement Agreement (collectively the
"Letter of Credit Application") completed to the satisfaction of Huntington, and
such other certificates, documents and other papers and information as the
Administrative Agent or Huntington may request.
(ii) Each Letter of Credit shall, among other things, provide
for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein. Each Letter of Credit Application and each Letter of Credit
shall be subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof and, to the extent not inconsistent therewith,
the laws of the State of Ohio.
(iii) Huntington shall give the Administrative Agent written
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance of a Letter of Credit, which notice to the Administrative Agent shall
promptly transmit by telecopy, telephone or similar transmission to each Lender.
(iv) In connection with the issuance of any Letter of Credit,
the Company shall indemnify, save and hold Huntington, the Administrative Agent,
the Syndication Agent and each Lender harmless from any loss, cost, expense or
liability, including, without limitation, payments made by Huntington, the
Administrative Agent, the Syndication Agent or any Lender, and expenses and
reasonable attorneys' fees incurred by any of the same arising out of, or in
connection with, any Letter of Credit issued on behalf of the Company, a
Restricted Subsidiary or any Approved Joint Venture. The Company shall be bound
by Huntington's or any issuing or accepting bank's regulations and good faith
interpretations of any Letter of Credit, regardless of whether any such
interpretation may be different from the Company's. Neither Huntington, the
Administrative Agent, the Syndication Agent nor any Lender, nor any of its
correspondents shall
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be liable for any error, negligence, or mistakes, whether of omission or
commission, in following the Company's instructions or those contained in any
Letter of Credit or in any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit, except in the case of the
Administrative Agent's, the Syndication Agent's, any Lender's, the issuing
bank's or such correspondents' gross negligence or willful misconduct.
(v) The Company shall authorize and direct Huntington with
respect to each Letter of Credit to name the Company, a Restricted Subsidiary or
an Approved Joint Venture as the "Account Party" therein, shall deliver to
Huntington, upon request of Huntington, all instruments, documents, and other
writings and property pursuant to the Letter of Credit and shall accept and rely
upon Huntington's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit or the application therefor.
(e) Use of Proceeds for Letters of Credit. The Letters of Credit
shall be used by the Company, a Restricted Subsidiary or any Approved Joint
Venture (i) to support bonding requirements for real estate site improvements or
maintenance in favor of various municipal entities, (ii) to secure the
Company's, a Restricted Subsidiary's or any Approved Joint Venture's contractual
performance with respect to the Company's land and lot development activities,
and (iii) to secure the Company's, a Restricted Subsidiary's or any Approved
Joint Venture's contractual performance in connection with land acquisition
activities.
1.1 Potential Defaults.
None of the Lenders shall have any obligation to advance or re-advance
any sums pursuant to the Revolving Loans, and Huntington shall have no
obligation to issue or extend any Letters of Credit at any time when (a) an
Event of Default has occurred and is continuing or (b) a set of facts or
circumstances exists, which, by themselves, upon the giving of notice, the lapse
of time, or any one or more of the foregoing, would constitute an Event of
Default under Sections 10.1(g), (h), (i) or (j) of this Agreement (herein a
"Potential Default").
1 SECTION BORROWING BASE DEFINITIONS
2
2.1 Borrowing Base.
2.2
2.3 "Borrowing Base" shall mean (without duplication) the aggregate sum of
the following:
2.4
(a) 100% of Available Cash, plus
(b) 80% of Eligible Accounts Receivable, plus
(c) 75% of Eligible Lumber Inventory, plus
(d) 90% of Eligible Home Work-in-Process, plus
(e) the lesser of $15,000,000.00 or 50% of Eligible Real Estate
Held for Development, plus
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(f) the lesser of $10,000,000.00 or 50% of Eligible Investments
in Joint Ventures, plus
(g) the lesser of or $5,850,000.00 or 90% of the aggregate sum of
Eligible Model Homes, plus
(h) the lesser of $6,000,000.00 or 90% of Eligible Speculative
Homes, plus
(i) 62.5% of Eligible Developed Lots, plus
(j) 50% of Eligible Lots Under Development, plus
(k) 100% of the Eligible Acquisition Assets.
The Administrative Agent shall deduct from any borrowing availability
under the Borrowing Base 100% of the amounts of outstanding Excess Permitted
Nonrecourse Borrowings (the "Excess Permitted Nonrecourse Borrowings Reserve").
1.1 Available Cash.
1.2
"Available Cash" means all of the cash or cash equivalents of the
Company or any Restricted Subsidiary held (a) for its own account at Huntington,
or (b) by title companies or other escrow agents, consisting solely of the net
closing proceeds from residential real estate closings, which cash or cash
equivalents are not subject to a lien or offset in favor of such entity.
1.1 Developed Lots.
1.2
1.3 "Developed Lots" means all lots of the Company and its Restricted
Subsidiaries located in the State of Ohio or any contiguous state on which all
development activity has been completed, including without limitation, all site
development for streets and sewers, and for which application has been made for
final acceptance by the applicable controlling municipality, valued at the
lesser of cost or market.
1.4
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1.5 Eligible Accounts Receivable.
1.6
The term "Eligible Accounts Receivable" means the portion of the
accounts or accounts receivable of the Company or its Restricted Subsidiaries
which are free and clear of all liens and encumbrances and which the
Administrative Agent determines from time to time, based on the creditworthiness
of the Account Debtor, is eligible for use in calculating the Borrowing Base. No
account will be an Eligible Account Receivable in calculating the Borrowing Base
unless, at a minimum, such account arises from a final sale (excluding
consignments) in the ordinary course of business, is due and owing to the
Company or a Restricted Subsidiary from an entity (the "Account Debtor"), and
meets all the following requirements until it is collected in full: (a) the
account is not paid in full and not more than 90 days have elapsed from the
original invoice therefor, or if a special dating program has been approved in
writing by the Administrative Agent, the account is due and payable on a date
permitted by the terms of such dating program and is not past-due; (b) the
account arises from the completed performance of a sale of goods or real estate,
or services, (if involving a sale of goods such goods having been lawfully
shipped and invoiced to the Account Debtor, and the Company or a Restricted
Subsidiary having possession of copies of all shipping documents and delivery
receipts evidencing such shipment); (c) the account does not arise from a
contract with the United States government or any agency thereof; (d) the
account is not subject to any prior assignment, claim, lien, security interest,
setoff, credit, contra account, allowance, adjustment, discount, levy, or return
of goods (other than pursuant to the terms of standard warranty); (e) the
account does not arise from a transaction with a person, corporation or entity
affiliated with the Company, except for accounts from Borror Realty Company and
Alliance Title Agency, Ltd.; (f) the account does not, when added to all other
accounts of the Account Debtor with the Company and its Restricted Subsidiaries,
produce an aggregate indebtedness from the Account Debtor of more than 50% of
the total of all the Eligible Accounts Receivable of the Company and its
Restricted Subsidiaries; (g) the Company or a Restricted Subsidiary has not
received notice of bankruptcy or insolvency of the Account Debtor; (h) the
account is not evidenced by any chattel paper, promissory note, payment
instrument or written agreement; (i) the account does not arise from an Account
Debtor whose mailing address or executive office is located outside the United
States or Canada (provided such account is payable in U.S. dollars), unless the
Administrative Agent is the beneficiary of an irrevocable letter of credit from
a bank acceptable to the Administrative Agent for the payment of such account;
and (j) the account does not arise from an Account Debtor who has more than 50%
of its accounts or account balances with the Company and its Restricted
Subsidiaries, unpaid more than 90 days after the original invoice dates
therefor.
1.1 Eligible Acquisition Assets.
1.2
1.3 The term "Eligible Acquisition Assets" means the aggregate Purchase
Price of all Permitted Acquisitions, minus any (a) assets purchased in any
Permitted Acquisition which become eligible for inclusion in the Borrowing Base
or (b) assets which become eligible for inclusion in the Borrowing Base of a
Person that becomes a Restricted Subsidiary as a result of such Permitted
Acquisition, both clauses (a) or (b) determined immediately upon consummation of
such Permitted Acquisition; provided, however, that the aggregate amount of all
advances attributable to Eligible Acquisition Assets shall not exceed the
aggregate sum of $10,000,000.00, and provided further that the amount of all
Eligible Acquisition Assets shall be zero, beginning
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May 31, 2001, and continuing thereafter. The amount of the Eligible Acquisition
Assets shall be determined as of the effective date of each Permitted
Acquisition.
1.4
1.5 Eligible Lumber Inventory.
1.6 The term "Eligible Lumber Inventory" means that portion of the
Company's or any Restricted Subsidiary's inventory consisting of finished lumber
or other building materials, raw materials and finished goods, which shall be
free and clear of all liens and encumbrances, valued at the lesser of cost or
market (calculated on a FIFO basis and in accordance with GAAP).
1.1 Eligible Real Estate.
With respect to Developed Lots, Lots under Development, Model Homes,
Real Estate Held for Development, Home Work-In-Process, Speculative Homes, or
any other form or type of real estate of the Company or any Restricted
Subsidiary which may be considered for the purposes of the Borrowing Base, the
term "Eligible" used in connection with any such type of real estate shall mean
that portion of real property (a) owned in fee simple title by the Company or a
Restricted Subsidiary, and (b) which is not subject to any mortgage, lien, or
encumbrance, except for Unleveraged Seller Financing, and except for
reservations, exceptions, encroachments, easements, rights-of-way, restrictions,
leases or other similar title exceptions which do not materially detract from
the value of such real estate or interfere with its use or resale.
1.1 Investments in Joint Ventures.
1.2
1.3 "Investments in Joint Ventures" shall mean the net equity investment
of the Company or any Restricted Subsidiary in all real estate limited liability
companies, partnerships or joint ventures (including without limitation Approved
Joint Ventures) entered into solely for the purpose of acquiring real property,
developing residential lots or other developments and distributing the same to
the owners of such entities, valued at the equity method. The term "Eligible"
used in connection with Investments in Joint Ventures means any of the foregoing
joint ventures or other entities between the Company or a Restricted Subsidiary
on one hand, and M/I Schottenstein Homes, Inc., Homewood Corporation, Rockford
Homes, Inc. or other joint venture partner or member whose profitability and
balance sheet demonstrate creditworthiness, as determined by the Administrative
Agent.
1.4
1.5 Lots Under Development.
1.6
"Lots Under Development" shall mean all lots of the Company or any
Restricted Subsidiary that such entity intends to use for residential
development during the time period between the commencement of development of
such lots (by the issuance of a Letter of Credit to support development
activities) and the completion of such lot as a Developed Lot, valued at the
lesser of cost or market.
1.1 Model Homes.
1.2
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<PAGE> 15
1.3 "Model Homes" shall mean residential dwellings of the Company or its
Restricted Subsidiaries that have been or are being constructed for the purpose
of marketing similar dwellings and for which there is no present intention to
sell, valued at the lesser of cost or market.
1.4
1.5 Real Estate Held for Development.
1.6
1.7 "Real Estate Held for Development" shall mean that portion of the real
estate of the Company or its Restricted Subsidiaries consisting of all
undeveloped real estate, prior to the commencement of construction for which
such entity intends to develop into residential lots, valued at the lesser of
cost or market and if such property is subject to Unleveraged Seller Financing,
net of the amount of such Unleveraged Seller Financing.
1.8
1.9 Home Work-in-Process.
1.10
"Home Work-in-Process" shall mean that portion of the real estate of
the Company or any Restricted Subsidiary consisting of (a) work-in-process prior
to completion and (b) completed units for which such entity has an effective and
existing, executed arm's-length, bona fide purchase contract (an "Arm's-Length
Contract"), valued at the lesser of cost or market.
1.1 Speculative Homes.
1.2
1.3 "Speculative Homes" shall mean residential dwellings or lots on which
the Company or a Restricted Subsidiary has commenced construction for such
dwellings, which such entity presently intends to sell, but for which such
entity does not have an Arm's-Length Contract, valued at the lesser of cost or
market.
1.4
1.5 Mutual Exclusivity.
1.6
Each of the terms defined in Sections 2.1 through 2.13 (excluding
Section 2.7) shall be mutually exclusive, and none of the real or personal
property of the Company or any Restricted Subsidiary shall be considered to be
in more than one of the foregoing categories at the same time.
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1 SECTION INTEREST RATES, FEES, ADDITIONAL COSTS AND PAYMENTS
2
2.1 Interest Rates.
2.2
All advances under the Revolving Loans shall bear interest upon the
unpaid principal amount thereof from the date such advances are made until paid
in full as follows: at the election of the Company at (a) the Applicable Prime
Rate Margin plus the Prime Commercial Rate from time to time in effect, with
each change in the Prime Commercial Rate automatically and immediately changing
the interest rate on such Revolving Loans without notice to the Company, or (b)
the Applicable Eurodollar Margin plus the Eurodollar Rate, or (c) the Applicable
Eligible Acquisition Assets Rate automatically and without the election of the
Company to the extent that the Revolving Credit Obligations exceed the Borrowing
Base calculated without respect to any Eligible Acquisition Assets.
1.1 Prepayment.
1.2
1.3 The Company shall have the right to prepay without penalty at any time
and from time to time before the Revolving Credit Termination Date any and all
Prime Rate Advances.
1.4
1.5 Eurodollar Rate.
1.6
1.7 (a) Eurodollar Rate. Each Eurodollar Advance shall be in a minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof, and
no more than ten (10) Eurodollar Advances shall be outstanding at any time under
the Revolving Loans.
1.8
1.9 The Eurodollar Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurodollar Reserve Percentage.
1.10
1.11 Each Eurodollar Advance shall be reserve adjusted, including all types
of reserve insurance and brokerage costs.
1.12
1.13 (b) Change in Margin. The Interest Coverage Ratio used to compute the
Applicable Eurodollar Margin initially shall be the Interest Coverage Ratio set
forth in the compliance certificate most recently delivered by the Company to
the Administrative Agent prior to the date hereof, and changes in the Applicable
Eurodollar Margin resulting from a change in the Interest Coverage Ratio shall
become effective as to all Eurodollar Advances upon the first day of the
calendar quarter following delivery by the Company to the Administrative Agent
of a new compliance certificate pursuant to Section 9(a) and notice by the
Company to the Administrative Agent that a rate change is required. If the
Company shall fail to deliver a certificate in respect of the Interest Coverage
Ratio within forty-five (45) days after the end of any fiscal quarter, the
Applicable Eurodollar Margin from and including the first day of the following
quarter to the date the Company delivers to the Administrative Agent such
certificate shall conclusively equal the highest Applicable Eurodollar Margin
set forth herein.
1.14
1.15 Interest on Advances for the Eligible Acquisition Assets.
1.16
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<PAGE> 17
1.17 Notwithstanding the foregoing, the aggregate amount of Revolving Credit
Obligations outstanding at any time attributable to Eligible Acquisition Assets
shall bear interest at a rate equal to the applicable Eurodollar Rate or the
Prime Commercial Rate, as the Company shall elect, plus the Applicable
Eurodollar Margin or the Applicable Prime Margin, as applicable, plus one-half
of one percent (.5%) per annum (the "Applicable Eligible Acquisition Assets
Rate"). The Applicable Eligible Acquisition Assets Rate shall be effective as of
the first day of the calendar month following delivery of a Borrowing Base
certificate (or other computation determined by the Administrative Agent)
demonstrating the applicability of such rate, and such rate shall continue until
the first day of the month following delivery of a Borrowing Base certificate
(or other computation determined by the Administrative Agent) demonstrating that
such rate is no longer applicable.
1.18
1.19 Conversions of Advances.
1.20
An outstanding advance may only be converted on the last day of the
then current Interest Period (if applicable) with respect to such advance, and
provided, further, that upon the continuation or conversion of an advance such
notice shall also specify the Interest Period (if applicable) to be applicable
thereto upon such continuation or conversion. If the Company shall fail to
timely deliver such a notice with respect to any outstanding advance, the
Company shall be deemed to have elected to convert such advance to a Prime Rate
Advance on the last day of the then current Interest Period with respect to such
advance.
1.1 Additional Costs.
1.2
1.3 In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or any interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Administrative
Agent or any of the Lenders with any request or directive of any such authority
(whether or not having the force of law), shall (a) affect the basis of taxation
of payments to the Administrative Agent or any of the Lenders of any amounts
payable by the Company for Revolving Credit Obligations or any advance under
this Agreement (other than taxes imposed on the overall net income of the
Administrative Agent or any of the Lenders by the jurisdiction, or by any
political subdivision or taxing authority of any such jurisdiction, in which the
Administrative Agent or any of the Lenders has its principal office), or (b)
shall impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by the Administrative Agent or any of the Lenders, and the result of
any of the foregoing is to increase the cost to the Administrative Agent or any
of the Lenders of making or maintaining the Revolving Credit Obligations or any
advance hereunder, to reduce the amount of any sum receivable by the
Administrative Agent or any of the Lenders thereon, or to reduce the rate of
return on the Administrative Agent's or any Lender's capital, then the Company
shall pay to the Administrative Agent or such Lender, as the case may be, from
time to time, upon request of the Administrative Agent, additional amounts
sufficient to compensate the Administrative Agent or such Lender, as the case
may be, for such increased cost, reduced sum receivable or reduced rate of
return to the extent the Administrative Agent or any Lender, as the case may be,
is not compensated therefor in the computation of the interest rates applicable
to the Revolving Loans.
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<PAGE> 18
A detailed statement as to the amount of such increased cost, reduced sum
receivable or reduced rate of return, prepared in good faith and submitted by
the Administrative Agent or any Lender, as the case may be, to the Company,
shall be conclusive and binding for all purposes relative hereto, absent
manifest error in computation.
1.4
1.5 Limitation on Requests and Elections.
1.6
Notwithstanding any other provision of this Agreement to the contrary,
if, upon receiving a request for an advance or a request for a continuation of
an advance as an advance of the then existing type or conversion of an advance
to an advance of another type, the Required Lenders advise the Administrative
Agent (a) that, in the case of any Eurodollar Advance, deposits in dollars for
periods comparable to the Interest Period elected are not generally available in
the London interbank or secondary market, or (b) that the Eurodollar Rate, as
determined by the Administrative Agent, will not accurately cover the cost to
such Lenders of making or maintaining the related Eurodollar Advance or (c) that
by reason of national or international financial, political or economic
conditions or by reason of any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or the interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by such Lenders with any
request or directive of such authority (whether or not having the force of law),
including without limitation exchange controls, it is impracticable, unlawful or
impossible for such Lenders (i) to make the relevant Eurodollar Advance or (ii)
to continue such advance as a Eurodollar Advance or (iii) to convert an advance
to a Eurodollar Advance, then the Company shall not be entitled, so long as such
circumstances continue, to request a Eurodollar Advance or a conversion to such
advance from the Lenders. In the event that such circumstances no longer exist,
the Lenders shall again consider requests for Eurodollar Advances of the
affected type and requests for continuations of and conversions to such advances
of the affected type.
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<PAGE> 19
1.1 Illegality and Impossibility.
1.2
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or any interpretation
or administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by the Administrative
Agent or any Lender with any request or directive of such authority (whether or
not having the force of law), including without limitation exchange controls,
shall make it unlawful or impossible for the Administrative Agent or any Lender
to maintain any advance under this Agreement, the Company shall upon receipt of
notice thereof from the Administrative Agent, repay in full the then outstanding
principal amount of all such advances made by the Administrative Agent together
with all accrued interest thereon to the date of payment and all amounts due to
the Administrative Agent under Section 3.1(b) or 1.1(h) on the last day of the
then current Interest Period, if any, applicable to such advance, if the
Administrative Agent or any Lender may lawfully continue to maintain such
advance to such day, or immediately if the Administrative Agent or any Lender
may not continue to maintain such advance to such day, in which case, the
Administrative Agent will permit such prepayment without payment of any
additional compensation or breakage costs. This Section 3.8 shall apply only as
long as such illegality exists. As an alternative to the repayment obligation
provided in this Section 3.8, the Company may, at its option, and at the time
provided in this Section 3.8, convert any affected advance to a Prime Rate
Advance.
1.1 Compensation.
1.2
Subject to Section 3.8 above, in addition to all amounts required to be
paid by the Company pursuant to this Section 3, the Company shall compensate the
Administrative Agent and the Lenders, and each of them, upon demand, for all
losses, expenses and liabilities (including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Administrative Agent or any Lender to fund or
maintain the Eurodollar Advances) which the Administrative Agent or any Lender
may sustain (a) if for any reason an advance, conversion into or continuation of
such an advance does not occur on the date specified therefor in the Notice of
Borrowing or in a telephonic request by the Company for borrowing or conversion
or continuation or a successive Interest Period does not commence after notice
therefor is given to the Administrative Agent, (b) if for any reason any
Eurodollar Advance is prepaid on a date which is not the last day of the
applicable Interest Period, (c) as a consequence of a required conversion of a
Eurodollar Advance to a Prime Rate Advance as a result of any of the events
indicated in Section 3.6 or 3.7, or (d) as a consequence of any failure by the
Company to repay a Eurodollar Advance when required by the terms hereof. The
Company shall reimburse the Administrative Agent and each Lender, or any of
them, as the case may be, on demand for any resulting loss or expense incurred
by such entity, determined in such entity's reasonable opinion, including
without limitation any loss incurred in obtaining, liquidating or employing
deposits or other sources of funding from third parties or funding sources. A
detailed statement as to the amount of such loss or expense, prepared in good
faith and submitted by such entity to the Company shall be conclusive and
binding for all purposes absent manifest error in computation.
14
<PAGE> 20
1.1 Survival of Obligations.
1.2
The provisions of Sections 3.6 and 3.9 shall survive the termination of
this Agreement and the payment in full of all Notes outstanding pursuant hereto.
1.1 Interest Rate Protection.
1.2
1.3 In the event that on any Business Day any Eurodollar Rate with respect
to any Interest Period available to the Company under this Agreement equals or
exceeds 8.50% per annum, the Company shall enter into or have entered into
interest rate contracts with any financial institution with an aggregate
notional amount of not less than 50% of the Revolving Credit Obligations
outstanding on such Business Day for a term extending to the Revolving Credit
Termination Date on terms reasonably satisfactory to the Administrative Agent.
1.4
1.5 Default Interest Rate.
1.6 Upon the occurrence of any Event of Default, interest shall thereafter
accrue (a) on the principal amount of the Revolving Loans and upon any unpaid
Reimbursement Obligations at a rate equal to two percentage points in excess of
the Prime Commercial Rate, and (b) on that portion of the Revolving Credit
Obligations attributable to Eligible Acquisition Assets at a rate equal to two
percentage points in excess of the Applicable Eligible Acquisition Assets Rate.
1.7
1.8 Fees.
1.9
1.10 Until and unless the Company pays the Revolving Credit Obligations in
full, and has no right to seek further extensions of credit pursuant thereto,
the Company agrees to pay to the Administrative Agent and the Syndication Agent
the fees set forth in this Section 3.13.
1.11
1.12 (a) On or prior to the date of this Agreement, the Company agrees to
pay to the Administrative Agent for the benefit of each of the Lenders who were
"Banks" under the Loan Agreement dated as of September 29, 1997 (the "Prior Loan
Agreement"), all fees which have accrued under the Prior Loan Agreement but
which are not yet due and payable under the terms thereof, payable on or before
execution of this Agreement, which fees shall be shared by each of the "Banks"
pursuant to the Prior Loan Agreement.
1.13
1.14 (b) The Company agrees to pay to the Administrative Agent for the
account of the Lenders fees in respect of the Letters of Credit equal to the
Applicable Eurodollar Margin per annum of the stated amount of each Letter of
Credit. Huntington, as issuing bank, shall retain a fee equal to one-eighth
percent of one percent per annum, and the remainder of such fee shall be shared
by the Lenders pursuant to each Lender's Pro Rata Share. Each fee shall be
payable as follows: (i) one-fourth of the amount of such fee shall be payable
upon the issuance of any Letter of Credit, and (ii) the remaining portion
(three-fourths of the amount of each fee) shall be payable quarterly in arrears,
beginning on the first day of the calendar quarter after issuance of each Letter
of Credit. In addition, the Company agrees to pay to Huntington, as issuing
bank, its normal and customary issuing, servicing and amendment fees for each
Letter of Credit.
1.15
15
<PAGE> 21
1.16 (c) The Company agrees to pay the Administrative Agent for the account
of the Lenders in accordance with their respective Pro Rata Shares, an unused
fee accruing from the initial disbursement of Revolving Loans hereunder through
and including the Revolving Credit Termination Date at the Applicable Unused
Commitment Fee Rate in effect from time to time on the daily amount by which the
Revolving Credit Commitments exceeds the Revolving Credit Obligations for such
period. Such fees shall be payable quarterly in arrears, beginning on the last
day of June, 1998, and continuing on the last day of each September, December,
March, and June thereafter.
1.17
1.18 (d) Change in Unused Commitment Fee Rate. The Interest Coverage Ratio
used to compute the Applicable Unused Commitment Fee Rate initially shall be the
Interest Coverage Ratio set forth in the compliance certificate most recently
delivered by the Company to the Administrative Agent prior to the date hereof,
and changes in the Applicable Unused Commitment Fee Rate resulting from a change
in the Interest Coverage Ratio shall become effective upon the first day of the
calendar quarter following delivery by the Company to the Administrative Agent
of a new compliance certificate pursuant to Section 9(a) and notice by the
Company to the Administrative Agent that a rate change is required. If the
Company shall fail to deliver a certificate in respect of the Interest Coverage
Ratio within forty-five (45) days after the end of any fiscal quarter, the
Applicable Unused Commitment Fee Rate from and including the first day of the
following fiscal quarter to the date the Company delivers to the Administrative
Agent such certificate shall conclusively equal the highest Applicable Unused
Commitment Fee Rate set forth herein.
1.19
1.20 (e) The Company shall pay to the Administrative Agent such other fees
as the Company is obligated to pay pursuant to the Letter Agreement.
1.21
1.22 Capital Adequacy and Removal of Affected Lender.
1.23
1.24 In the event that any Lender shall have determined that the adoption
of any articles of incorporation, bylaws, code of regulations or any other
organizational or governing document, or any law, treaty, rule or regulation, or
determination of any Governmental Authority, regarding capital adequacy, or any
change therein or in the interpretation or application thereof or compliance by
any Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or Governmental Authority,
does or shall have the effect of reducing the rate of return on such Lender's
capital as a consequence of its obligations hereunder to a level below that
which such Lender could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
such capital adequacy) by an amount deemed by such Lender to be material, then
from time to time, upon submission by such Lender to the Company (with a copy to
the Administrative Agent), of a written request therefore setting forth in
reasonable detail the assumptions used by such Lender in determining such amount
and the manner in which such amount was calculated, the Company shall pay to
such Lender such additional amount or amounts that will compensate such Lender
for such reduction in rate of return; provided, however, that if such event or
condition with respect to capital adequacy applies only to one Lender and/or the
Company receives notice only from one Lender, then the Company shall not be
required to pay any such additional amount that accrues during the initial 120
day period after notice to the Company of
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<PAGE> 22
the occurrence of such event or condition with respect to capital adequacy. If
any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Company, through the Administrative
Agent, of the entitling event. A certificate as to any additional amounts
payable pursuant to this subsection submitted by any Lender to the Company,
through the Administrative Agent, shall be presumed correct with respect to the
Company, absent manifest error.
1.25
1.26 In the event that (a) the Company receives certification of the type
described in the immediately preceding paragraph from any Lender and (b) such
increase in capital requirements is not generally applicable to the Lenders, the
Company, at its option and in its discretion, shall have the right to designate
an assignee which is not affiliated with the Company and which is acceptable to
the Administrative Agent and the Required Lenders, to purchase for cash,
pursuant to an Assignment and Acceptance in form satisfactory to the
Administrative Agent and the Company, the outstanding Revolving Credit
Obligations of such Lender and to assume all of such Lender's other rights and
obligations (including, without limitation, such Lender's obligation to
participate in all outstanding Letters of Credit) hereunder without recourse to
or warranty by, or expense to, such Lender, for a purchase price equal to the
principal amount of all of such Lender's outstanding Revolving Loans plus any
accrued but unpaid interest thereon and the accrued but unpaid fees in respect
of such Lender's Revolving Credit Commitment hereunder and any other amounts
that may be owing to such Lender hereunder.
1.27
1.28 Mandatory Reduction.
1.29
1.30 The Company shall make a mandatory reduction or repayment of the
Revolving Credit Obligations immediately if at any time (a) the sum of the
Revolving Credit Obligations exceeds (b) the Borrowing Base Availability, in an
amount equal to such difference.
1.31
1.32
2 SECTION EVIDENCE OF INDEBTEDNESS
3
(a) Evidence of the Revolving Loans. The Company hereby agrees to pay
when due the principal amount of each Revolving Loan and further agrees to pay
when due all unpaid interest accrued thereon, in accordance with the terms
hereof and with the Notes evidencing the Revolving Loans. The Company shall
execute and deliver to each Lender, as applicable, revolving credit promissory
notes substantially in the form of Exhibit A and thereafter shall execute and
deliver such other promissory notes as are necessary to evidence the Revolving
Loans owing to the Lenders after giving any effect to any assignment or
substitution thereof pursuant to this Agreement, all in form and substance
acceptable to the Administrative Agent and the parties to such assignment (all
such promissory notes and all amendments thereto, replacements thereof, and
substitutions thereof being collectively referred to as the "Notes" and
separately as a "Note").
(b) Evidence of the Letters of Credit. Subject to the terms hereof, the
Company unconditionally agrees to pay Huntington the amount of all Reimbursement
Obligations, interest and other amounts payable to Huntington under and in
connection with any Letter of Credit when such amounts are due and payable,
irrespective of any claim, setoff, defense, or other right
17
<PAGE> 23
which the Company may have at any time against Huntington or any other Person.
The Company shall execute and deliver to Huntington as issuing bank a Standby
Letter of Credit Reimbursement Agreement substantially in the form of Exhibit B.
In the event any payment by the Company received by Huntington with respect to a
Letter of Credit and distributed by the Administrative Agent to the Lenders on
account of their participation is thereafter set aside, voided or recovered from
Huntington in connection with any receivership, liquidation or bankruptcy
proceeding, each such Lender which received such distribution shall, upon demand
by Huntington, contribute such Lender's Pro Rata Share of the amount set aside,
voided or recovered, together with interest at the rate required to be paid by
Huntington upon the amount required to be repaid or returned by it.
1 SECTION COSTS AND EXPENSES.
2
(a) The Company shall pay all reasonable costs and expenses of the
Syndication Agent, the Administrative Agent and Huntington in connection with
the preparation, negotiation and execution of the Loan Documents and any
proposal or commitment letters or otherwise incidental to the Revolving Credit
Commitments, any amendment or modification of this Agreement or any Loan
Documents, any litigation, contest, dispute, proceeding or action in any way
relating to this Agreement or to any instrument, promissory note, agreement, or
other document executed in connection with this Agreement, whether any of the
foregoing be incurred prior to or after maturity, the occurrence of an Event of
Default, or the rendering of a judgment. Such costs shall include, but not be
limited to, reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent, the Syndication Agent, and Huntington, recording fees,
revenue stamps and note and mortgage taxes.
(b) The Company further agrees to pay or reimburse the Administrative
Agent, the Syndication Agent, Huntington, and the Lenders upon demand for all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses, incurred by any of the foregoing
after the occurrence of an Event of Default (i) in enforcing any Loan Document
or exercising or enforcing any other right or remedy available by reason of any
Event of Default; (ii) in connection with any refinancing or restructuring of
the credit arrangements provided hereunder in the nature of a "work-out" or any
insolvency or bankruptcy proceeding; and (iii) in commencing, defending or
intervening in any litigation or legal proceeding relating to the Revolving
Credit Obligations, the Company or any Subsidiary related to or arising out of
the transactions contemplated hereby except to the extent that such proceeding
(A) involves the gross negligence or willful conduct of a party hereto other
than the Company or a Restricted Subsidiary or (B) is between or among parties
hereto and does not include the Company or a Restricted Subsidiary.
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<PAGE> 24
1 SECTION CONDITIONS PRECEDENT.
2
2.1 Effectiveness and Initial Advance.
2.2
This Agreement shall become effective, each Lender shall be obligated
to make the initial advance hereunder, and Huntington shall be required to issue
Letters of Credit only after the Administrative Agent shall have received from
the Company each of the following items in form and substance satisfactory to
the Administrative Agent:
(a) The Administrative Agent shall have received this Agreement, the
Notes and the Letter of Credit reimbursement agreement referenced above and all
other agreements, documents and instruments described in Schedule 6.1(a)
attached hereto and made a part hereof, each duly executed where appropriate in
form and substance satisfactory to the Administrative Agent, and without
limiting the foregoing, the Company hereby directs its counsel Vorys, Sater,
Seymour and Pease, LLP to prepare and deliver to the Administrative Agent and
the Lenders the opinion referred to in such Schedule.
(b) The Administrative Agent shall have received a certificate signed
by the chief operating officer and chief financial officer of the Company,
stating to the best of his knowledge after due inquiry, on such effective date
no Event of Default has occurred and is continuing.
1.1 Conditions Precedent to Subsequent Advances.
1.2
1.3 The obligation of each Lender to make any disbursement or advance
subsequent to the initial disbursement or initial advance under the Revolving
Loans, or of Huntington as issuing bank to issue any Letters of Credit is
subject to all the conditions and requirements of this Agreement and delivery of
the following required documents, or other action, all of which are conditions
precedent:
1.4
1.5 (a) Warranties and Representations. On the date of each advance
pursuant to the Revolving Loans, the warranties and representations set forth in
Section 7 hereof and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time
pursuant to this Agreement or any related document shall be true and correct on
and as of such date with the same effect as though such warranties and
representations had been made on and as of such date, except to the extent that
such warranties and representations expressly relate to an earlier date.
1.6
1.7 (b) Compliance. The Company and any Subsidiary shall have complied and
shall then be in compliance with all the terms, covenants and conditions of this
Agreement which are binding upon it, and no Event of Default or Potential
Default shall have occurred and be continuing on such date or after giving
effect to the advances requested to be made.
1.8
1.9 (c) Confirmation of Conditions Precedent. The Company and any
Subsidiary shall then be in compliance with and able to confirm all the
foregoing conditions precedent with the same effect as though such conditions
precedent were requirements to the making of any advance contemplated herein.
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<PAGE> 25
1.10
1.11
2 SECTION WARRANTIES AND REPRESENTATIONS
3
4 In order to induce the Administrative Agent, the Syndication Agent and
each of the Lenders to enter into this Agreement and to make the Revolving
Loans, the Letters of Credit and the other financial accommodations to the
Company, the Company represents and warrants to the Administrative Agent, the
Syndication Agent and each of the Lenders that each of the following statements
is true and correct:
5
5.1 Organization and Authority.
5.2
5.3 The Company and each of the Subsidiaries (a) is a corporation, limited
liability company, partnership or joint venture duly organized, validly existing
and in good standing under the laws of the state of its formation; (b) has all
requisite power and authority and all necessary licenses and permits to own and
operate its properties and to carry on its business as now conducted and as
presently proposed to be conducted; and (c) is not doing business or conducting
any activity in any jurisdiction in which it has not duly qualified and become
authorized to do business, where the failure to do so has or is reasonably
likely to have a Material Adverse Effect.
5.4
5.5 Borrowing is Legal and Authorized.
5.6
5.7 (a) The execution and delivery of each of the Loan Documents which have
been executed and to which the Company or any Subsidiary is a party has been
authorized by the Board of Directors or other manager of such entity and will
constitute valid and binding obligations enforceable in accordance with their
respective terms; (b) the execution of this Agreement and related Notes and Loan
Documents and the compliance with all the provisions of this Agreement (i) are
within the corporate or constituent powers of such entity; and (ii) are legal
and will not conflict with, result in any breach in any of the provisions of,
constitute a default under, or result in the creation of any lien or encumbrance
upon any property of the Company or any Subsidiary under the provisions of, any
agreement, charter instrument, bylaw, or other instrument to which the Company
or any Subsidiary is a party or by which it may be bound; and (c) there are no
limitations in any indenture, material contract or agreement, mortgage, deed of
trust or other agreement or instrument to which the Company or any Subsidiary is
now a party or by which the Company or any Subsidiary may be bound with respect
to the payment of principal or interest on any Indebtedness, or the Company's or
any Subsidiary's ability to incur Indebtedness, including the Notes to be
executed in connection with this Agreement.
5.8
5.9 Taxes.
5.10
5.11 All tax returns required to be filed by the Company and each Subsidiary
in any jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges which are required to be paid pursuant to Section
8.1 or other provisions of this Agreement in respect of the Company, and each
Subsidiary, or upon any of properties of the same, which are due and payable
have been paid. The Company does not know of any proposed
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additional tax assessment against it or any Subsidiary. The accruals for taxes
on the books of the Company and each Subsidiary for its current fiscal period
are adequate.
5.12
5.13 Corporate Information.
5.14
Schedule 7.4 attached hereto accurately represents as of the date
hereof the following: (a) the classes of capital stock of the Company and each
Subsidiary and par value of each such class, all as authorized by the Company's
or such Subsidiary's Articles of Incorporation, (b) the number of shares of each
such class of stock issued and outstanding, and (c) the Company's and each
Subsidiary's employer tax identification number. All shares of all classes of
capital stock issued and outstanding are fully paid and nonassessable. Except
for options granted pursuant to the Company's Incentive Stock Plan, neither the
Company nor any Subsidiary has outstanding any other stock or other equity
security, or any other instrument convertible to an equity security of the
Company or such Subsidiary, or any commitment, understanding, agreement or
arrangement to issue, sell or have outstanding any of the foregoing.
1.1 Compliance with Law.
1.2
1.3 Neither the Company nor any Subsidiary (a) is in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, including
without limitation any laws, rulings or regulations relating to ERISA or Section
4975 of the Internal Revenue Code or (b) has failed to obtain any licenses,
permits, franchises or other governmental or environmental authorizations
necessary to the ownership of its properties or to the conduct of its business,
which violation or failure under clause (a) or clause (b) above has or is
reasonably likely to have a Material Adverse Effect.
1.4
1.5 Financial Statements; Full Disclosure.
1.6
1.7 The financial statements for the fiscal year ending December 31, 1997,
which have been supplied to the Administrative Agent and the Lenders on or prior
to the date hereof, have been prepared in accordance with GAAP and fairly
represent the Company's consolidated financial condition as of such date, and
the financial statements for the interim period ending March 31, 1998, which
have been supplied to the Administrative Agent and the Lenders prior to the date
hereof, fairly represent the Company's consolidated financial condition as of
such date. No material adverse change in the Company's consolidated financial
condition has occurred since such dates. The financial statements referred to in
this paragraph do not, nor does this Agreement or any written statement
furnished by the Company to the Administrative Agent and the Lenders in
connection with obtaining the Revolving Loans and the Letters of Credit, contain
any untrue statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading. The Company has
disclosed to the Administrative Agent and the Lenders in writing all facts,
including, without limitation, all pending litigation, administrative
proceedings, and arbitration proceedings, which may or is likely to have a
Material Adverse Effect.
1.8
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1.9 Litigation: Adverse Effects.
1.10
There is no action, suit, audit, proceeding, investigation or
arbitration (or series of related actions, suits, proceedings, investigations or
arbitrations) before or by any Governmental Authority or private arbitrator
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary or any property of the Company or any Subsidiary (a) challenging
the validity or the enforceability of any of this Agreement, or any Loan
Document, agreement, or instrument executed in connection herewith, or (b) which
has had, shall have or is reasonably likely to have a Material Adverse Effect.
Neither the Company nor any Subsidiary is (i) in violation of any applicable
requirements of law which violation shall have or is likely to result in a
Material Adverse Effect, or (ii) subject to or in default with respect to any
final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or Governmental Authority, in each case
which shall have or is likely to have a Material Adverse Effect.
1.1 No Insolvency.
1.2
1.3 On the date of this Agreement and after giving effect to all
Indebtedness of the Company (including, without limitation, the Revolving Credit
Obligations and all Contingent Obligations) and on the date of each advance
under the Revolving Loans or the issuance of any Letter of Credit hereunder,
each of the Company and each Subsidiary (a) will be able to pay its obligations
as they become due and payable; (b) has assets, the present fair saleable value
of which exceeds the amount that will be required to pay its probable liability
on its obligations as the same become absolute and matured; (c) has sufficient
property, the sum of which at a fair valuation exceeds all of its Indebtedness;
and (d) will have sufficient capital to engage in its business.
1.4
1.5 Government Consent.
1.6
1.7 Neither the nature of the Company or any Subsidiary or of any of their
businesses or properties, nor any relationship between the Company or any
Subsidiary and any other entity or person, nor any circumstance in connection
with the execution of this Agreement, is such as to require a consent, approval
or authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of the Company or any Subsidiary as a
condition to the execution and delivery of this Agreement or the Loan Documents.
1.8
1.9 Title to Properties.
1.10
The Company and each of its Subsidiaries (a) has good title to all the
property in which it has a property interest, free from any liens and
encumbrances, except as set forth on Schedule 7.10 attached hereto or as
permitted by Section 8.4 of this Agreement, and (b) has not agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its property whether now owned or hereafter acquired to be
subject to a lien or encumbrance except as provided in this Section 7.10.
1.1 No Defaults.
1.2
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<PAGE> 28
1.3 No event has occurred and no condition exists which would constitute a
Potential Default or an Event of Default pursuant to this Agreement. Neither the
Company nor any Subsidiary is in violation of any term of any agreement, charter
instrument, bylaw or other instrument to which it is a party or by which it may
be bound, which violation has or is reasonably likely to have a Material Adverse
Effect.
1.4
1.5 Environmental Protection.
1.6
1.7 Except for matters, conditions, operations and noncompliance which
would not have or be reasonably likely to have a Material Adverse Effect,
neither the Company nor any Subsidiary has actual knowledge of (a) the permanent
placement, burial or disposal of any Hazardous Substances (as hereinafter
defined) on any real property owned, leased, or used by the Company or any
Subsidiary (the "Premises"), of any spills, releases, discharges, leaks, or
disposal of Hazardous Substances that have occurred or are presently occurring
on, under, or onto the Premises, or of any spills, releases, discharges, leaks
or disposal of Hazardous Substances that have occurred or are occurring off the
Premises as a result of the improvement, operation, or use of the Premises which
would result in non-compliance with any of the Environmental Laws (as
hereinafter defined); (b) a violation of any applicable Environmental Laws; (c)
any pending or threatened environmental civil, criminal or administrative
proceedings against the Company or any Subsidiary relating to Hazardous
Substances; (d) any facts or circumstances that would give rise to any future
civil, criminal or administrative proceeding against the Company or any
Subsidiary relating to Hazardous Substances; or (e) any of its employees,
agents, contractors, subcontractors, or any other person occupying or present on
the Premises generating, manufacturing, storing, disposing or releasing on,
about or under the Premises any Hazardous Substances which would result in the
Premises not complying with the Environmental Laws.
1.8
1.9 Margin Loans.
1.10
None of the transactions contemplated in the Agreement will violate or
result in a violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulation issued pursuant thereto, including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or
intends to carry or purchase any "margin security" within the meaning of said
Regulation U. None of the proceeds of the Revolving Loans or the Letters of
Credit have been or will be used to purchase or refinance any borrowing, the
proceeds of which were used to purchase any "security" within the meaning of the
Securities Exchange Act of 1934, as amended.
1.1 Real Estate Ownership.
1.2
1.3 With respect to each tract of unimproved or improved real property
which the Company or any Subsidiary now owns or acquires after the date hereof
(hereinafter "Real Property Parcel"), except where a failure, violation,
condition, requirement or noncompliance with any of the items specified below
does not or is not reasonably likely to have a Material Adverse Effect:
1.4
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1.5 (a) Neither the Company nor any Subsidiary has received notice of any
pending or threatened condemnation proceeding or notice of any special
assessment for improvements to and/or for the benefit of any Real Property
Parcel;
1.6
1.7 (b) Neither the Company nor any Subsidiary has knowledge of any
boundary line dispute, encroachment, access limitation or other survey defect
affecting any Real Property Parcel. Each Real Property Parcel has legal access
to a public street by unrestricted frontage or over a title-insured easement and
complies with applicable subdivision regulations, except for minor survey
defects which do not materially interfere with the Company's or any Subsidiary's
intended use and except for subdivision of acreage into residential lots after
acquisition in the ordinary course of the Company's or any Subsidiary's
business. The Company has a survey of each Real Property Parcel obtained prior
to the acquisition thereof;
1.8
1.9 (c) The surveys obtained for each Real Property Parcel certify those
portions, if any, of the Real Property Parcel which are located within a flood
hazard area;
1.10
1.11 (d) The Company or such Subsidiary has a "Phase One" environmental
study prepared by an environmental engineering company obtained prior to
acquisition of each Real Property Parcel;
1.12
1.13 (e) Neither the Company nor any Subsidiary has filled any Real
Property Parcel which contains "wetlands," or did contain "wetlands," unless
such fill was approved by state and federal authorities having jurisdiction, as
"wetlands" are defined or described in applicable state and federal laws and
regulations. Neither the Company nor any Subsidiary has acquired any Real
Property Parcel without obtaining a wetlands determination study by a qualified
expert;
1.14
1.15 (f) Except to the extent permitted by Section 8.18 below, each Real
Property Parcel is finally and unappealably zoned for the Company's or such
Subsidiary's intended use prior to purchase, except for Real Property Parcels
which will be rezoned by the Company or such Subsidiary for development as
residential lots in the ordinary course of its business in which case the
Company or such Subsidiary will use its best efforts to obtain the appropriate
rezoning as soon as practicable after acquisition;
1.16
1.17 (g) The Company and each of the Subsidiaries has obtained appropriate
assurances of availability in adequate capacities of all necessary utilities, at
a property line or by extension through publicly dedicated rights-of-way or
recorded easements, prior to acquisition of such Real Property Parcel;
1.18
1.19 (h) The Company or a Subsidiary has good and marketable fee simple
title to each Real Property Parcel, free and clear of all liens and encumbrances
except: (i) the lien of real estate taxes and assessments not yet due; (ii)
easements, covenants, conditions and restrictions of record which do not
materially interfere with present lawful use or the Company's or a Subsidiary's
intended use; (iii) the effect of zoning and building laws; (iv) the effect of
legal highways; and (v) liens or encumbrances disclosed as set forth on Schedule
7.10 to this Agreement or permitted in connection with borrowings or lease
obligations permitted pursuant to Sections 8.4 or 8.5 or 8.7 hereof. Neither the
Company nor any Subsidiary has knowledge of
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<PAGE> 30
any off-record or undisclosed legal or equitable interest claimed by any person
in any Real Property Parcel or any pending or threatened litigation or
administrative proceeding against or affecting any Real Property Parcel or any
claim of right to file a mechanic's or materialman's lien against any Real
Property Parcel. The Company or a Subsidiary has obtained owner's title
insurance in the amount of the purchase price showing good and marketable fee
simple title to each Real Property Parcel, free and clear of all liens and
encumbrances except as permitted by this Section 7.14; and
1.20
1.21 (i) Upon receipt of written request by the Administrative Agent, the
Company will promptly furnish to the Administrative Agent copies of existing
documentation or certificates in the Company's or a Subsidiary's possession
affecting any Real Property Parcel, as the Administrative Agent may reasonably
request.
1.22
1.23
2 SECTION COMPANY BUSINESS COVENANTS
3
4 Effective on and after the date of this Agreement, so long as any of
the indebtedness or credit provided for herein remains unpaid or outstanding,
the Company covenants and agrees in favor of the Administrative Agent, the
Syndication Agent and each Lender as follows:
5
5.1 Payment of Taxes and Claims.
5.2
5.3 The Company and each of the Subsidiaries will pay before they become
delinquent (a) all taxes, assessments and governmental charges or levies imposed
upon it or its property; and (b) all claims or demands of materialmen and
mechanics in excess of $100,000.00 in the aggregate, carriers, warehousemen,
landlords, bailees and other like persons which, if unpaid, might result in the
creation of a lien or encumbrance upon its property, provided, however, that
items of the foregoing description need not be paid (i) while being contested in
good faith and by appropriate proceedings or (ii) if uncontested, such entity is
able to obtain title insurance insuring against such items, and provided further
that adequate book reserves have been established with respect thereto and
provided further that the such entity's title to, and its right to use, its
property are not materially adversely affected thereby. In the case of any item
of the foregoing description involving in excess of the amount which the
Company's independent public accountants shall fix as the threshold of
materiality for purposes of their audit of the then current year, the
appropriateness of the proceedings shall be supported by an opinion of the
independent counsel responsible for such proceedings and the adequacy of such
reserves shall be supported by the opinion of the independent accountants.
5.4
5.5 Maintenance of Properties and Corporate Existence.
5.6
The Company and the Subsidiaries shall each:
(a) Property -- maintain its property in good condition, ordinary wear
and tear excepted, and make all renewals, replacements, additions, betterments
and improvements thereto which are deemed necessary by the Company or such
Subsidiary;
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<PAGE> 31
(b) Insurance -- maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business against such
casualties and contingencies, of such types (including but not limited to fire
and casualty, public liability, products liability, larceny, embezzlement or
other criminal misappropriation insurance) and in such amounts as is customary
in the case of corporations of established reputations engaged in the same or a
similar business and similarly situated;
(c) Financial Records -- keep true books of records and accounts in
which full and correct entries will be made of all its business transactions,
and reflect in its financial statements adequate accruals and appropriations to
reserves, all in accordance with GAAP;
(d) Existence and Rights -- except as otherwise permitted by this
Agreement, do or cause to be done all things necessary (i) to preserve and keep
in full force and effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation, limited liability company, partnership or
other entity duly organized and existing and in good standing under the laws of
the state of its formation; and
(e) Compliance with Law -- not be in violation of any laws, ordinances,
or governmental rules and regulations to which it is subject and will not fail
to obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its properties or to the conduct of its business,
which violation or failure to obtain has or is reasonably likely to have a
Material Adverse Effect.
1.1 Sale of Assets.
1.2
1.3 Neither the Company nor any Subsidiary shall sell, lease, transfer,
assign or otherwise dispose of, any of its assets or property, whether now owned
or hereafter acquired, or any income or profits therefrom, or enter into any
agreement to do so, except (a) sales, transfers or other distributions of
personal property or real property in the ordinary course of business, including
without limitation, the sale of Model Homes, Real Estate Held for Development,
Developed Lots, and Lots Under Development for consideration not less than fair
market value (but in no event less than the amount advanced to the Company under
the Borrowing Base); and (b) the disposition of obsolete equipment in the
ordinary course of business.
1.4
1.5 Liens and Encumbrances (Negative Pledge).
1.6
Neither the Company nor any of the Subsidiaries will cause or permit or
agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance except for:
(a) liens securing taxes, assessments or governmental charges or levies
or the claims or demands of materialmen, mechanics, carriers, warehouses,
landlords and other like persons in connection with such items permitted by
Section 8.1 above;
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<PAGE> 32
(b) liens incurred or deposits made in the ordinary course of business
in connection with worker's compensation, unemployment insurance, social
security and other like laws;
(c) attachment, judgment and other similar liens arising in connection
with court proceedings in an aggregate amount less than $1,000,000.00;
(d) attachment, judgment or other similar liens arising in connection
with court proceedings for the payment of money aggregating in excess of
$1,000,000.00, but less than $10,000,000.00, provided that (i) fewer than 21
days have elapsed from the date of the filing of such lien or liens, or (ii)
such lien or liens have been discharged in the full amount or the execution or
other enforcement of such lien or liens are effectively stayed or bonded in
full, and the claims secured thereby are being actively contested in good faith
and by appropriate proceedings;
(e) reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other similar title exceptions
or encumbrances affecting real property, provided they do not materially
interfere with its use in the ordinary conduct of the Company's or its
Subsidiary's business;
(f) inchoate liens arising under ERISA to secure the contingent
liability of the Company or any of the Subsidiaries; and
(g) the liens and encumbrances disclosed on Schedule 7.10 to this
Agreement or made pursuant to the Indebtedness and operating lease rentals
permitted by Sections 8.5(b) or (c) and 8.7 below.
In addition, neither the Company nor any of the Subsidiaries will
contractually agree with any other creditor to provide such creditor a negative
pledge, or other covenant similar to this Section 8.4.
1.1 Indebtedness.
1.2
1.3 Neither the Company nor any of the Subsidiaries shall directly or
indirectly create, incur, assume or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness (other than Contingent
Obligations permitted by Section 8.6 below), except for (a) the Revolving Credit
Obligations; (b) up to the aggregate sum of $10,000,000.00 outstanding at any
time in (i) secured nonrecourse Indebtedness, and (ii) capital lease or purchase
money Indebtedness incurred to finance the acquisition of capital assets,
provided that such Indebtedness (A) has a scheduled maturity and is not due on
demand, (B) is secured only by the property being purchased and does not exceed
the purchase price thereof, and (C) does not exceed the aggregate sum of
$2,000,000.00 outstanding at any time outstanding at any time, in connection
with the Company's or any Restricted Subsidiaries' business; (c) additional
nonrecourse Indebtedness to sellers of real estate not to exceed the purchase
price of such real estate incurred in connection with the purchase of such real
estate in an aggregate sum up to $5,000,000.00 outstanding at any time (which
Indebtedness shall be termed the "Excess Permitted Nonrecourse Borrowings" if
and to the extent that the Company's and its Subsidiaries' Indebtedness pursuant
to clauses (b) and (c) of this paragraph exceeds the aggregate sum of
27
<PAGE> 33
$10,000,000.00 outstanding at any time); (d) unsecured indebtedness subordinated
to the Revolving Credit Commitments, which shall be subordinated in a manner
satisfactory to the Administrative Agent; and (e) Indebtedness evidenced by
interest rate agreements in respect of interest rate, swap, collar, cap or
similar agreements pursuant to which the Company hedges its actual interest rate
exposure pursuant to the terms of this Agreement.
1.4
1.5 Contingent Liabilities.
1.6
Neither the Company nor any of the Subsidiaries directly or indirectly
will create or become liable with respect to any Contingent Obligations, except
(a) by indorsement of negotiable instruments for deposit or collection in the
ordinary course of business; (b) the guaranty of Letters of Credit issued in
connection with Approved Joint Ventures, (c) up to the maximum aggregate stated
amount of $10,000,000.00 in guaranteed obligations outstanding at any time in
connection with (i) Non-Facility Contingent Obligations, and (ii) Indebtedness
in connection with seller financing for Approved Joint Ventures, (d) the
guaranty of any Indebtedness of the Company or any Subsidiary that is permitted
to be incurred under Section 8.5 above; (e) the Company's contingent liability
as a partner or joint venture partner in connection with joint ventures or
partnerships; (f) the guaranty of any other Indebtedness not to exceed the sum
of $100,000.00 in the aggregate outstanding at any time; (g) obligations,
warranties and indemnities not relating to Indebtedness, which have been or are
undertaken or made in the ordinary course of business, and (h) Contingent
Obligations with respect to surety, appeal and performance bonds obtained by the
Company or any Restricted Subsidiary.
1.1 Operating Lease Rentals.
1.2
1.3 Neither the Company nor any of the Subsidiaries will enter into: (a)
operating leases (excluding Model Home rentals) providing in the aggregate for
annual rentals which exceed $2,000,000.00, or (b) Model Home rentals providing
in the aggregate for annual rentals which exceed $1,000,000.00.
1.4
1.5 Acquisition of Capital Stock.
1.6
The Company shall not redeem or acquire any of its own capital stock or
any options or other interests in respect thereof having an aggregate value in
excess of $500,000.00 in any fiscal year, except (a) the purchase or redemption
of capital stock in connection with a simultaneous sale of an equivalent or
greater amount of capital stock for not less than the same aggregate purchase or
redemption price, or (b) up to the aggregate amount of $1,000,000.00 in any
fiscal year for the purchase of capital stock, options or other interests in
respect thereto using funds escrowed pursuant to the Company's Amended and
Restated Executive Deferred Compensation Plan or otherwise pursuant to any of
the Company's management incentive plans. None of the Subsidiaries shall redeem
or acquire any of its own capital stock.
1.1 Restrictions on Dividends.
1.2
1.3 The Company shall not declare or pay any cash dividends for any fiscal
year, which total in excess of 25% of the Company's Consolidated Net Income
after taxes for such fiscal year.
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<PAGE> 34
None of the Subsidiaries shall declare or pay any cash dividends or
distributions for any fiscal year, except to or for the benefit of the Company.
1.4
1.5 Management.
1.6
1.7 The Company shall not replace or change the position of its chief
executive officer or the chief operating officer unless such replacement or
change will not or is not reasonably likely to have or cause a Material Adverse
Effect.
1.8
1.9 Investments, Loans and Advances.
1.10
1.11 Neither the Company nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except: (a) cash or cash equivalents
(marketable direct obligations issued or unconditionally guaranteed and backed
by the full faith and credit of the United States government), bonds or other
obligations of the United States of America, certificates of deposit issued by
commercial banks with a minimum capital of $500,000,000.00, and commercial paper
rated at least A-1 or P-1 and having a maturity of not more than one year; (b)
Investments in Joint Ventures, provided that such Investment does not cause the
Company and its Subsidiaries to exceed the Maximum New Market Investment Amount;
(c) Investments in Permitted Acquisitions not to exceed the aggregate Purchase
Price of $25,000,000.00 after the date hereof, provided, however, that such
Acquisition does not cause the Company and its Subsidiaries to exceed the
Maximum New Market Investment Amount; (d) Investments in Restricted
Subsidiaries, provided, however, that such Investments does not cause the
Company and its Subsidiaries to exceed the Maximum New Market Investment Amount;
(e) investments consisting of deposit accounts maintained or managed by the
Company or its Subsidiaries; (f) loans or advances to employees of the Company
or any Subsidiary, which loans and advances shall not in the aggregate exceed
$200,000.00 outstanding at any time; (g) Investments up to the sum of $2,000,000
after the date hereof in one or more mortgage companies which (i) conduct
business in areas in which the Company or its Subsidiaries also conduct business
and (ii) are principally in the residential mortgage lending business; (h) loans
and advances evidenced by promissory notes from the purchasers of any of the
Company's real property (individually which shall not exceed the purchase price
paid for such property) in an amount not to exceed the aggregate sum of
$2,000,000.00 outstanding at any time; and (i) any other Investment (including
Alliance Title Agency, Ltd.) not to exceed the aggregate amount of $100,000
outstanding at any time.
1.12
1.13 ERISA.
1.14
1.15 The Company and each of the Subsidiaries shall with respect to any
pension plan or profit-sharing plan in effect now or in the future:
1.16
(a) at all times make prompt payment of contributions required to meet
the minimum funding standards set forth in Section 302 through 305 of
ERISA with respect to its plan,
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(b) promptly, after the filing thereof, upon the request of the
Administrative Agent, furnish to the Administrative Agent copies of
each annual report required to be filed pursuant to Section 103 of
ERISA in connection with its plan for the plan year, including any
certified financial statements or actuarial statements required
pursuant to said Section 103,
(c) notify the Administrative Agent immediately of any fact, including,
but not limited to, any "Reportable Event," as that term is defined in
Section 4043 of ERISA, arising in connection with the plan which might
constitute grounds for termination thereof by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United
States District Court of a Trustee to administer the plan, and
(d) notify the Administrative Agent of any "Prohibited Transaction" as
that term is defined in Section 406 of ERISA.
Neither the Company nor any of the Subsidiaries will:
(e) engage in any "Prohibited Transaction," or
(f) terminate any such plan in a manner which could result in the
imposition of a lien on the property of the Company or any Subsidiary
pursuant to Section 4068 of ERISA.
1.1 Tangible Net Worth.
1.2
At all times, the Company shall maintain a Consolidated Tangible Net
Worth of the following amounts for the following periods: (a) from closing
through and including December 30, 1998, not less than $35,000,000; and (b) from
and after December 31, 1998, the sum of (i) $35,000,000, plus (ii) 75% of the
Company's Consolidated Net Income after taxes in each fiscal year which the
Company's Consolidated Net Income after taxes is positive, beginning with the
fiscal year ending December 31, 1998, and ending with the most recently ended
fiscal year as of the date of calculation.
1.1 Leverage Ratio.
1.2
1.3 The Company shall maintain at all times a Leverage Ratio of (a) not
greater than 2.75 to 1.00, beginning with the date hereof and continuing through
and including December 31, 1999, and (b) not greater than 2.50 to 1.00 for the
period beginning January 1, 2000, and continuing at all times thereafter.
1.4 No Losses.
1.5
Beginning with the quarter ending June 30, 1998, and continuing as of
the end of each quarter thereafter, the Company and its consolidated
Subsidiaries shall not incur an Adjusted Loss in any five consecutive fiscal
quarters ending on the date of determination.
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1.1 Ratio of Uncommitted Land Holdings to Consolidated Tangible Net Worth.
The Company and its Subsidiaries shall maintain at all times a ratio of
Uncommitted Land Holdings to Consolidated Tangible Net Worth of (a) not greater
than 2.00 to 1.00 from the date of this Agreement through and including December
31, 1999, and (b) not greater than 1.75 to 1.00 for the period beginning January
1, 2000, and continuing at all times thereafter.
1.1 Interest Coverage Ratio.
1.2
1.3 The Interest Coverage Ratio of the Company and its Subsidiaries on a
consolidated basis, as determined as of the last day of each fiscal quarter for
the twelve month period ending on such date, shall not be less than 2.25 to
1.00.
1.4
1.5 Land Held for Development (Unzoned).
1.6
1.7 Without the consent of the Administrative Agent and the Required
Lenders, the Company and its Subsidiaries shall not purchase or hold any Real
Estate Held for Development, whether now owned or acquired hereafter which is
not zoned for single-family residential use, or any series of purchases of
adjacent, related or contiguous parcels of such property, or such property in
the same geographical location, in excess of the aggregate sum of $2,500,000.00,
valued at the lesser of cost or market outstanding at any time.
1.8
1.9 Maintenance of Deposits.
1.10
1.11 The Company and each of the Subsidiaries shall maintain its primary
operating and deposit accounts at Huntington, except for those deposits managed
by the Company, but not owned by the Company.
1.12
1.13 Model Homes Inventory.
1.14
The Company and its Subsidiaries shall not permit at any time Model
Homes, whether now owned or hereafter acquired, to exceed the aggregate sum of
$6,500,000.00, outstanding at any time, valued at the lesser of cost or market.
1.1 Speculative Homes.
1.2
The Company and its Subsidiaries, shall not permit at any time its
inventory of Speculative Homes and other dwellings built for speculation,
whether now owned or hereafter acquired, to exceed $12,500,000.00 in the
aggregate outstanding at any time valued at the lesser of cost or market.
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<PAGE> 37
1.1 Further Real Estate Acquisition Limitations, New Market Investment
Amount.
1.2
(a) The Company and its Subsidiaries shall not permit their Uncommitted
Land Holdings in Central Ohio whether now owned or hereafter acquired to exceed
the aggregate amount of $73,000,000.00, as of December 31, 1997, and
$73,000,000.00, plus 50% of the Company's Consolidated Net Income in each year
the Company's Consolidated Net Income is positive beginning with the Company's
fiscal year ending December 31, 1998, and ending with the most recently ended
fiscal year as of the date of calculation; provided, however, the Company's
Uncommitted Land Holdings in Central Ohio shall not exceed $90,000,000.00 at any
time and shall be valued at the lesser of cost or market, as of the end of any
fiscal year.
(b) The Company and its Subsidiaries shall not permit the Maximum New
Market Investment Amount to exceed the sum of $25,000,000.00 outstanding at any
time; provided, however the Company's total Investment or purchase of any
Uncommitted Land Holdings, Speculative Homes, Model Homes and all other real or
personal property constituting one or more "start up operations" or other de
novo entries in any markets outside Central Ohio shall not exceed the aggregate
sum of $15,000,000.00 outstanding at any time. In addition, the Company shall
not build homes or develop real estate in any locations or markets other than
the State of Ohio or any contiguous state.
1.1 Conduct of Business, Subsidiaries.
1.2
Neither the Company nor any of its Subsidiaries shall engage in any
business other than the businesses engaged in by them on the date hereof and any
business or activities which are substantially similar, related or incidental
thereto including, without limitation, a mortgage company pursuant to Section
8.11 above. The Company shall not permit any of its Subsidiaries to create,
capitalize or acquire any Subsidiary after the date hereof except in connection
with a Permitted Acquisition or an Investment permitted pursuant to Section 8.11
above.
1.1 Permitted Acquisitions.
1.2
1.3 (a) Neither the Company nor any Subsidiary shall make any Acquisition
without the prior written consent of the Administrative Agent and the Required
Lenders, except in connection with a Permitted Acquisition, the Purchase Price
of which, together with the aggregate Purchase Price of all other Permitted
Acquisitions made after the date hereof does not exceed the sum of
$25,000,000.00, provided, however such Acquisition, does not cause the Company
and its Subsidiaries to exceed the Maximum New Market Investment Amount. In
addition, the Company and its Subsidiaries shall not make more than four
Acquisitions, without the consent of the Required Lenders; and
1.4
1.5 (b) on the funding date for any borrowing of Revolving Loans for the
purpose of consummating a Permitted Acquisition, the Administrative Agent shall
have received an officer's certificate from a Financial Officer certifying that
(i) the Acquisition meets the requirements of the definition of Permitted
Acquisition and sets forth detailed calculations of all financial covenants,
(ii) the liabilities assumed with respect to such Permitted Acquisition do not
or are not reasonably likely to have a Material Adverse Effect, (iii) the
Company shall deliver to the
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<PAGE> 38
Administrative Agent copies of all material documentation evidencing the
Permitted Acquisition, and (iv) the Company shall have delivered to the
Administrative Agent copies of all material, business and financial information
(with appropriate supporting detail) relating to the business purchased in the
Permitted Acquisition as the Administrative Agent may reasonably request.
1.6
1.7 Restriction on Fundamental Changes.
1.8
1.9 Neither the Company nor any of its Subsidiaries shall (a) enter into
any merger or consolidation, or (b) liquidate, wind up or dissolve (or suffer
any liquidation or dissolution), or convey, lease, sell, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or substantially
all of the Company's or any such Subsidiary's business or property, whether now
or hereafter acquired, except for a Permitted Acquisition involving the (i)
Company in which the Company is the surviving constituent or (ii) a Subsidiary
in which the Company owns directly or indirectly the Person acquired, and except
for the merger or liquidation of assets of a Subsidiary into the Company. The
Company shall cause each Subsidiary to be a direct or indirect wholly-owned
Subsidiary of the Company.
1.10
1.11
2 SECTION INFORMATION AS TO COMPANY AND SUBSIDIARIES.
3
4 The Company shall deliver the following to the Administrative Agent,
the Syndication Agent and each Lender:
5
6 (a) within 45 days after the end of each month, consolidated financial
statements, including a balance sheet, statements of operations of the Company
and the Subsidiaries, and statements of income and surplus, in the form of
Exhibit D attached hereto certified by the president, chief operating officer
and chief financial officer, or treasurer (a "Financial Officer") of the Company
as fairly representing the financial condition of the Company and the
Subsidiaries as of the end of such period;
7
8 (b) within 45 days after the end of each month, a statement signed by
a Financial Officer of the Company setting forth and certifying the calculation
of the Borrowing Base as of the end of that period;
9
10 (c) within 45 days after the end of each month, a statement signed by
a Financial Officer of the Company certifying that the Company is in compliance
with terms of this Agreement and calculating the financial covenants and ratios
of the Company set forth in Sections 8.13, 8.14, 8.16 and 8.17 above;
11
12 (d) within 45 days after the end of each month, and at such other
times as the Administrative Agent may request, a report for the Company and the
Subsidiaries, signed by a Financial Officer of the Company setting forth the
number and dollar total of accounts receivable in format satisfactory to the
Administrative Agent and consistent with past practices;
13
14 (e) within 45 days after the end of each month, a report signed by a
Financial Officer of the Company in form substantially similar to that being
currently provided to the
33
<PAGE> 39
Administrative Agent as of the date hereof setting forth, inter alia, the
following consolidated information with respect to the Company and its
Subsidiaries: 15
(i) work-in-process for each subdivision then under development
specifying the number of units and related costs;
(ii) backlog report, including beginning backlog, sales,
closings, and ending backlog;
(iii)the number of Model Homes for each subdivision then under
development specifying the number of units and related
costs;
(iv) sales of units and closings of units for each subdivision
then under development by the Company and its Subsidiaries;
and
(v) Speculative Homes for each subdivision then under
development by the Company and its Subsidiaries specifying
the number of units and related costs;
(f) within 45 days after the end of each month, a Land Development Lot
Availability Report, specifying the completed lots and lots under development
for each subdivision then under development by the Company or any of the
Subsidiaries;
(g) within 45 days after the end of each quarter, (i) consolidating
financial statements, including a balance sheet, statements of the operations of
the Company and each of the Subsidiaries, and statement of income and surplus
certified by a Financial Officer of the Company as fairly representing the
financial condition of the Company and each of the Subsidiaries as of the end of
such period, and (ii) a report substantially similar to the report required by
Section 9(d) above for the Company and for each Subsidiary;
(h) immediately upon the filing, release or disclosure, as the case may
be, copies of all filings, documents, disclosures or other information filed
with the Securities and Exchange Commission or state or local securities
commissions or other regulatory agency and all press releases;
(i) within 90 days of the end of each fiscal year, audited consolidated
financial statements prepared in accordance with GAAP and certified by
independent public accountants satisfactory to the Administrative Agent,
containing a balance sheet and statement of income and surplus, statement of
cash flows and a reconciliation of capital accounts, along with any management
letters written by such accountants;
(j) immediately upon becoming aware of the existence of any condition
or event which constitutes an Event of Default, a written notice specifying the
nature and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(k) at the request of the Administrative Agent, such other information
the Administrative Agent may from time to time reasonably require; and
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<PAGE> 40
(l) within 45 days after the end of each quarter, a real estate
acquisition report for the Company and its Subsidiaries detailing all real
estate acquired or obtained for such quarter and the total of such acquisitions
on a year to date basis through the end of such quarter; which includes (i) the
total amount of acreage or developed lots, both for such quarter and on a year
to date basis through the end of such quarter; (ii) the total dollar amount of
such acquisitions, both for such quarter and on a year to date basis through the
end of such quarter; (iii) the title and common name or subdivision name of such
real property, both for such quarter and on a year to date basis through the end
of such quarter; and (iv) such other information as the Administrative Agent
shall request.
1 SECTION EVENTS OF DEFAULT
2
2.1 Nature of Events.
2.2
An "Event of Default" shall exist if any of the following occurs:
(a) the Company fails to make any payment of principal (including
without limitation any payment or reduction required under Section 3.15 above)
or fails to reimburse a Lender pursuant to this Agreement or any Note,
reimbursement agreement, or guaranty agreement executed in connection with this
Agreement on or before five days after the date such payment is due;
(b) the Company fails to make any payment of interest on any Note
executed in connection with this Agreement on or before five days after the date
such payment is due;
(c) the Company fails to perform or observe any covenant contained in
Sections 8.2(d), 8.3, or 8.12 of this Agreement;
(d) the Company fails to perform or observe any covenant contained in
Sections 8.4, 8.5, or 8.6 of this Agreement and such failure involves an amount
in excess of the aggregate sum of $1,000,000.00;
(e) the Company fails to comply (i) with any covenant contained in
Sections 8.4, 8.5 or 8.6 and such failure involves an amount of $1,000,000.00 or
less or (ii) with any other provision of this Agreement, and such failure
continues for more than 30 days after such failure shall first become known to
any Financial Officer of the Company;
(f) any warranty, representation or other statement by or on behalf of
the Company contained in this Agreement or by a Subsidiary in any Loan Document
or in any instrument furnished by an officer thereof in compliance with or in
reference to this Agreement is false or misleading in any material respect on
the date made (or deemed made);
(g) the Company or any Material Subsidiary makes an assignment for the
benefit of creditors, or consents to the appointment of a trustee, receiver or
liquidator;
35
<PAGE> 41
(h) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings are instituted by the Company or any Material Subsidiary;
(i) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings are instituted against the Company or any of the Subsidiaries, and
remain undismissed for a period of 90 days;
(j) a final judgment or judgments for the payment of money aggregating
in excess of $1,000,000.00 in excess of applicable insurance coverage (as
verified by the Administrative Agent) is or are outstanding against the Company
or any of the Subsidiaries, and such judgment or judgments have been outstanding
for more than 21 days from the date of entry and have not been discharged,
stayed or bonded in the full amount of such judgment or judgments;
(k) the Company's audited financial statements referred to in Section
9(i) above, or any discussion draft thereof, reflects that the Company's
financial statement is a "qualified" statement and such circumstance has existed
for more than 48 hours;
(l) the Company or any Subsidiary fails to perform or observe any
covenant not specified in Section 10.1 (a) through (k) above in favor of the
Administrative Agent or any of the Lenders pursuant to any Loan Document or any
agreement, instrument, or document executed in connection with this Agreement,
including, without limitation, any interest rate contracts or agreements
relating to interest rate limitations or interest rate "swaps," and such failure
continues for more than 30 days after such failure shall become first known to
any Financial Officer of the Company;
(m) any Change of Control shall occur; or
(n) the Administrative Agent and the Required Lenders shall determine
that a Material Adverse Effect has occurred.
1.1 Default Remedies.
1.2
1.3 (a) Acceleration and Termination. Upon the occurrence of any Event of
Default described in Sections 10.1(g), (h), or (i), the Revolving Credit
Commitments shall automatically and immediately terminate and the unpaid
principal amount of, and any and all accrued interest on, the Revolving Credit
Obligations and all accrued fees shall automatically become immediately due and
payable, without presentment, demand, or protest or other requirements of any
kind, all of which are hereby expressly waived by the Company; and upon the
occurrence of any other Event of Default, the Administrative Agent shall at the
request, or may with the consent, of the Required Lenders, by written notice to
the Company (i) declare that all or any portion of the Revolving Credit
Commitments are terminated, in which case the Revolving Credit Commitments and
the obligations of each Lender to make any Revolving Loan hereunder and of each
Lender or Huntington to issue or participate in any Letter of Credit not then
issued shall immediately terminate, (ii) declare the unpaid principal amount of
and any and all accrued and unpaid interest on the Revolving Credit Obligations
to be immediately due and payable,
36
<PAGE> 42
without presentment, demand or protest or any requirements of any kind, all of
which are hereby expressly waived by the Company.
1.4
1.5 (b) Deposit for Letters of Credit. In addition, within five days after
the occurrence of an Event of Default, the Company shall, promptly upon demand
by the Administrative Agent, in its sole discretion, deliver to the
Administrative Agent cash collateral in such form as requested by the
Administrative Agent, together with such endorsements, and execution and
delivery of such documents and instruments as the Administrative Agent may
request in an aggregate stated amount equal to the then outstanding Letter of
Credit Obligations. Any such cash collateral shall be promptly returned to the
Company upon the satisfaction or expiration of the Letter of Credit Obligations.
1.6
1.7 (c) Nonwaiver; Remedies Cumulative. No course of dealing on the part of
the Administrative Agent or any Lender, nor any delay or failure on the part of
the Administrative Agent or any Lender in exercising any rights, powers or
privileges hereunder, shall operate as a waiver of such rights, powers or
privileges or otherwise prejudice any of the Administrative Agent's or Lenders'
rights and remedies hereunder; nor shall any single or partial exercise thereof
preclude any further exercise thereof or the exercise of any other right, power
or privilege by the Administrative Agent or each Lender. No right or remedy
conferred upon or reserved to the Administrative Agent or any Lender under this
Agreement is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every other right or
remedy given hereunder or now or hereafter existing under any applicable law.
Every right and remedy given by this Agreement or by applicable law to the
Administrative Agent or any Lender may be exercised from time to time and as
often as may be deemed expedient by the Administrative Agent or any Lender.
1.8
1.9 (d) Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default hereunder, the Administrative Agent, each Lender, and
any of them, subject to the terms of this Agreement, are hereby authorized at
any time and from time to time, without notice to the Company (any such notice
being expressly waived by the Company) and to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Administrative Agent or each Lender, or any of them to or for
the credit or the account of the Company against any and all of the obligations
of the Company now or hereafter existing under this Agreement, irrespective of
whether or not the Administrative Agent or any Lender shall have made any demand
hereunder and although such obligations may be unmatured. Notwithstanding the
foregoing, none of the Lenders shall be permitted to exercise any right of
offset or set-off referred to in this Section 10.2 without the prior written
consent of the Administrative Agent.
1.10
1.11
2 SECTION THE ADMINISTRATIVE AGENT AND SYNDICATION AGENT
3
3.1 Appointment.
37
<PAGE> 43
Each of the Lenders hereby designates and appoints (a) Huntington
Capital Corp. as the Syndication Agent and (b) Huntington as Administrative
Agent hereunder and under each of the Loan Documents, and each of the Lenders
irrevocably authorizes the Administrative Agent to act as the contractual
representative of such Lender. The Administrative Agent agrees to act as such
contractual representative upon the express conditions contained in this Section
11. Notwithstanding the use of the defined term "Administrative Agent" or
"Syndication Agent," it is expressly understood and agreed that neither the
Administrative Agent nor the Syndication Agent shall have any fiduciary
responsibilities to any Lender or to the Company or any Subsidiary of the
Company by reason of this Agreement and that each of the Administrative Agent
and the Syndication Agent is merely acting as the representative of the Lenders
with only those duties as are expressly set forth in this Agreement and the
other Loan Documents. In its capacity as the Lenders' contractual
representative, neither the Administrative Agent nor the Syndication Agent (i)
hereby assumes any fiduciary duties to any of the Lenders, (ii) the
Administrative Agent is a "representative" of the Lenders within the meaning of
Section 9-105 of the Uniform Commercial Code, and (iii) each of the
Administrative Agent and the Syndication Agent is acting as an independent
contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents. Each of the Lenders hereby
agrees to assert no claim against the Administrative Agent or the Syndication
Agent on any agency theory or any other theory of liability for breach of
fiduciary duty, all of which claims each Lender hereby waives.
1.1 Powers.
1.2
1.3 The Administrative Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Administrative Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have no implied duties to the
Lenders, or any obligation to the Lenders to take any action thereunder except
any action specifically provided by the Loan Documents to be taken by the
Administrative Agent.
1.4
1.5 General Immunity.
1.6
1.7 None of the Administrative Agent, the Syndication Agent or any of its
directors, officers, agents or employees shall be liable to any or all of the
Company, any Subsidiary of the Company or the Lenders for any action taken or
omitted to be taken by it or them hereunder or under any other Loan Documents or
in connection herewith or therewith, except to the extent that such action or
inaction is found in a final judgment by a court of competent jurisdiction to
have arisen solely from the gross negligence or willful misconduct of such
Persons.
1.8
1.9 No Responsibility for Loans, Recitals.
1.10
1.11 None of the Administrative Agent, the Syndication Agent, or any of
their respective directors, officers, or employees shall be responsible
for or have any duty to ascertain, inquire into, or verify (a) any statement,
warranty or representation made in connection with any Loan Documents or any
borrowing hereunder; (b) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Documents, including, without
38
<PAGE> 44
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Section 6, except
receipt of items required to be delivered to the Administrative Agent; or (d)
the validity, effectiveness or genuineness of any Loan Documents or any other
instrument or writing furnished in connection therewith. The Administrative
Agent shall have no duty to disclose to the Lenders information that is not
required to be furnished by the Company to the Administrative Agent at such
time, but is voluntarily furnished by the Company to the Administrative Agent
(either in its capacity as Administrative Agent or in its individual capacity).
1.12
1.13 Action on Instructions of Lenders.
1.14
1.15 The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and under any other Loan
Document in accordance with written instructions signed by the Required Lenders
or, in the case of any act or failure to act calculated to give rise to any of
the events or circumstances described in clauses (a) through (e) of Section
13.4, each affected Lender, and such instructions and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders and on
all holders of Notes. The Administrative Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Documents unless it shall first be indemnified to its satisfaction by the
Lenders pro rata against any and all liability, costs and expense that it may
incur by reason of taking or continuing to take any such action.
1.16
1.17 Employment of Administrative Agents and Counsel.
1.18
1.19 The Administrative Agent may execute any of its duties as
Administrative Agent hereunder and under any other Loan Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Administrative Agent shall be entitled
to advice of counsel concerning all matters pertaining to the agency hereby
created and its duties hereunder and under any other Loan Documents.
1.20
1.21 Reliance on Documents, Counsel.
1.22
1.23 The Administrative Agent shall be entitled to rely upon any note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document believed to be genuine and correct and to have been signed or sent by
the proper person or persons, and, in respect of legal matters, upon the opinion
of counsel selected by the Administrative Agent, which counsel may be employees
of the Administrative Agent.
1.24
1.25 Reimbursement and Indemnification.
1.26
1.27 The Lenders agree to reimburse and indemnify the Administrative Agent
and the Syndication Agent ratably in proportion to their respective Revolving
Credit Commitments (a) for any amounts not reimbursed by the Company for which
the Administrative Agent is entitled to reimbursement by the Company under the
Loan Documents, (b) for any amounts not
39
<PAGE> 45
reimbursed by the Company for any other expenses incurred by the Administrative
Agent or the Syndication Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents, and (c) for any amounts not reimbursed by the Company for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative Agent or the
Syndication Agent in any way relating to or arising out of the Loan Documents or
any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they are determined in a final judgment of a court of
competent jurisdiction to have arisen solely from the gross negligence or
willful misconduct of the Administrative Agent or the Syndication Agent. The
obligations of the Lenders under this Section 11.8 shall survive payment of the
Revolving Credit Obligations and termination of this Agreement.
1.28
1.29 Rights as a Lender.
1.30
1.31 In the event the Administrative Agent is a Lender, the Administrative
Agent shall have the same rights and powers hereunder and under any other Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the term "Lender" or "Lenders" shall at any time when
the Administrative Agent is a Lender, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity. The Administrative
Agent may accept deposits from, lend money to, and generally engage in any kind
of trust, debt, equity or other transaction, in addition to those contemplated
by this Agreement or any other Loan Documents, with the Company or any of its
Subsidiaries in which the Company or any of its Subsidiaries is not restricted
hereby from engaging with any other Person. The Administrative Agent, in its
individual capacity, is not obligated to remain a Lender, provided, however,
that in the event that the Administrative Agent ceases to be a Lender hereunder,
the Required Lenders may remove the Administrative Agent and appoint a successor
Administrative Agent, if no Event of Default has occurred and is continuing,
with the consent of the Company.
1.32
1.33 Lender Credit Decision.
1.34
1.35 Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or the Syndication Agent or any other
Lender and based on the financial statements prepared by the Company and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent, the Syndication Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents.
1.36
1.37 Successor Administrative Agent.
1.38
40
<PAGE> 46
1.39 The Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Company, such resignation to be effective
upon the appointment of a successor Administrative Agent or, if no successor
Administrative Agent has been appointed, 45 days after the resigning
Administrative Agent gives notice of its intention to resign. Upon any such
resignation the Required Lenders shall have the right to appoint, on behalf of
the Company and the Lenders, a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders within
30 days after the resigning Administrative Agent's giving notice of its
intention to resign, then the resigning Administrative Agent may appoint, on
behalf of the Company and the Lenders, a successor Administrative Agent. If the
Administrative Agent has resigned and no successor Administrative Agent has been
appointed, the Lenders may perform all the duties of the Administrative Agent
hereunder and the Company shall make all payments in respect of the Revolving
Credit Obligations to the applicable Lender and for all other purposes shall
deal directly with the Lenders. No successor Administrative Agent shall be
deemed to be appointed hereunder until such successor Administrative Agent has
accepted the appointment and, if no Event of Default or Potential Default has
occurred and is continuing, the Company has consented to such appointment. Any
such successor Administrative Agent shall be a commercial bank having capital
and retained earnings of at least $500,000,000.00. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
41
<PAGE> 47
Administrative Agent, shall be obligated to issue substitute Letters of Credit
for the outstanding Letters of Credit issued by the resigning Administrative
Agent or otherwise to provide credit assurance satisfactory to the resigning
Administrative Agent with respect to such outstanding Letters of Credit. Upon
the effectiveness of the resignation of the Administrative Agent, the resigning
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Administrative Agent, the provisions of this Section 11 shall
continue in effect for the benefit of such Administrative Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder and under the other Loan Documents.
1.40
1.41
1.42 Ratable Payments.
1.43
If any Lender, whether by setoff or otherwise has payment made to it
upon its Revolving Loans (other than payments received pursuant to Sections 3.6,
3.9 or 3.14 in a greater proportion than that received by any other Lender, such
Lender agrees, promptly upon demand, to purchase a portion of the Revolving
Loans held by the other Lenders so that after such purchase each Lender will
hold its Pro Rata Share of Revolving Loans. If any Lender, whether in connection
with setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Revolving Credit Obligations or such
amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral in respect of their Pro Rata Shares. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
1 SECTION BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
2
2.1 Successors and Assigns.
2.2
The terms and provisions of the Loan Documents shall be binding upon
and inure to the benefit of the Company, the Administrative Agent and the
Lenders and their respective successors and assigns, except that (a) the Company
shall not have the right to assign its rights or obligations under the Loan
Documents without the consent of all of the Lenders and (b) any assignment by
any Lender must be made in compliance with Section 12.3. Notwithstanding clause
(b) of the preceding sentence, any Lender may at any time, without the consent
of the Company or the Administrative Agent, assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank for the
purpose of securing loans from such Federal Reserve Bank to any such Lender;
provided, however, that no such assignment shall release the transferor Lender
from its obligations hereunder. The Administrative Agent may treat the payee of
any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with the
Administrative Agent. Any assignee or transferee of an Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issues in exchange therefor.
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<PAGE> 48
1.1 Participations.
1.2
1.3 (a) Permitted Participants; Effect. Any Lender, in the ordinary course
of its business and in accordance with the applicable law, at any time may sell
to one or more entities (each such entity being referred to herein as a
"Participant") participating interests in any Revolving Loan owing to such
Lender, any Note held by such Lender, any interest in Letters of Credit held by
such Lender, the Revolving Credit Commitment of such Lender or any other
interest of such Lender under the Loan Documents. In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Company under this
Agreement shall be determined as if such Lender had not sold such participating
interests, and the Company and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents. The participation agreement effecting the
sale of any participating interest shall contain a representation by the
Participant to the effect that none of the consideration used to make the
purchase of the participating interest in the Revolving Credit Commitment,
Revolving Loans and interests in Letters of Credit under such participation
agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Participant in and under the Loan Documents will not be "plan
assets" under ERISA.
1.4
1.5 (b) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents.
1.6
1.7 (c) Benefit of Setoff. The Company agrees that to the extent permitted
by applicable law each Participant shall be deemed to have the right of setoff
provided in Section 10.2(d) in respect of its participating interest in amounts
owing under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the Loan
Documents, provided that each Lender shall retain the right of setoff provided
in Section 10.2(d) with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and each
Participant shall be deemed to agree, by exercising the right of setoff provided
in Section 10.2(d) to share with each Lender, any amount received pursuant to
the exercise of its right of setoff, such amounts to be shared in accordance
with Section 10.2(d) as if each Participant were a Lender.
1.8
1.9 Assignments.
1.10
1.11 (a) Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its Revolving
Credit Commitment and outstanding Revolving Loans and interests in the Letters
of Credit, together with its rights and obligations under the Loan Documents
with respect thereof; provided, however, that (i) each such assignment shall be
of a constant, and not a varying percentage of all of the assigning Lender's
rights and obligations
43
<PAGE> 49
so assigned; (ii) the amount of the Revolving Credit Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of such assignment) may be in the amount of such Lender's entire Revolving
Credit Commitment but otherwise shall not be less than $5,000,000 or an integral
multiple of $1,000,000 in excess of that amount; and (iii) notwithstanding the
foregoing clause (ii), (A) if the assignment is made to a Lender, the amount of
the Revolving Credit Commitment assigned shall not be less than $5,000,000 or an
integral multiple thereof and (B) if the assignment is made pursuant to Section
3.14, the Revolving Credit Commitment assigned may be in the amount of the
relevant Lender's entire remaining Revolving Credit Commitment. Such assignment
shall be substantially in the form of Exhibit E hereto or in such other form as
may be agreed to by the parties thereto. The consent of the Company, the
Syndication Agent and the Administrative Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a Lender;
provided, however, that if an Event of Default has occurred and is continuing,
or if the assignment is made to an affiliate of the assigning Lender, the
consent of the Company shall not be required. Such consents shall not be
unreasonably withheld.
1.12
1.13 (b) Effect; Effective Date. Following delivery to the Administrative
Agent of a notice of assignment, substantially in the form attached to Exhibit E
hereof (a "Notice of Assignment"), together with any consents required by
Section 12.3(a), and payment by the Purchaser of a $2,500.00 fee (which the
Company shall not be obligated to pay or reimburse) to the Administrative Agent
for processing such assignment, upon the date certain specified in such Notice
of Assignment, such assignment shall become effective (the "Effective Assignment
Date"). The Notice of Assignment shall contain a representation by the Purchaser
to the effect that none of the consideration used to make the purchase of the
Revolving Credit Commitment, Revolving Loans and interests in the Letters of
Credit under the applicable assignment agreement are "loan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and under the
Loan Documents will not be "plan assets" under ERISA. On and after the Effective
Assignment Date of such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Documents executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto and
thereto, and no further consent or action by the Company, the Lenders or the
Administrative Agent shall be required to release the transferor Lender with
respect to the percentage of the aggregate Revolving Credit Commitments assigned
to such Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3(b) the transferor Lender, the Administrative
Agent, and the Company shall make appropriate arrangements so that replacement
Notes are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in principal
amounts reflecting its Revolving Credit Commitment, as adjusted pursuant to such
assignment.
1.14
1.15 Dissemination of Information.
1.16
1.17 The Company authorizes each Lender to disclose to any Participant or
Purchaser or any other person acquiring an interest in the Loan Documents by
operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's
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<PAGE> 50
possession concerning the creditworthiness of the Company and its Subsidiaries;
provided that each Transferee and prospective Transferee agrees to be bound by
Section 13.11.
1.18
1.19 Tax Treatment.
1.20
1.21 If any interest in any Loan Documents is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States of America or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the following provisions: with respect to any Lender that is not incorporated
under the laws of the United States of America, or a state thereof, such Lender
agrees that it will deliver to each of the Company and the Administrative Agent
two duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States or federal income taxes. Each Lender which so delivers such form
further agrees and undertakes to deliver to each of the Company and the
Administrative Agent two additional copies of such form (or successor or related
form) on or before the date such form expires.
1.22
1.23
2 SECTION NOTICES AND GENERAL PROVISIONS
3
3.1 Notices.
3.2
(a) Giving Notice. Except as otherwise permitted by Section 1.1(d) with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted.
(b) Change of Address. The Company, the Administrative Agent and any
Lender may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.
1.1 Reproduction of Documents.
1.2
1.3 This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by the Administrative Agent or any Lender at
the closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Administrative Agent or any
Lender, may be reproduced by the Administrative Agent or any Lender by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and the Administrative Agent or any Lender may destroy any
original document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether
45
<PAGE> 51
or not the original is in existence and whether or not such reproduction was
made by the Administrative Agent or any Lender in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
1.4
1.5 Survival.
1.6
1.7 All warranties, representations, and covenants made by the Company
herein or on any certificate or other instrument delivered by it or on its
behalf under this Agreement shall be considered to have been relied upon by the
Administrative Agent, the Syndication Agent and each Lender and shall survive
the closing of the Revolving Credit Commitments regardless of any investigation
made by the Administrative Agent or any Lender on their behalf. All statements
in any such certificate or other instrument shall constitute warranties and
representations by the Company. This Agreement shall inure to the benefit of and
be binding upon the heirs, successors and assigns of each of the parties.
1.8
1.9 Amendments.
1.10
1.11 Subject to the provisions of this Section 13.4, the Required Lenders
(or the Administrative Agent with the consent in writing of the Required
Lenders) and the Company may enter into agreements supplemental hereto for the
purpose of adding to or modifying any provisions of the Loan Documents or
changing in any manner the rights of the Lenders and the Company hereunder or
waiving any Event of Default hereunder; provided, however, that no such
supplemental agreement, waiver or amendment or modification shall, without the
consent of each Lender affected thereby,
1.12
1.13 (a) extend the Revolving Credit Termination Date, any Note, or
Reimbursement Obligation or forgive all of any portion of the principal amount
thereof, any interest thereon, or any fees or other amounts payable hereunder
(except that the Administrative Agent may waive payment of the fee required
under Section 12.3(b) without obtaining the consent of any other party to this
Agreement) or reduce the rate or rates of interest or extend the time of payment
of interest, fees or other amounts payable hereunder;
1.14
1.15 (b) reduce the percentage specified in the definition of Required
Lenders or change the aggregate Pro Rata Share required for the Lenders or any
of them to take action hereunder;
1.16
1.17 (c) reduce the amount or extend the payment date for any payments
required under Section 3.16 or increase the amount of the Revolving Credit
Commitment of any Lender hereunder or permit the Company to assign its rights or
obligations under this Agreement;
1.18
1.19 (d) change or amend the percentages applicable to any component of the
Borrowing Base; or
1.20 (e) amend this Section 13.4.
1.21
1.22 No amendment of any provision of this Agreement relating in any way to
the Administrative Agent or the Syndication Agent or any of the Letters of
Credit shall be effective without the written consent of the Administrative
Agent or the Syndication Agent, as the case may be. No
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<PAGE> 52
delay or failure or other course of conduct by the Administrative Agent or any
Lender in the exercise of any power or right shall operate as a waiver thereof;
nor shall any single or partial exercise of the same preclude any other or
further exercise thereof, or the exercise of any other power or right.
1.23
1.24 Duplicate Originals.
1.25
1.26 Multiple duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
1.27
1.28 Enforceability and Governing Law.
1.29
1.30 Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction, as to such jurisdiction, shall be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. No delay or omission on the part of the Administrative Agent
or any of the Lenders in exercising any right shall operate as a waiver of such
right or any other right. All of the Administrative Agent's or any Lender's
rights and remedies, whether evidenced hereby or by any other agreement or
instrument, shall be cumulative and may be exercised singularly or concurrently.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Ohio.
1.31
1.32 Fiscal Year.
The Company's fiscal year begins January 1 and ends December 31 of each
calendar year, and the Company will not change its fiscal year without the prior
written consent of the Administrative Agent and the Required Lenders.
1.1 Consent to Jurisdiction and Waiver of Objection to Venue.
The Company, the Administrative Agent, the Syndication Agent and each
Lender agree that any legal action or proceeding with respect to this Agreement,
the Notes or the other Loan Documents or the transactions contemplated hereby
may be brought in the Court of Common Pleas of Franklin County, Ohio, or in the
United States District Court for the Southern District of Ohio, Eastern
Division, and the Company, the Administrative Agent, the Syndication Agent and
each Lender hereby irrevocably submit to and accept generally and
unconditionally the jurisdiction of those courts with respect to its person,
property and revenues and irrevocably consent to service of process in any such
action or proceeding by the mailing thereof by U.S. mail to the designated party
at the address referenced in Section 13.1 hereof.
The Company, the Administrative Agent, the Syndication Agent and each
Lender hereby irrevocably waive any objection to the laying of venue of any such
suit or proceeding in the above described courts, and unconditionally waive and
agree not to plead or claim that any such suit or proceeding brought in any such
court has been brought in an inconvenient forum, provided, that this provision
shall not preclude any party from seeking to consolidate actions brought against
it.
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<PAGE> 53
Nothing in this paragraph shall affect the right of the Administrative
Agent or any Lender to serve process in any other manner permitted by law or
limit the right of the Administrative Agent or any Lender to bring any such
action or proceeding against the Company or to obtain execution on any judgment
in any other jurisdiction or in any other manner permitted by law.
1.1 Waiver of Jury Trial.
1.2
1.3 THE PARTIES ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY
ARISE BETWEEN THE PARTIES, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH
THIS AGREEMENT ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY.
ACCORDINGLY, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS
AGREEMENT OR TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION
HEREWITH.
1.4
1.5 Confidentiality.
1.6
1.7 The Administrative Agent, the Syndication Agent and each Lender shall
hold all non-public information obtained pursuant to the requirements hereof and
identified as such by the Company in accordance with the customary procedures of
the Administrative Agent, the Syndication Agent and each of the Lenders
respectively for handling confidential information of this nature and in
accordance with safe and sound banking practices, and in any event may make
disclosures reasonably required by a bona fide participant or co-lender in
connection with the contemplated participation or assignment, or as required or
requested by any Governmental Authority or any representative thereof, or
pursuant to any legal process, or to its accountants, lawyers and other
advisors.
1.8
1.9
2 SECTION DEFINITIONS
3
3.1 Accounting Terms. As used in this Agreement, and any promissory
notes, certificates, reports or other documents made or delivered pursuant
hereto, accounting terms not defined in this Agreement shall have the respective
meanings given to such terms under GAAP. "GAAP" means generally accepted
accounting principles consistently applied set forth in the opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board as in
effect on the date hereof.
3.2 Other Definitional Provisions.
3.3
3.4 (a) The words "hereof," "herein," and "hereunder," and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement;
3.5
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<PAGE> 54
3.6 (b) Whenever required by the context of this Agreement, the Notes or
other Loan Documents executed in connection herewith, the singular shall include
the plural, and vice versa and the masculine and feminine genders shall include
the neuter gender and vice versa.
3.7
3.8 Defined Terms.
3.9
3.10 "Account Debtor" is defined in Section 2.4.
3.11
3.12 "Acquisition" means any transaction, or any series of related
transactions, by which the Company or any of its Subsidiaries (a) acquires any
going business or all or substantially all of the assets of any firm,
corporation or division thereof which constitutes a going business, whether
through purchase of assets, merger or otherwise, or (b) directly or indirectly
acquires (in one transaction or in a series of transactions) at least a majority
(in number of votes) of the securities of a corporation which have ordinary
voting power for the election of directors or a majority (by percentage or
voting power) of the outstanding partnership interest of a partnership or a
majority (by percentage or voting power) of the outstanding ownership interest
of a limited liability company.
3.13
3.14 "Adjusted EBITDA" means for any period the sum of such Person's
(a) EBITDA, plus (b) the compensation of any shareholders and affiliates of such
Person and other expenses outside of the ordinary course of business for such
shareholders or affiliates (if such shareholders and affiliates will not remain
with the business or if such related expenses will not be continued in the
operation of the acquired entity), plus (c) any extraordinary losses, as
determined by GAAP, minus (d) any extraordinary gains, as determined by GAAP.
3.15
3.16 "Adjusted Loss" shall mean with respect to any fiscal quarter, if the
Company and its consolidated Subsidiaries' (a) Consolidated Net Income before
taxes as determined in accordance with GAAP, minus (b) the sum of all
extraordinary gains (and any unusual gains arising outside the ordinary course
of business not included in extraordinary gains determined in accordance with
GAAP), is less than $1.00.
3.17
3.18 "Administrative Agent" is defined in the Preamble.
3.19
3.20 "Agreement" is defined in the Preamble.
3.21
3.22 "Applicable Eligible Acquisition Assets Rate" is defined in
Section 3.4.
3.23
3.24 "Applicable Eurodollar Margin" means the applicable rate per annum set
forth below based on the Interest Coverage Ratio as of the end of the Company's
most recently ended fiscal quarter:
3.25
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Interest Coverage Ratio Applicable Eurodollar Margin
- ------------------------------------------------------------------------------------------
<S> <C>
greater than 3.75 to 1.00 1.75%
- ------------------------------------------------------------------------------------------
greater than or equal to 3.25 to 1.00,
but less than or equal to 3.75 to 1.00 2.00%
- ------------------------------------------------------------------------------------------
greater than or equal to 2.75 to 1.00,
but less than 3.25 to 1.00 2.25%
- ------------------------------------------------------------------------------------------
less than 2.75 to 1.00 2.50%
- ------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 55
"Applicable Prime Rate Margin" means zero percent (0%).
"Applicable Unused Commitment Fee Rate" means the applicable rate per
annum set forth below based on the Interest Coverage Ratio as of the end of the
Company's most recently ended quarter:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Interest Coverage Ratio Applicable Unused Commitment Fee Rate
- ---------------------------------------------------------------------------------------------
<S> <C>
greater than or equal to 2.75 to 1.00 0.25%
- ---------------------------------------------------------------------------------------------
less than 2.75 to 1.00 0.375%
- ---------------------------------------------------------------------------------------------
</TABLE>
"Approved Joint Venture" means (a) any entity which satisfies all the
requirements of the last sentence of this paragraph, or (b) any other entity in
which the Company has an Investment in Joint Venture for which for which (A) the
Company acts as managing partner or similar manager, as applicable, (B) the
Administrative Agent for the benefit of the Lenders has received guaranty
agreements or other undertakings satisfactory to the Administrative Agent in an
aggregate amount not less than the full amount of any Letter of Credit issued on
account of such entity, and (C) such entity satisfies the following conditions
to the satisfaction of the Administrative Agent and the Required Lenders (i)
review and approval by the Administrative Agent of financial statements and
financial condition of such partner or partners, including confirmation of the
absence of any borrowings by such entity (other than purchase money seller
financing in an amount not to exceed the purchase price of any undeveloped real
property), (ii) review and approval by the Administrative Agent of articles of
incorporation of such partner or partners, joint venture agreement or
partnership agreement or other evidence of the Company's ownership interest in
such entity, (iii) execution and delivery to the Administrative Agent of an
application and agreement for standby letter of credit for such entity in form
satisfactory to the Administrative Agent, (iv) review and approval by the
Administrative Agent of resolutions or other indicia of authority for those
persons signing on behalf of such entity, (v) execution and delivery of a
guaranty agreement in form acceptable to the Administrative Agent by each of the
partners or owners in such entity, (vi) review and approval by the
Administrative Agent of resolutions or other indicia of authority of those
persons executing such guaranty agreements, (vii) review and approval by the
Administrative Agent of any other documents, instruments or agreements deemed
necessary by the Administrative Agent with respect to the issuance of such
Letters of Credit in respect of such entity or the other partner or owner
therein, and (viii) evidence that all of the real property owned by such entity
is located in the State of Ohio or any state contiguous thereto. The
Administrative Agent and each Lender stipulate that until the Administrative
Agent gives the Company notice to the contrary, any limited liability company,
partnership or joint venture (a) in which (i) the Company and (ii) M/I
Schottenstein Homes, Inc., Homewood Corporation or Rockford Homes, Inc. (or any
combination thereof) are the sole owners or partners, (b) for which the Company
is liable for the full amount of all Letters of
50
<PAGE> 56
Credit issued on behalf of such entity, and (c) for which the Company acts as
managing partner or similar manager, as applicable, shall constitute an Approved
Joint Venture.
"Arm's-Length Contract" is defined in Section 2.12.
"Assignment and Acceptance" means an assignment and acceptance in
substantially the form of Exhibit E attached hereto and made a part hereof (with
blanks appropriately completed) delivered to the Administrative Agent in
connection with an assignment of a Lender's interest hereunder in accordance
with the provisions of this Agreement.
"Available Cash" is defined in Section 2.2.
"Borror Group" means (a) any corporation, partnership, entity or trust
in respect of which Donald A. Borror and/or his lineal descendants directly or
indirectly (i) exercise voting control and (ii) have a majority of the
beneficial interests thereof, (b) any individual shareholder of Borror Realty
Company as of the date of this Agreement, (c) any lineal descendant of Donald A.
Borror, or (d) any combination thereof.
"Borrowing Base" is defined in Section 2.1.
"Borrowing Base Availability" means, at any time, the sum of the
Borrowing Base, minus the amount of the Excess Permitted Nonrecourse Borrowings
Reserve, if any.
"Business Day" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close (a) in Columbus, Ohio,
and (b) in the case of a Eurodollar Advance, in London, England.
"Central Ohio" means any area within a 60 mile radius from the
Company's corporate headquarters, Franklin County, Ohio.
"Change in Control" shall mean (a) the replacement of a majority of the
Board of Directors of the Company or Borror Realty Company from the directors
who constituted the Board of Directors on the date of this Agreement for any
reason other than death or disability, and such replacement shall not have been
approved by the Board of Directors of the Company or of Borror Realty Company,
as the case may be, as constituted on the date of this Agreement (or as changed
over time with the approval of the Board of Directors of such entity) or (b) a
company, person, entity or group of companies, person or entities (other than
any of the Borror Group) acting in concert, shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases, exercise
of the stock pledge or otherwise, have become the beneficial owner (within the
meaning of Rule 13d.3 under the Securities Exchange Act of 1934, as amended) of
securities of the Company or Borror Realty Company representing more than 30% of
the combined voting power of the outstanding securities of the Company
ordinarily having the right to vote in the election of directors from the
beneficial owners as of the date hereof; or (c) the failure of the Borror Group
at any time to (i) have at least a majority (on a fully diluted basis) of the
beneficial ownership and voting control of the outstanding securities of the
51
<PAGE> 57
Company or of Borror Realty Company, as the case may be, or (ii) have the right
to designate or nominate at least a majority of the Board of Directors of the
Company.
"Company" is defined in the Preamble.
"Consolidated Net Income" means, for any period on a consolidated basis
for the Company and its Subsidiaries, the net income (or loss) after taxes for
such period taken as a single accounting period, determined in conformity with
GAAP.
"Consolidated Tangible Net Worth" shall mean the consolidated
stockholders' equity of the Company and its consolidated Subsidiaries, minus the
sum of all the following: (a) the excess of cost over the value of net assets of
purchased businesses, rights, and other similar intangibles, (b) organization
expenses, (c) intangible assets (to the extent not reflected in the foregoing),
(d) goodwill, (e) deferred charges or deferred financing costs, (f) loans or
advances to and/or accounts receivable or notes receivable from affiliates
(other than funds in escrow due from affiliates in connection with holdbacks or
other amounts to ensure the completion of performance for the sale of
residential dwellings), (g) non-compete agreements, and (h) to the extent
included in stockholders' equity, minority interests in any Subsidiaries held by
other persons or entities.
"Consolidated Total Liabilities" shall mean with respect to the Company
and its consolidated Subsidiaries (a) all indebtedness and obligations which, in
accordance with GAAP, would be classified upon a balance sheet as liabilities
(except capital stock and surplus earned), and further, including, without
limitation, the amount of Noncancellable Land Commitments, and (b) to the
extent, if any, not included within a GAAP classification of liabilities, all
liabilities secured by any lien or encumbrance on any property owned by the
Company even though the Company has not assumed or otherwise become liable for
the payment thereof.
"Contingent Obligations" means any agreement, undertaking or
arrangement by which the Company or any Subsidiary assumes, guaranties,
endorses, agrees to provide funding, or otherwise becomes or is contingently
liable upon the obligation or liability of any other Person.
"Developed Lots" is defined in Section 2.3.
"EBITDA" means for any period, the sum of the amounts for such period
of (a) Consolidated Net Income, (b) Interest Expense, (c) charges for federal,
state, local and foreign income taxes, and (d) depreciation, amortization
expense and non-cash charges which were deducted in determining net income.
"Effective Assignment Date" is defined in Section 12.3(b).
"Eligible" is defined in Section 2.7.
"Eligible Accounts Receivable" is defined in Section 2.4.
"Eligible Acquisition Assets" is defined in Section 2.5.
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<PAGE> 58
"Eligible Investments in Joint Ventures" is defined in Section 2.8.
"Eligible Lumber Inventory" is defined in Section 2.6.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act, as amended (42 U.S.C. Section 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section
1801, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section
2601, et seq.), the Resource Conservation and Recovery Act, as amended (42
U.S.C. Section 6901, et seq.), the Water Quality Act of 1987, as amended (33
U.S.C. Section 1251, et seq.), the Clean Water Act, as amended (33 U.S.C.
Section 1321 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act,
as amended (7 U.S.C. Section 136, et seq.), the National Environmental Policy
Act of 1969, as amended (42 U.S.C. Section 4321, et seq.), and the Clean Air
Act, as amended (42 U.S.C. Section 7401, et seq.), and any other federal, state
or local statute, ordinance, law, code, rule, regulation or order regulating or
imposing liability (including strict liability) or standards of conduct
regarding Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Eurodollar Advance" shall mean any amount borrowed as part of the
Revolving Loans that bears interest at a rate calculated with a reference to the
Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Advance
and the related Interest Period, the per annum rate that is obtained by
dividing: (a) the actual or estimated arithmetic mean of the per annum rates of
interest at which deposits in U.S. dollars for the related Interest Period and
in an aggregate amount comparable to the amount of such Eurodollar Advance are
being offered to U.S. banks by one or more prime banks in the London interbank
market, as determined by the Administrative Agent in its sole discretion based
upon reference to information appearing in Telerate, a service of Telerate
Systems Incorporated, in the section captioned "British Bankers Assoc. Interest
Settlement Rates," or any comparable index selected by the Administrative Agent
for the obtaining of rate quotations, or any other reasonable procedure, at
approximately 11:00 a.m. London, England time, on the second Business Day prior
to the first day of the related Interest Period, all as determined by the
Administrative Agent, such interest rate to be rounded up to the nearest whole
multiple of 1/16 of 1% per annum, by (b) a percentage equal to 100%, minus the
Eurodollar Reserve Percentage.
"Eurodollar Reserve Percentage" means, for any day, that percentage
which is in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental, or other marginal reserve requirement) for a member
bank of the Federal Reserve System in respect of "Certificate of Deposit
Liabilities" or in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Advances is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any bank to United States
residents, or with respect to any "Eurocurrency Liabilities" under
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Regulation D of the Board of Governors of the Federal Reserve System, or any
other regulations of any Governmental Authority having jurisdiction with respect
thereto.
"Event of Default" is defined in Section 10.1.
"Excess Permitted Nonrecourse Borrowings" is defined in Section 8.5.
"Excess Permitted Nonrecourse Borrowings Reserve" is defined in Section
2.1.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day or
the next preceding Business Day by the Federal Reserve Bank of New York.
"Financial Officer" is defined in Section 9(a).
"GAAP" is defined in Section 14.1.
"Governmental Authority" means any arbitrator or court, government,
state, or political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Substances" shall mean and include all hazardous and toxic
substances, wastes, materials, compounds, pollutants and contaminants
(including, without limitation, asbestos, polychlorinated biphenyls, and
petroleum products) which are included under or regulated by any Environmental
Laws, but does not include such substances as are permanently incorporated into
a structure or any part thereof in such a way as to preclude their subsequent
release into the environment, or the permanent or temporary storage or disposal
of household hazardous substances by tenants, and which are thereby exempt from
or do not give rise to any violation of any Environmental Laws.
"Home Work-in-Process" is defined in Section 2.12.
"Hostile Acquisition" shall mean to acquire, or obtain the right to
acquire, beneficial ownership of 5% or more of common stock or 5% or more of
assets then outstanding of any other business entity pursuant to a tender offer,
exchange offer, or other offer not expressly authorized in writing by the Board
of Directors of such business entity.
"Huntington" is defined in the Preamble.
"Huntington Capital" is defined in the Preamble.
"Indebtedness," as applied to the Company or any other Person shall
mean, at any time, (a) all indebtedness, obligations or other liabilities (other
than accounts payable arising in the ordinary course of business payable on
terms customary in the trade) which in accordance with
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<PAGE> 60
GAAP should be classified upon such Person's balance sheet as liabilities,
including, without limitation (i) for borrowed money or evidenced by debt
securities, debentures, acceptances, notes or other similar instruments, and any
accrued interest, fees and charges relating thereto, (ii) payable out of the
proceeds or production of property owned by such Person, or in respect of
obligations to redeem, repurchase or exchange any securities or to pay dividends
in respect of any stock, (iii) with respect to letters of credit issued, (iv) to
pay the deferred purchase price of property or services, except accounts payable
and accrued expenses arising in the ordinary course of business, or (v) in
respect of capital leases; (b) all indebtedness, obligations or other
liabilities secured by a lien on any property, whether or not such indebtedness,
obligations or liabilities are assumed by the owner of the same; and (c) all
indebtedness, obligations or other liabilities in respect of interest rate
contracts and currency agreements, net of liabilities owed by the counterparties
thereon.
"Interest Coverage Ratio" means, with respect to any period, the ratio
of (a) EBITDA of the Company and its Subsidiaries for such period to (b)
Interest Expense for such period.
"Interest Expense" means, for any period, as determined in conformity
with GAAP, total interest expense, whether paid or accrued or due and payable
(without duplication), including without limitation the interest component of
capital lease obligations for such period, all bank fees, commissions, discounts
and other fees and charges owed with respect to the Letters of Credit and net
costs under interest rate contracts.
"Interest Payment Date" shall mean in respect of the Revolving Loans,
the last day of each Interest Period, and for any Interest Period that exceeds
three months, on the 90th day after the commencement of such Interest Period.
"Interest Period" shall mean:
(a) With respect to any Prime Rate Advance, an initial period
commencing, as the case may be, on the day such an advance shall be made by the
Administrative Agent, or on the day of conversion of any then outstanding
advance to an advance of such type, and ending the last day of each month and on
the day of conversion to an advance of a different type.
(b) With respect to any Eurodollar Advance, an initial period
commencing, as the case may be, on the day such an advance shall be made by the
Administrative Agent, or on the day of conversion of any then outstanding
advance to an advance of such type, and ending on the date one (1), two (2),
three (3) or six (6) months thereafter, all as the Company may elect pursuant to
this Agreement; provided, that (i) any Interest Period with respect to a
Eurodollar Advance that shall commence on the last Business Day of the calendar
month (or any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
respective subsequent calendar month; and (ii) each Interest Period with respect
to a Eurodollar Advance that would otherwise end on a day which is not a
Business Day or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day. Notwithstanding
the provisions of paragraphs (a) and (b) above, no Interest Period shall be
permitted which would end after the Revolving Credit Termination Date.
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(c) Interest with respect to all advances under the Revolving Loans
shall be calculated on a 360 day year basis and shall be based on the actual
number of days which elapse during the interest calculation period.
"Investment" means any loan, advance, extensions of credit (other than
accounts receivable arising in the ordinary course of business on terms
customary in the trade), deposit accounts or contribution of capital in or to
any other entity or any investment in, or purchase or other acquisition of, the
stock, partnership interests, ownership interests in any limited liability
company, notes debentures, or other securities of any other entity.
"Investments in Joint Ventures" is defined in Section 2.8.
"Land Deposits" shall mean the sum of down payments, deposits, or
other funds paid pursuant to noncancellable, bona fide, arm's length contracts
for the purchase of real property by the Company.
"Lender" and "Lenders" are defined in the Preamble.
"Letter Agreement" means the fee letter dated April 17, 1998, from the
Administrative Agent and the Syndication Agent and accepted and agreed to by the
Company.
"Letter of Credit" and "Letters of Credit" are defined in Section
1.2(a).
"Letter of Credit Application" is defined in Section 1.2(d).
"Letter of Credit Obligations" means, at any time, the sum of (i) the
aggregate non-contingent reimbursement or repayment obligations of the Company,
any Subsidiary or any Approved Joint Venture with respect to amounts drawn under
the Letters of Credit, plus (ii) the aggregate undrawn stated amount of all
outstanding Letters of Credit, plus (iii) the aggregate stated amount of all
Letters of Credit requested hereunder, but not yet issued or rejected.
"Leverage Ratio" means, for any period, the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth for such period.
"Loan Document" and "Loan Documents" means this Agreement, the Notes,
any Letter of Credit Application, the documents executed or delivered pursuant
to this Agreement, any interest rate contracts to which any Lender or affiliate
of a Lender is a party, and all other instruments, guaranties, agreements and
contracts between (a) the Company or any Subsidiary of the Company and (b) any
of the Administrative Agent, the Syndication Agent, the Lenders or Huntington,
in each case delivered to either the Administrative Agent, the Syndication
Agent, such Lender or Huntington pursuant to or in connection with this
Agreement or the Revolving Credit Commitments.
"Lots Under Development" is defined in Section 2.9.
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<PAGE> 62
"Material Adverse Effect" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries taken as a whole,
(b) the ability of the Company or any Subsidiary to perform its obligations
under this Agreement, any Loan Document or any document, agreement, guaranty, or
instrument executed in connection herewith, or (c) the ability of the
Administrative Agent or the Lenders to enforce the terms of this Agreement, or
any document, agreement, guaranty, or instrument executed in connection
herewith.
"Material Subsidiary" means any Subsidiary in which the sum of the
Company's (a) Investment in such Subsidiary and (b) Contingent Obligations with
respect to such Subsidiary equals or exceeds $1,000,000.00.
"Maximum New Market Investment Amount" means, with respect to the
Company and its Subsidiaries, the aggregate amount of (a) each Purchase Price
for an Acquisition of a Person or the assets of a Person whose principal
business is outside Central Ohio, (b) the aggregate amount of Investments in
Restricted Subsidiaries or in Investments in Joint Ventures, whose principal
operations or property are outside Central Ohio, and (c) the aggregate cost of
all Uncommitted Land Holdings, Speculative Homes, Model Homes and all other real
or personal property located outside Central Ohio.
"Maximum Revolving Credit Amount" means, at any time, an amount equal
to the Revolving Credit Commitments, less the amount of the Excess Permitted
Nonrecourse Borrowings Reserve in effect at such time.
"Model Homes" is defined in Section 2.10.
"Noncancellable Land Commitments" shall mean the amount of the
Company's obligations with respect to the unpaid purchase price of
noncancellable contracts for the purchase of real property by the Company.
"Non-Facility Contingent Obligations" means the aggregate stated amount
of the Company's or any Subsidiary's Contingent Obligations in connection with
letters of credit or other forms of surety issued by a financial institution
other than pursuant to the terms of this Agreement.
"Note" or "Notes" is defined in Section 4(a).
"Notice of Assignment" is defined in Section 12.3(b).
"Notice of Borrowing" is defined in Section 1.1(d).
"Participant" is defined in Section 12.2(a).
"Permitted Acquisition" shall mean an Acquisition by the Company or any
Subsidiary, for which the Company or a Restricted Subsidiary satisfies each of
the following conditions to the good faith satisfaction of the Administrative
Agent and the Required Lenders:
(a) such Acquisition is of or with a Person in the homebuilding or
related industry;
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<PAGE> 63
(b) such Acquisition is made at a time when, after giving effect
thereto and the related financing thereof, (i) no Event of Default exists or
would occur based upon (A) a pro forma prospective calculation for the next
twelve (12) month period and (B) a pro forma historical calculation (using
Adjusted EBITDA if applicable) for the most recent twelve (12) month period of
the financial covenants set forth in this Agreement performed in accordance with
GAAP giving effect to any higher levels of Indebtedness associated with the
acquired operations, together with interest thereon to be accrued for such
twelve (12) month period, and (ii) after giving effect to such Acquisition, the
Company and each Subsidiary would remain solvent pursuant to the warranties
contained in this Agreement;
(c) the acquired business entity shall have had positive Adjusted
EBITDA for the twelve (12) month period immediately prior to the effective date
of the Acquisition;
(d) on the date of the closing of the Permitted Acquisition and after
giving effect thereto and to any advances under the Revolving Loan made to
finance such Permitted Acquisition, (i) no Event of Default shall have occurred
and be continuing and (ii) all representations and warranties under this
Agreement shall be true and correct as though made on and as of such date,
except to the extent that any such representation or warranty expressly relates
to an earlier date;
(e) the acquired business entity, if the acquisition is of capital
stock and such entity constitutes a Subsidiary, obligates itself on the
Revolving Loans or this Agreement pursuant to a guaranty or supplement
substantially in the form of Exhibit F hereto or other loan documents
satisfactory to the Administrative Agent and otherwise complies with the
requirements of this Agreement and executes and delivers such documentation as
the Administrative Agent deems appropriate with respect to intercompany
borrowings from the Company;
(f) the acquired assets are free and clear of all liens or encumbrances
except as permitted under this Agreement;
(g) the Company delivers written notice to the Administrative Agent of
its intention to make such Acquisition no less than 45 days prior to the
proposed closing date for such acquisition that sets forth, among other things,
information regarding liabilities and obligations with respect to the
environmental matters, labor matters, or ERISA matters to be incurred by the
Company (including, without limitation, the acquired business entity in the
event of an acquisition of capital stock) as a result of such Acquisition, any
indemnities afforded under the terms of such acquisition and the scope and
results of any environmental review, labor review, or ERISA review undertaken by
the Company in connection therewith and the results of any further due diligence
required by the Administrative Agent;
(h) the Company shall provide the Administrative Agent with copies of
financial statements of the proposed acquired business entity;
(i) the Company shall not engage in a Hostile Acquisition; and
(j) all assets and/or Subsidiaries acquired shall be subject to the
provisions of this Agreement.
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<PAGE> 64
"Person" means any natural person, corporation, limited partnership,
limited liability company, general partnership, joint stock company, joint
venture, association, company, trust, business trust, or other organization
whether the same constitutes a legal entity, and any Governmental Authority.
"Potential Default" is defined in Section 1.3.
"Premises" is defined in Section 7.12.
"Prime Commercial Rate" as used herein shall mean the rate established
by Huntington from time to time based on its consideration of economic, money
market, business and competitive factors, and it is not necessarily Huntington's
most favored rate.
"Prime Rate Advance" shall mean any amount borrowed as part of the
Revolving Loans that bears interest at a rate calculated with reference to the
Prime Commercial Rate.
"Prior Loan Agreement" is defined in Section 3.13(a).
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing (a) the sum of such Lender's Revolving Credit Commitment at
such time by (b) the sum of the aggregate amount of all Revolving Credit
Commitments at such time; provided, however, if all of the Revolving Credit
Commitments are terminated pursuant to the terms of this Agreement, then "Pro
Rata Share" means the percentage obtained by dividing (c) the sum of the
aggregate amount of such Lender's Revolving Credit Obligations by (d) the sum of
the aggregate amount of all Revolving Credit Obligations.
"Purchase Price" shall mean the sum of cash and cash equivalents paid,
notes or other indebtedness given, liabilities assumed, or the fair market value
of property transferred in connection with any Acquisition.
"Purchasers" is defined in Section 12.3(a).
"Real Estate Held for Development" is defined in Section 2.11.
"Real Property Parcel" is defined in Section 7.14.
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Company with respect to amounts
drawn under Letters of Credit issued for the account of the Company, a
Restricted Subsidiary or any Approved Joint Venture.
"Required Lenders" means, at any time, Lenders holding in the aggregate
at least 66-2/3% of the sum of the then aggregate amount of the Revolving Credit
Commitments in effect at such time; provided, however, that in the event any of
the Lenders shall have failed to fund its Pro Rata Share of any Revolving Loan
requested by the Company, which such Lenders are obligated to fund under the
terms hereof and any such failure has not been cured, then for so long as such
failure continues, "Required Lenders" means Lenders (excluding the Lenders whose
failure to fund their respective Pro Rata Share of such Revolving Loans have not
been cured)
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<PAGE> 65
whose Pro Rata Shares represent at least 66-2/3% of the aggregate Pro Rata
Shares of such Lenders. Provided, however, further that, in the event that the
Revolving Credit Commitments have been terminated pursuant to the terms hereof,
"Required Lenders" means Lenders (without regard to such Lenders' performance of
their respective obligations hereunder) whose aggregate ratable shares (stated
as a percentage) of the aggregate outstanding principal balance of all Revolving
Credit Obligations are at least 66-2/3%.
"Restricted Subsidiary" means a Subsidiary of the Company which (a) is
organized and existing under the laws of any state of the United States of
America, and (b) which has become obligated under the terms of this Agreement
pursuant to a supplement or guaranty agreement satisfactory to the
Administrative Agent, in its sole and absolute discretion.
"Revolving Credit Availability" means, at any time, the amount by
which the Maximum Revolving Credit Amount exceeds the Revolving Credit
Obligations outstanding at such time.
"Revolving Credit Commitment" means, with respect to any Lender, the
obligation of such Lender to make Revolving Loans and to participate in Letters
of Credit pursuant to the terms and conditions hereof, which obligation shall
not exceed the amount set forth opposite the heading Revolving Credit Commitment
under such Lender's name on the signature pages hereof or the signature page of
the Assignment and Acceptance by which it became a Lender, as modified from time
to time pursuant to the terms hereof or to give effect to any applicable
Assignment and Acceptance.
"Revolving Credit Commitments" means the aggregate amount of the
Revolving Credit Commitments of all the Lenders, provided that the maximum
aggregate principal amount of Revolving Loans and stated amount of Letters of
Credit shall not exceed $125,000,000, as reduced from time to time pursuant to
the terms hereof.
"Revolving Credit Obligations" means, at any time, the sum of (a) the
outstanding principal amount of the Revolving Loans at such time, plus (b) the
stated amount of Letter of Credit Obligations outstanding at such time.
"Revolving Credit Termination Date" means the earlier to occur of (a)
the date of termination of the Revolving Credit Commitments pursuant to the
terms hereof, and (b) May 31, 2003.
"Revolving Loan" and "Revolving Loans" are defined in Section 1.1(a).
"Speculative Homes" is defined in Section 2.13.
"Subsidiary" of the Company means any corporation or other entity more
than 50% of the outstanding securities or other ownership interest having
ordinary voting power or the equivalent thereof which shall at the time be owned
or controlled, directly or indirectly, by the Company or by one or more of its
Subsidiaries, and shall exclude Alliance Title Agency, Ltd.
"Syndication Agent" is defined in the Preamble.
"Transferee" is defined in Section 12.4.
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"Uncommitted Land Holdings" shall mean the sum of all of the following,
valued at cost or market: (a) Real Estate Held for Development, (b) Lots Under
Development, (c) Developed Lots, (d) Land Deposits, (e) Noncancellable Land
Commitments, and (f) the Company's net equity investment in Investments in Joint
Venture.
"Unleveraged Seller Financing" means Real Estate Held for Development
which is subject to seller financing and secured by a mortgage or deed of trust
on such property permitted under the terms of Sections 8.4 and 8.5 of this
Agreement, for which the cost of such real property is equal to or greater than
two times the amount of the Indebtedness owing to such seller, and the value of
any such Real Estate Held for Development shall be calculated in accordance with
Section 2.11 above.
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Each of the undersigned parties has signed this Agreement as of the
date set forth in the Preamble hereto.
THE COMPANY AS BORROWER:
DOMINION HOMES, INC.
By: */s/ Jon M. Donnell
-------------------
Jon M. Donnell
Its: Chief Operating Officer
Dominion Homes, Inc.
5501 Frantz Road
Dublin, Ohio 43017-0766
Attention: Jon M. Donnell,
Chief Operating Officer
Fax: 614/761-6139
with a copy to:
Robert A. Meyer, Jr., Esq.
Senior Vice President and General Counsel
Dominion Homes, Inc.
5501 Frantz Road
Dublin, Ohio 43017-0766
Fax: 614/761-6139
62
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THE SYNDICATION AGENT:
HUNTINGTON CAPITAL CORP.
By: */s/ Michael T. Miller
-----------------------
Michael T. Miller
Its: Managing Director
Huntington Capital Corp.
41 South High Street
9th Floor
Columbus, Ohio 43215
Attention: Michael T. Miller
Vice President
Fax: 614/480-4999
63
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THE ADMINISTRATIVE AGENT
THE HUNTINGTON NATIONAL BANK
By: */s/ William R. Remias
-----------------------
William R. Remias
Its: Assistant Vice President
The Huntington National Bank,
Administrative Agent
41 South High Street
Columbus, Ohio 43215
Attention: William R. Remias,
Assistant Vice President
Fax: 614/480-3066
With a copy to:
Timothy E. Grady, Esq.
PORTER, WRIGHT, MORRIS & ARTHUR
41 South High Street
Columbus, Ohio 43215
Fax: 614/227-2100
THE LENDERS:
THE HUNTINGTON NATIONAL BANK,
as Lender and Issuing Bank
By: */s/ William R. Remias
-----------------------
William R. Remias
Its: Assistant Vice President
REVOLVING CREDIT COMMITMENT: $35,000,000
The Huntington National Bank
41 South High Street
Columbus, Ohio 43215
Attention: William R. Remias,
Assistant Vice President
Fax: 614/480-3066
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NBD BANK
By: */s/ Steven J. Mahr
-----------------------
Steven J. Mahr
Its: First Vice President
REVOLVING CREDIT COMMITMENT: $25,000,000
NBD Bank
Commercial Real Estate, Suite 8029
611 Woodward Avenue
Detroit, MI 48226
Attention: Steven J. Mahr,
First Vice President
Fax: 313/226-0857
KEYBANK NATIONAL ASSOCIATION
By: */s/ Robert L. Zelina
-----------------------
Robert L. Zelina
Its: Assistant Vice President
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<PAGE> 71
REVOLVING CREDIT COMMITMENT: $22,500,000
KeyBank National Association
88 East Broad Street
Columbus, Ohio 43215
Attention: Robert L. Zelina
Assistant Vice President
Fax: 614/460-3469
NATIONAL CITY BANK
By: */s/ Steven A. Smith
-----------------------
Steven A. Smith
Its: Vice President
REVOLVING CREDIT COMMITMENT: $17,500,000
National City Bank
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<PAGE> 72
155 East Broad Street
Columbus, Ohio 43251
Attention: Steven A. Smith,
Vice President
Fax: 614/463-8058
COMERICA BANK
By: */s/ Charles W. Weddell
-----------------------
Charles W. Weddell
Its: Vice President
REVOLVING CREDIT COMMITMENT: $12,500,000
Comerica Bank
500 Woodward Avenue
7th Floor
Detroit, Michigan 48226-3256
Attention: Charles L. Weddell,
Vice President
Fax: 313/222-9295
67
<PAGE> 73
STAR BANK, N.A.
By: */s/ Marilyn K. Miller
-----------------------
Marilyn K. Miller
Its: Vice President
REVOLVING CREDIT COMMITMENT: $12,500,000
Star Bank, N.A.
175 South 3rd Street, 4th Floor
Columbus, Ohio 43215-5134
Attention: Marilyn K. Miller,
Vice President
Fax: 614/232-8043
68
<PAGE> 1
Exhibit 10.24
EMPLOYMENT AGREEMENT
This Agreement is entered into this day of , 1998,
by and between Dominion Homes, Inc. (hereinafter called the "Company") and Peter
J. O'Hanlon (hereinafter called the "Employee").
WHEREAS, the Company desires to employ Employee, and Employee desires
employment with the Company, as Vice President and Chief Financial Officer; 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 agrees to employ the
Employee, and the Employee hereby accepts employment with the Company upon the
terms and conditions hereinafter set forth. The Employee shall serve the Company
as Vice President and Chief Financial Officer. 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 June 1, 1998 (the "Effective Date"). It shall continue through the
period ending on December 31, 2000, 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 Forty Thousand Dollars ($140,000.00),
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 Company's incentive
compensation program, as such program has been established and from time to time
amended.
<PAGE> 2
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, 1998, 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, 1999 and ending on December
31, 2001. 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.
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<PAGE> 4
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
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<PAGE> 6
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:
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.
-6-
<PAGE> 7
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 and grants of
restricted shares under the Company's Incentive Stock Plan 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).
-7-
<PAGE> 8
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:
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.
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<PAGE> 9
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 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: Dominion Homes, Inc.
5501 Frantz Road
Dublin, Ohio 43017
Attn: President/CEO
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<PAGE> 10
If to the Employee: Peter J. O'Hanlon
345 Barkshire Lane
Roswell, Georgia 33076
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.
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<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. 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.
DOMINION HOMES, INC.
By:*/s/ ROBERT A. MEYER, JR.
----------------------------
Robert A. Meyer, Jr.
Senior Vice President
*/s/ PETER J. O'HANLON
----------------------------
Peter J. O'Hanlon
11
<PAGE> 1
EXHIBIT 10.25
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made to be effective as of June 1, 1998, by and
between Dominion Homes, Inc., an Ohio corporation (the "COMPANY"), and Peter J.
O'Hanlon (the "EMPLOYEE").
WITNESSETH:
WHEREAS, the Board of Directors of the COMPANY adopted the Dominion
Homes, Inc. Incentive Stock Plan (the "PLAN") on February 28, 1994; and
WHEREAS, the shareholders of the COMPANY, upon the recommendation of
the COMPANY'S Board of Directors, approved the PLAN on March 3, 1994; and
WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors
of the COMPANY has appointed a committee (the "COMMITTEE") to administer the
PLAN, and the COMMITTEE has determined that an award of 5,000 common shares,
without par value, of the COMPANY (the "SHARES") should be granted to the
EMPLOYEE upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
make the following agreement, intending to be legally bound thereby:
1. PLAN as Controlling. All terms and conditions of the PLAN, as it may
be amended from time to time, applicable to Restricted Stock granted thereunder
shall be deemed incorporated herein by reference. A copy of the PLAN as in
effect on the date of this Agreement is attached hereto as Annex A. In the event
that any provision in this Agreement conflicts with any term in the PLAN, the
term in the PLAN shall be deemed controlling.
2. Grant of SHARES of Restricted Stock. The COMPANY hereby grants to
the EMPLOYEE 5,000 SHARES. Such SHARES shall initially be unvested and, unless
and until they vest as provided in Section 3, they shall be subject to
forfeiture.
3. Vesting of Shares. The shares shall vest in accordance with the
following vesting schedule:
Vesting Date Shares That Will Vest
------------ ---------------------
June 1, 1999 2,500
June 1, 2000 2,500
provided, however, that upon the occurrence of a "Change in Control," any shares
which have not vested on or before the date of the "Change in Control" shall
fully vest; and, provided further that if the employment of EMPLOYEE with the
COMPANY is terminated
<PAGE> 2
for any reason, any SHARES which have not vested on or before the date of
termination of employment shall be forfeited. The grant of the SHARES shall not
confer upon EMPLOYEE any right to continue in the employment of the COMPANY nor
limit in any way the right of the COMPANY to terminate the employment of
EMPLOYEE at any time.
4. Transfer Restrictions. Until the SHARES are vested, the SHARES may
not be sold, assigned, transferred, pledged or otherwise encumbered.
Certificates issued in respect of SHARES which are unvested shall be registered
in the name of the EMPLOYEE and deposited by the EMPLOYEE, together with a stock
power endorsed in blank, with the COMPANY. Upon the vesting of SHARES, such
restrictions on transfer shall terminate with respect to such vested SHARES and
the COMPANY shall deliver to the EMPLOYEE the certificates issued in respect of
such vested SHARES.
5. Voting and Dividend Rights. Unless and until any unvested SHARES are
forfeited pursuant to Section 3, the EMPLOYEE shall have all voting rights and,
subject to Section 6, all dividend rights with respect to the SHARES.
6. Adjustments. In the event that any dividend or other distribution
(whether in the form of SHARES, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
SHARES or other securities of the COMPANY, issuance of warrants or other rights
to purchase SHARES or other securities of the COMPANY, or other similar
corporate transaction or event affects the SHARES such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the PLAN to the EMPLOYEE,
then the COMMITTEE shall make such adjustment (as necessary). Any property
(other than cash) that is distributed with respect to any unvested SHARES as a
result of any such adjustment shall be deposited by the EMPLOYEE, together with
a stock power endorsed in blank, with the COMPANY and shall be subject to the
same conditions and restrictions (including vesting and forfeiture) imposed by
this Agreement on the unvested SHARES to which the same relate.
7. Income Tax Election. If the EMPLOYEE makes an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, the EMPLOYEE shall
provide to the COMPANY a copy of such election within thirty (30) days of the
filing of such election with the Internal Revenue Service.
8. Satisfaction of Taxes and Tax Withholding Requirements. The COMPANY
shall be entitled and is authorized, if the COMMITTEE deems it necessary or
desirable, to withhold (or secure payment from the EMPLOYEE in lieu of
withholding) as provided in Section 10(e) of the PLAN.
9. Governing Law. The rights and obligations of the EMPLOYEE and the
COMPANY under this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws principles thereof)
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<PAGE> 3
in all respects, including, without limitation, matters relating to the
validity, construction, interpretation, administration, effect, enforcement, and
remedies provisions of the PLAN and its rules and regulations, except to the
extent preempted by applicable federal law.
10. Rights and Remedies Cumulative. All rights and remedies of the
COMPANY and of the EMPLOYEE enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed by law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
11. Captions. The captions contained in this Agreement are included
only for convenience of reference and do not define, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as a part of this Agreement.
12. Severability. If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined to
be invalid or unenforceable, then such determination shall not affect any other
provision of this Agreement or the application of said provision to any other
person or circumstance, all of which other provisions shall remain in full force
and effect, and it is the intention of each party to this Agreement that if any
provision of this Agreement is susceptible of two or more constructions, one of
which would render the provision enforceable and other or others of which would
render the provision unenforceable, then the provision shall have the meaning
which renders it enforceable.
13. Number and Gender. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
14. Amendment, Etc. The COMMITTEE may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
the provisions of this Agreement, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation
or termination that would impair the rights of the EMPLOYEE shall not to that
extent be effective without the consent of the EMPLOYEE.
15. Entire Agreement. This Agreement, including the PLAN as amended
from time to time and incorporated by referenced herein, constitutes the entire
agreement between the COMPANY and the EMPLOYEE in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement. No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first above written.
COMPANY:
DOMINION HOMES, INC.
By: */s/ ROBERT A. MEYER
--------------------------
Robert A. Meyer
Its: Senior Vice President
-------------------------
EMPLOYEE:
*/s/PETER J. O'HANLON
-----------------------------
Peter J. O'Hanlon
<PAGE> 1
EXHIBIT 10.26
STOCK OPTION AGREEMENT
(Incentive Stock Option)
THIS AGREEMENT is made to be effective as of June 1, 1998 (the "GRANT
DATE"), by and between Dominion Homes, Inc., an Ohio corporation (the
"COMPANY'), and Peter J. O'Hanlon (the "OPTIONEE").
WITNESSETH:
WHEREAS, the Board of Directors of the COMPANY adopted the Borror
Corporation Incentive Stock Plan (the "PLAN") on February 28, 1994; and
WHEREAS, the shareholders of the COMPANY, upon the recommendation of
the COMPANY's Board of Directors, approved the PLAN on March 3, 1994; and
WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors
of the COMPANY has appointed a committee (the "COMMITTEE") to administer the
PLAN, and the COMMITTEE has determined that an option to acquire common shares,
without par value, of the COMPANY (the "SHARES") should be granted to the
OPTIONEE upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises, the parties hereto
make the following agreement, intending to be legally bound thereby:
1. PLAN as Controlling. All terms and conditions of the PLAN, as it may
be amended from time to time, applicable to options granted thereunder shall be
deemed incorporated herein by reference. A copy of the PLAN as in effect on the
date of this Agreement is attached hereto as Annex A. In the event of any
provision in this Agreement conflicts with any term in the PLAN, the term in the
PLAN shall be deemed controlling.
2. Grant of OPTION. The COMPANY hereby grants to the OPTIONEE an option
(the "OPTION") to purchase ten thousand (10,000) SHARES. The OPTION is intended
to qualify as an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").
3. Terms and Conditions of the OPTION.
(A) EXERCISE PRICE. The purchase price (the "EXERCISE PRICE")
to be paid by the OPTIONEE to the COMPANY upon the exercise of the OPTION shall
be Twelve and 11/16 Dollars ($12.6875) per SHARE, being 100% of the Fair Market
Value (as that term is defined in the PLAN) of the SHARES on the GRANT DATE.
(B) Exercise of the OPTION. The OPTIONEE may exercise the
OPTION, from time to time and at any time, after the SHARES subject thereto have
vested. Subject
<PAGE> 2
to the provisions of the PLAN and the other provisions of this Agreement, the
OPTION shall remain exercisable as to the SHARES subject thereto which have
vested until the date of expiration of the OPTION term. In accordance with the
vesting schedule set forth below, twenty percent (20%) of the SHARES subject to
the OPTION shall vest for the first time on each of the first, second, third,
fourth and fifth year anniversaries, respectively, of the GRANT DATE:
<TABLE>
<CAPTION>
Anniversaries of the GRANT DATE
-------------------------------
<S> <C> <C> <C> <C>
First Year Second Year Third Year Fourth Year Fifth Year
20% Vested 40% Vested 60% Vested 80% Vested 100% Vested
- ---------- ---------- ---------- ---------- -----------
Total Total Total Total Total
Number of Number of Number of Number of Number of
SHARES Vested SHARES Vested SHARES Vested SHARES Vested SHARES Vested
- ------------- ------------- ------------- ------------- -------------
2,000 2,000 2,000 2,000 2,000
</TABLE>
The grant of this OPTION shall not confer upon the OPTIONEE
any right to continue in the employment of the COMPANY or any subsidiary nor
limit in any way the right of the COMPANY or a subsidiary to terminate the
employment of the OPTIONEE at any time.
(C) Full Vesting Upon Change in Control. Notwithstanding the
foregoing, the OPTION shall fully vest with respect to all SHARES subject
thereto upon the occurrence of a "Change in Control."
(D) OPTION Term. The OPTION shall in no event be exercisable
after the expiration of ten (10) years from the GRANT DATE.
(E) Method of Exercise. The OPTION may be exercised by giving
written notice of exercise to the COMMITTEE in care of the Treasurer of the
COMPANY stating the number of SHARES subject to the OPTION in respect of which
it is being exercised. The OPTIONEE shall be required, as a condition precedent
to the OPTIONEE'S right to exercise the OPTION and at the OPTIONEE'S expense, to
supply the COMMITTEE with such evidence, representations and agreements as the
COMMITTEE may deem necessary or desirable to establish the OPTIONEE'S right to
exercise the OPTION and the propriety of the sale of the SHARES by reason of
such exercise under the Securities Act of 1933, as amended from time to time
(the "Securities Act"), and any other laws or requirements of any governmental
authority. Without limiting the generality of the foregoing, the OPTION shall
not be exercisable unless the sale of the SHARES by reason of such exercise has
been registered under the Securities Act and all other applicable securities
laws of any jurisdiction or unless such sale is exempt from such registration
requirements.
-2-
<PAGE> 3
Payment of the EXERCISE PRICE for all such SHARES shall be made to the
COMPANY at the time of the OPTION is exercised in such form as authorized by
Section 6(d) of the PLAN. After payment in full for the SHARES purchased under
the OPTION has been made, the COMPANY shall take all such action as is necessary
to deliver appropriate stock certificates evidencing the SHARES purchased upon
the exercise of the OPTION as promptly thereafter as is reasonably practicable.
(F) Satisfaction of Taxes and Tax Withholding Requirements.
The COMPANY or a subsidiary shall be entitled and is authorized, if the
COMMITTEE deems it necessary or desirable, to withhold (or secure payment from
the OPTIONEE in lieu of withholding) as provided in Section 10(e) of the PLAN.
The COMPANY may defer delivery of any SHARES pursuant to the exercise of the
OPTION unless indemnified to its satisfaction in this regard.
4. Adjustments and Changes in the SHARES Subject to the Option.
(A) In the event that any dividend or other distribution
(whether in the form of SHARES, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
SHARES or other securities of the COMPANY, issuance of warrants or other rights
to purchase SHARES or other securities of the COMPANY, or other similar
corporate transaction or event affects the SHARES such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the PLAN to the OPTIONEE,
then the COMMITTEE shall proportionately adjust either or both (as necessary)
of: (i) the number of SHARES or other securities of the COMPANY (or number and
kind of other securities or property) subject to the OPTION; and (ii) the
EXERCISE PRICE with respect to the OPTION;
(B) Notwithstanding the foregoing, any and all adjustments in
connection with the OPTION shall comply in all respects with Sections 442 and
424 of the CODE, or any successor provision as in effect from time to time, and
the rules and regulations promulgated thereunder as in effect from time to time.
5. Non-Assignability of the OPTION.
(A) During the lifetime of the OPTIONEE, the OPTION shall not
be assignable or transferable and may be exercised only by the OPTIONEE, or, if
permissible under applicable law, by the OPTIONEE's guardian or legal
representative or a transferee receiving the OPTION pursuant to a qualified
domestic relations order ("QDRO"), as determined by the COMMITTEE.
(B) The OPTION may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the OPTIONEE otherwise
than by will or the laws of descent and distribution or pursuant to a QDRO, and
any such purported
-3-
<PAGE> 4
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
ve void and unenforceable against the COMPANY or any subsidiary.
6. Exercise After Termination of Employment
(A) Except as otherwise provided in this Agreement or in the
PLAN, the OPTION: (i) is exercisable only by the OPTIONEE; (ii) is exercisable
only while the OPTIONEE is in the employment of the COMPANY or a subsidiary of
the COMPANY and then only if the OPTION has become exercisable by its terms; and
(iii) if not exercisable by its terms at the time the OPTIONEE ceases to be in
the employment of the Company and its subsidiaries, shall immediately expire on
the date of termination of employment.
(B) Except as otherwise provided in this Section 6, if the
OPTION is exercisable by its terms at the time the OPTIONEE ceases to be in the
employment of the COMPANY, by reason of retirement or otherwise, it must be
exercised on or before the earlier of three months after the date of termination
of employment or the fixed expiration date of the OPTION, after which period the
OPTION shall expire.
(C) In the event of the death of the OPTIONEE while in the
employment of the COMPANY, the unexercised portion of the OPTION (to the extent
then exercisable by its terms) shall be exercisable by his estate for a period
ending on the earlier of the fixed expiration date of the OPTION or twelve
months after the date of death, after which period the OPTION shall expire. For
purposes hereof, the estate of the OPTIONEE shall be defined to include the
legal representative thereof or any person who has acquired the right to
exercise the OPTION by reason of the death of the OPTIONEE.
(D) In the event of the termination of employment by reason of
the "disability" of the OPTIONEE, the unexercised portion of the OPTION (to the
extent then exercisable by its terms) shall be exercisable by the OPTIONEE for a
period ending on the earlier of twelve months after the termination of
employment or other fixed expiration date of the OPTION. For purposes hereof,
"disability" shall have the same meaning as that set forth for that term in
Section 22(e)(3) of the CODE, or any successor provision as in effect from time
to time.
7. Restrictions on Transfers of SHARES. Anything contained in
this Agreement or elsewhere to the contrary notwithstanding, the OPTION may not
be exercised if the COMMITTEE determines that the sale of SHARES upon exercise
of the OPTION may violate the Securities Act or any other law or requirement of
any governmental authority. An appropriate restrictive legend shall be placed on
certificates representing SHARES acquired upon the exercise of the OPTION,
unless the COMMITTEE determines, upon the advise of counsel to the COMPANY, that
such legend is not required because of the existence of an effective
registration statement registering the SHARES under the Securities Act or
because all applicable federal and state legal requirements have been satisfied.
-4-
<PAGE> 5
8. No Rights of the OPTIONEE as a Shareholder. The OPTIONEE shall have
no rights as a shareholder of the COMPANY with respect to any SHARES covered by
the OPTION until the date of issuance of a certificate to the OPTIONEE
evidencing such SHARES.
9. Governing Law. The rights and obligations of the OPTIONEE and the
COMPANY under this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws principles thereof) in all respects, including, without limitation, matters
relating to the validity, construction, interpretation, administration, effect,
enforcement, and remedies provisions of the PLAN and its rules and regulations,
except to the extent preempted by applicable federal law.
10. Rights and Remedies Cumulative. All rights and remedies of the
COMPANY and of the OPTIONEE enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed by law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
11. Captions. The captions contained in this Agreement are included
only for convenience of reference and do not define, limit, explain or modify
this Agreement or its interpretation, construction or meaning and are in no way
to be construed as a part of this Agreement.
12. Severability. If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined to
be invalid or unenforceable, then such determination shall not affect any other
provision of this Agreement or the application of said provision to any other
person or circumstance, all of which other provisions shall remain in full force
and effect, and it is the intention of each party to this Agreement that if any
provision of this Agreement is susceptible of two or more constructions, one of
which would render the provision enforceable and the other or others of which
would render the provision unenforceable, then the provision shall have the
meaning which renders it enforceable.
13. Number and Gender. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
14. Amendment, Etc. of OPTION. The COMMITTEE may waive any conditions
or rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, the OPTION, prospectively or retroactively; provided that any such
waiver, amendment, alteration, suspension, discontinuance, cancellation or
termination that would impair the rights of the OPTIONEE or any holder or
beneficiary of the OPTION shall not to that extent be effective without the
consent of the OPTIONEE, holder or beneficiary.
-5-
<PAGE> 6
15. Entire Agreement. This Agreement, including the PLAN as amended
from time to time incorporated by reference herein, constitutes the entire
agreement between the COMPANY and the OPTIONEE in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement. No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first above written.
COMPANY:
DOMINION HOMES, INC.
By: */s/ ROBERT A. MEYER
--------------------------
Robert A. Meyer
Its: Senior Vice President
-------------------------
OPTIONEE:
*/s/ PETER J. O'HANLON
-----------------------------
Peter J. O'Hanlon
<PAGE> 1
EXHIBIT 10.27
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made to be effective as of August 1, 1998, by and
between Dominion Homes, Inc., an Ohio corporation (the "COMPANY"), and Jon M.
Donnell (the "EMPLOYEE").
WITNESSETH:
WHEREAS, the Board of Directors of the COMPANY adopted the Dominion
Homes, Inc. Incentive Stock Plan (the "PLAN") on February 28, 1994; and
WHEREAS, the shareholders of the COMPANY, upon the recommendation of
the COMPANY'S Board of Directors, approved the PLAN on March 3, 1994; and
WHEREAS, pursuant to the provisions of the PLAN, the Board of Directors
of the COMPANY has appointed a committee (the "COMMITTEE") to administer the
PLAN, and the COMMITTEE has determined that an award of eleven thousand (11,000)
common shares, without par value, of the COMPANY (the "SHARES") should be
granted to the EMPLOYEE upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
make the following agreement, intending to be legally bound thereby:
1. PLAN as Controlling. All terms and conditions of the PLAN, as it may
be amended from time to time, applicable to Restricted Stock granted thereunder
shall be deemed incorporated herein by reference. A copy of the PLAN as in
effect on the date of this Agreement is attached hereto as Annex A. In the event
that any provision in this Agreement conflicts with any term in the PLAN, the
term in the PLAN shall be deemed controlling.
2. Grant of SHARES of Restricted Stock. The COMPANY hereby grants to
the EMPLOYEE eleven thousand (11,000) SHARES. Such SHARES shall initially be
unvested and, unless and until they vest as provided in Section 3, they shall be
subject to forfeiture.
3. Vesting of Shares. The shares shall vest on August 1, 2002,
provided, however, that upon the occurrence of a "Change in Control," any shares
which have not vested on or before the date of the "Change in Control" shall
fully vest; and, provided further that if the employment of EMPLOYEE with the
COMPANY is terminated for any reason, any SHARES which have not vested on or
before the date of termination of employment shall be forfeited. The grant of
the SHARES shall not confer upon EMPLOYEE any right to continue in the
employment of the COMPANY nor limit in any way the right of the COMPANY to
terminate the employment of EMPLOYEE at any time.
4. Transfer Restrictions. Until the SHARES are vested, the SHARES may
not be sold, assigned, transferred, pledged or otherwise encumbered.
Certificates issued in
<PAGE> 2
respect of SHARES which are unvested shall be registered in the name of the
EMPLOYEE and deposited by the EMPLOYEE, together with a stock power endorsed in
blank, with the COMPANY. Upon the vesting of SHARES, such restrictions on
transfer shall terminate with respect to such vested SHARES and the COMPANY
shall deliver to the EMPLOYEE the certificates issued in respect of such vested
SHARES.
5. Voting and Dividend Rights. Unless and until any unvested SHARES are
forfeited pursuant to Section 3, the EMPLOYEE shall have all voting rights and,
subject to Section 6, all dividend rights with respect to the SHARES.
6. Adjustments. In the event that any dividend or other distribution
(whether in the form of SHARES, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
SHARES or other securities of the COMPANY, issuance of warrants or other rights
to purchase SHARES or other securities of the COMPANY, or other similar
corporate transaction or event affects the SHARES such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the PLAN to the EMPLOYEE,
then the COMMITTEE shall make such adjustment (as necessary). Any property
(other than cash) that is distributed with respect to any unvested SHARES as a
result of any such adjustment shall be deposited by the EMPLOYEE, together with
a stock power endorsed in blank, with the COMPANY and shall be subject to the
same conditions and restrictions (including vesting and forfeiture) imposed by
this Agreement on the unvested SHARES to which the same relate.
7. Income Tax Election. If the EMPLOYEE makes an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, the EMPLOYEE shall
provide to the COMPANY a copy of such election within thirty (30) days of the
filing of such election with the Internal Revenue Service.
8. Satisfaction of Taxes and Tax Withholding Requirements. The COMPANY
shall be entitled and is authorized, if the COMMITTEE deems it necessary or
desirable, to withhold (or secure payment from the EMPLOYEE in lieu of
withholding) as provided in Section 10(e) of the PLAN.
9. Governing Law. The rights and obligations of the EMPLOYEE and the
COMPANY under this Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws principles thereof) in all respects, including, without limitation, matters
relating to the validity, construction, interpretation, administration, effect,
enforcement, and remedies provisions of the PLAN and its rules and regulations,
except to the extent preempted by applicable federal law.
10. Rights and Remedies Cumulative. All rights and remedies of the
COMPANY and of the EMPLOYEE enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or
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<PAGE> 3
remedies allowed by law or in equity, and each of said rights or remedies may be
exercised and enforced concurrently.
11. Captions. The captions contained in this Agreement are included
only for convenience of reference and do not define, explain or modify this
Agreement or its interpretation, construction or meaning and are in no way to be
construed as a part of this Agreement.
12. Severability. If any provision of this Agreement or the application
of any provision hereof to any person or any circumstance shall be determined to
be invalid or unenforceable, then such determination shall not affect any other
provision of this Agreement or the application of said provision to any other
person or circumstance, all of which other provisions shall remain in full force
and effect, and it is the intention of each party to this Agreement that if any
provision of this Agreement is susceptible of two or more constructions, one of
which would render the provision enforceable and other or others of which would
render the provision unenforceable, then the provision shall have the meaning
which renders it enforceable.
13. Number and Gender. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
14. Amendment, Etc. The COMMITTEE may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or terminate,
the provisions of this Agreement, prospectively or retroactively; provided that
any such waiver, amendment, alteration, suspension, discontinuance, cancellation
or termination that would impair the rights of the EMPLOYEE shall not to that
extent be effective without the consent of the EMPLOYEE.
15. Entire Agreement. This Agreement, including the PLAN as amended
from time to time and incorporated by referenced herein, constitutes the entire
agreement between the COMPANY and the EMPLOYEE in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
agreements between the parties hereto in connection with the subject matter of
this Agreement. No change, termination or attempted waiver of any of the
provisions of this Agreement shall be binding upon any party hereto unless
contained in a writing signed by the party to be charged.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed to be effective as of the date first above written.
COMPANY:
DOMINION HOMES, INC.
By: */s/ ROBERT A. MEYER
-------------------------
Robert A. Meyer
Its: Senior Vice President
-------------------------
EMPLOYEE:
*/s/JON M. DONNELL
-------------------------
Jon M. Donnell
<PAGE> 1
EXHIBIT 10.28
DOMINION HOMES, INC.
INCENTIVE STOCK PLAN
SECTION 1. PURPOSE. The purposes of the Dominion Homes, Inc. Incentive
Stock Plan are to promote the interests of Dominion Homes, Inc. and its
stockholders by: (i) attracting and retaining Employees and Eligible Directors;
(ii) motivating Employees and Eligible Directors by means of performance-related
incentives to achieve longer-range performance goals; and (iii) enabling
Employees and Eligible Directors to participate in the long-term growth and
financial success of the Company.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
"Award" shall mean any Option, Restricted Stock Award or Performance
Award but shall not include any Director Option.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean a committee of the Board designated by the Board
to Administer the Plan and composed of not less than the minimum number of
persons from time to time required by Rule 16b-3, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a "disinterested person" within the
meaning of Rule 16b-3.
"Company" shall mean Dominion Homes, Inc., together with any successor
thereto.
"Director Option" shall mean a "Non-Qualified Stock Option" granted to
each Eligible Director pursuant to Section 6(e) without any action by the Board
or the Committee.
"Eligible Director" shall mean, on any date, a person who is serving as
a member of the Board but shall not include a person who is or was an Employee
of the Company or a subsidiary.
"Employee" shall mean an employee of the Company.
<PAGE> 2
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in its sole discretion,
provided that the fair market value of Shares of Common Stock shall be
determined by reference to the most recent closing price quotation, or, if none,
the average of the bid and asked prices, as reported as of the most recent
available date with respect to the sale of Common Stock on any quotation system
approved by the National Association of Securities Dealers then reporting sales
of Common Stock or on any national securities exchange on which the Common Stock
is then listed.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not intended
to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option but shall not include a Director Option.
"Participant" shall mean any Employee selected by the Committee to
receive an Award under the Plan.
"Performance Award" shall mean any right granted under Section 8 of the
Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
"Plan" shall mean the Dominion Homes, Inc. Incentive Stock Plan.
"Restricted Stock" shall mean any Share granted under Section 7 of the
Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by
the SEC under the Exchange Act, or any successor rule or regulation thereto as
in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
"Shares" shall mean common shares, without par value, of the Company,
or such other securities of the Company as may be designated by the Committee
from time to time.
2
<PAGE> 3
"Subsidiary" shall mean any corporation which, on the date of
determination, qualifies as a subsidiary corporation of the Corporation under
Section 425(f) of the Code.
"Substitute Awards" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired by
the Company or with which the Company combines.
"Ten Percent Shareholder" shall mean any shareholder who, at the time
an Incentive Stock Option is granted to such shareholder, owns (within the
meaning of Section 425(d) of the Code) more than ten percent of the voting power
of all classes of shares of the Company or a subsidiary.
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to an eligible Employee; (iii) determine
the number of shares to be covered by, or with respect to which payments,
rights, or other matters are to be calculated in connection with, Awards; (iv)
determine the terms and conditions of any Award; (v) determine whether, to what
extent, and under what circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or cancelled,
forfeited, or suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property, and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (viii) establish, amend, suspend, or waive
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (ix) make any other determination
and take any other action that the Committee deems necessary or desirable for
the administration of the Plan. Notwithstanding anything else contained in the
Plan to the contrary, neither the Committee nor the Board shall have any
discretion regarding whether an Eligible Director shall receive a Director
Option pursuant to Section 6(e) or regarding the terms of any Director Option,
including without limitation, the number of Shares subject to such Director
Option or the exercise price per Share of such Director Option.
3
<PAGE> 4
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Subsidiary, any Participant, any holder or
beneficiary of any Award, any shareholder and any Employee.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Awards and Director Options may
be granted under the Plan shall be 850,000. If, after the effective date of the
Plan, any Shares covered by an Award or Director Option granted under the Plan,
or to which such an Award or Director Option relates, are forfeited, or if an
Award or Director Option otherwise terminates or is cancelled without the
delivery of Shares, then the Shares covered by such Award or Director Option, or
to which such Award or Director Option relates, or the number of Shares
otherwise counted against the aggregate number of Shares with respect to which
Awards and Director Options may be granted, to the extent of any such
settlement, forfeiture, termination or cancellation, shall again be, or shall
become, Shares with respect to which Awards and Director Options may be granted,
to the extent permissible under Rule 16b-3. In the event that any Option,
Director Option or other Award granted hereunder is exercised through the
delivery of Shares, the number of Shares available for Awards under the Plan
shall be increased by the number of Shares surrendered, to the extent
permissible under Rule 16b-3.
(b) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
necessary in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall proportionately adjust any or all (as necessary) of: (i) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) with respect to which Awards may be granted; (ii) the
number of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards; and (iii) the grant or
exercise price with respect to any Award, provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended. If, pursuant to the
preceding sentence, an adjustment is made to outstanding Options held by
Participants, a corresponding adjustment shall be made to outstanding Director
Options and if, pursuant to the preceding sentence, an adjustment is made to the
number of Shares authorized for issuance under the Plan, a corresponding
adjustment shall be made to
4
<PAGE> 5
the number of Shares subject to each Director Option thereafter granted pursuant
to Section 6(e).
(c) Sources of Shares. Any Shares delivered pursuant to an Award or
Director Option may consist, in whole or in part, of authorized and unissued
Shares or of treasury Shares.
SECTION 5. ELIGIBILITY. Any Employee, including any officer or
employee-director of the Company or any Subsidiary, who is not a member of the
Committee shall be eligible to be designated a Participant, except that only
Employees who are employees of the Company or a Subsidiary shall be eligible for
the grant of nondiscretionary Director Options in accordance with, and only in
accordance with, Section 6(e) hereof.
SECTION 6. OPTIONS AND DIRECTOR OPTIONS.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Options
shall be granted, the number of Shares to be covered by each Option, the
exercise price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may
be prescribed by Section 422 of the Code, as from time to time amended, and any
regulations implementing such statute, including, without limitation, the
requirements of Code Section 422(d) which limit the aggregate fair market value
of Shares for which Incentive Stock Options are exercisable for the first time
to $100,000.00 per calendar year. Each provision of the Plan and of each written
option agreement relating to an Option designated as an Incentive Stock Option
shall be construed so that such Option qualifies as an Incentive Stock Option,
and any provision that cannot be construed shall be disregarded.
(b) Exercise Price. The Committee shall, in its sole discretion,
establish the exercise price of an Option at the time the Option is granted.
Notwithstanding the forgoing sentence and any other provision contained herein
to the contrary, in the case of an Incentive Stock Option, the exercise price at
the time such Incentive Stock Option is granted to any Employee who, at the time
of such grant, is not a Ten Percent Shareholder, shall be not less than 100% of
the per Share Fair Market Value on the date of grant and the exercise price at
the time such Incentive Stock Option is granted to any Employee who, at the time
of such grant, is a Ten Percent Shareholder, shall be not less than 110% of the
per Share Fair market Value on the date of grant.
(c) Exercise. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter; provided,
in the case of an Incentive Stock Option, a Participant may not exercise such
Incentive Stock Option after: (i) the date which is ten years (five years in the
case of a Participant who is a Ten Percent
5
<PAGE> 6
Shareholder) after the date on which such Incentive Stock Option is granted; or
(ii) the date which is three months (twelve months in the case of a Participant
who becomes disabled, as defined in Section 22(e)(3) of the Code, or who dies)
after the date on which he ceases to be an Employee of the Company or a
Subsidiary. The Committee may impose such conditions with respect to the
exercise of Options, including without limitation, any relating to the
application of federal or state securities laws, as it may deem necessary or
advisable. The Committee shall have the right to accelerate the exercisability
of any Option or outstanding Option in its discretion.
(d) Payment. No Shares shall be delivered pursuant to any exercise of
an Option until payment in full of the exercise price therefor is received by
the Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Shares so
tendered to the Company as of the date of such tender is at least equal to such
exercise price.
(e) Director Options. Notwithstanding anything else contained herein to
the contrary, each Eligible Director shall receive, on the first business day
after each annual meeting of stockholders of the Company, provided that the
Eligible Director is serving as a member of the Board on such date, a grant of a
Director Option to purchase 2,500 Shares at an exercise price per Share equal to
the Fair Market Value on the date of grant. A Director Option shall be
exercisable until the earlier to occur of the following two dates: (i) the tenth
anniversary of the date of grant of such Director Option; or (ii) three months
(twelve months in the case of an Eligible Director who becomes disabled, as
defined in Section 22(e)(3) of the Code, or who dies) after the date the
Eligible Director ceases to be a member of the Board, except that if the
Eligible Director ceases to be a member of the Board after having been convicted
of, or pled guilty or nolo contendere to, a felony, his Director Option shall be
cancelled on the date he ceases to be a member of the Board. An Eligible
Director may pay the exercise price of a Director Option in the manner described
in Section 6(d).
SECTION 7. RESTRICTED STOCK.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Shares of
Restricted Stock shall be granted, the number of Shares of Restricted Stock to
be granted to each Participant, the duration of the period during which, and the
conditions under which, the Restricted Stock will vest and no longer be subject
to forfeiture to the Company, and the other terms and conditions of such Awards.
The Committee shall have the right to accelerate the vesting of any Restricted
Stock or outstanding Restricted Stock in its discretion.
(b) Transfer Restrictions. Until the lapse of applicable restrictions,
Shares of Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise
6
<PAGE> 7
encumbered except as provided in the Plan or the applicable Award Agreements.
Certificates issued in respect of Shares of Restricted Stock shall be registered
in the name of the Participant and deposited by such Participant, together with
a stock power endorsed in blank, with the Company. Upon the lapse of the
restrictions applicable to such Shares of Restricted Stock, the Company shall
deliver such certificates to the Participant or the Participant's legal
representative.
(c) Payment of Dividends. Dividends paid on any Shares of Restricted
Stock may be paid directly to the Participant, or may be reinvested in
additional Shares of Restricted Stock, as determined by the Committee in its
sole discretion.
SECTION 8. PERFORMANCE AWARDS.
(a) Grant. The Committee shall have sole and complete authority to
determine the Employees who shall receive a Performance Award denominated in
cash or Shares: (i) valued, as determined by the Committee, in accordance with
the achievement of such performance goals during such performance periods as the
Committee shall establish; and (ii) payable at such time and in such form as the
Committee shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall determine the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award and the amount and kind of any
payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance Awards may be paid in a
lump sum or in installments following the close of the performance period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 9. AMENDMENT AND TERMINATION.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act for which or with which the Board deems it necessary
or desirable to qualify or comply; and, provided further that no amendment may
be made to Section 6(e) or any other provision of the Plan relating to Director
Options within six months of the last date on which any such provision was
amended, other than to comport with changes to the Code, the Employee Retirement
Income Security Act, or the rules thereunder. Notwithstanding anything to the
contrary herein, the Committee may amend the Plan, subject to any shareholder
approval required under Rule 16b-3, in such manner as may be necessary
7
<PAGE> 8
so as to have the Plan conform with local rules and regulations in any
jurisdiction outside the United States.
(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of any
Participant or any holder or beneficiary of any Award theretofore granted shall
not to that extent be effective without the consent of the affected Participant,
holder or beneficiary.
(c) Cancellation. Any provision of this Plan or any Award Agreement to
the contrary notwithstanding, the Committee may cause any Award granted
hereunder to be cancelled in consideration of the granting to the holder of an
alternative Award having a Fair market Value equal to the Fair Market Value of
such cancelled Award.
SECTION 10. GENERAL PROVISIONS.
(a) Nontransferability.
(i) Each Award and each Director Option, and each right under
any Award or any Director Option, shall be exercisable during the
Participant's or the Eligible Director's lifetime only by the
Participant or the Eligible Director or, if permissible under
applicable law, by the Participant's or the Eligible Director's
guardian or legal representative or a transferee receiving such Award
pursuant to a qualified domestic relations order ("QDRO"), as
determined by the Committee.
(ii) No Award or Director Option that constitutes a
"derivative security," for purposes of Section 16 of the Exchange Act,
may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant or Eligible Director
otherwise than by will or by the laws of descent and distribution or
pursuant to a QDRO, and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Subsidiary; provided that the
designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance.
(b) No Rights to Awards. No Employee, Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.
(c) Share Certificates. All certificates for Shares or other
securities of the Company or any Subsidiary delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other
8
<PAGE> 9
requirements of the SEC, any stock exchange or national securities association
upon which such Shares or other securities are then listed, and any applicable
federal or state laws, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(d) Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the Company or
any Subsidiary, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by, Employees who are not
officers or directors of the Company for purposes of Section 16 of the Exchange
Act, or any successor section thereto, or who are otherwise not subject to such
Section.
(e) Withholding. A Participant or Eligible Director may be required to
pay to the Company or any Subsidiary and the Company or any Subsidiary shall
have the right and is hereby authorized to withhold from any Award or Director
Option, from any payment due or transfer made under any Award or any Director
Option or under the Plan or from any compensation or other amount owing to a
Participant or Eligible Director the amount of any applicable withholding taxes
in respect of an Award or a Director Option, its exercise, or any payment or
transfer under an Award, under a Director Option or under the Plan and to take
such other action as may be necessary in the opinion of the Company to satisfy
all obligations for the payment of such taxes. With respect to participants who
are not subject to Section 16 of the Exchange Act, the withholding may be in the
form of cash, Shares, other securities, other Awards or other property as the
Committee may allow. With respect to Participants and Eligible Directors who are
subject to Section 16 of the Exchange Act, the withholding shall be in cash or
in any other property permitted by Rule 16b-3 as the Committee may allow. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payments
of any Award.
(f) Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto,
including but not limited to the effect on such Award of the death, retirement
or other termination of employment of a Participant and the effect, if any, of a
change in control of the Company.
(g) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Subsidiary from adopting or continuing
in effect other compensation arrangements, which may, but need not, provide for
the grant of Options, Restricted Stock, Shares and other types of Awards
provided for hereunder (subject to stockholder approval if such approval is
required), and such arrangements may be either generally applicable or
applicable only in specific cases.
9
<PAGE> 10
(h) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Subsidiary. Further, the Company or a Subsidiary may at any time
dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or any Award
Agreement.
(i) No Rights as Shareholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a shareholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.
Notwithstanding the foregoing, in connection with each grant of Restricted Stock
hereunder, the applicable Award shall specify if and to what extent the
Participant shall not be entitled to the rights of a shareholder in respect of
such Restricted Stock.
(j) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement shall
be determined in accordance with the laws of the State of Ohio.
(k) Severability. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.
(l) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(m) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Subsidiary and a Participant
or any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Subsidiary pursuant to an Award, such rights
shall be no greater than the right of any unsecured general creditor of the
Company or any Subsidiary.
10
<PAGE> 11
(n) Rule 16b-3 Compliance. With respect to Persons subject to Section
16 of the Exchange Act, transactions under this Plan are intended to comply with
all applicable terms and conditions of Rule 16b-3 and any successor provisions.
To the extent that any provision of the Plan or action by the Committee fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
(o) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(p) No Impact on Benefits. Plan Awards shall not be treated as
compensation for purposes of calculating an Employee's rights under any employee
benefit plan.
(q) Indemnification. Each person who is or shall have been a member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be made a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of any
judgment in any such action, suit, or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and defend the
same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Regulations, by
contract, as a matter of law, or otherwise.
(r) Notwithstanding anything to the contrary contained in the Plan, no
Participant shall, during any calendar year, receive Awards covering more than
50,000 Shares in the aggregate pursuant to such Awards.
SECTION 11. TERM OF THE PLAN.
(a) Effective Date. The Plan shall be effective as of the date of
shareholder approval of the Plan.
(b) Expiration Date. No Award shall be granted under the Plan after
December 31, 2003. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any such
Award shall, continue after December 31, 2003.
11
<PAGE> 1
EXHIBIT 10.29
AMENDMENT TO
DOMINION HOMES, INC.
INCENTIVE STOCK PLAN
The Dominion Homes, Inc. Incentive Stock Plan, as amended to the date
hereof (the "Plan"), is hereby amended in the following respects:
1. Section 10(e) of the Plan is hereby amended to read in its entirety as
follows:
"(e) Withholding. A Participant or Eligible Director may be
required to pay to the Company or any Subsidiary, and the Company or
any Subsidiary shall have the right and is hereby authorized to
withhold from any Award or Director Option, from any payment due or
transfer made under any Award or any Director Option or under the Plan
or from any compensation or other amount owing to a Participant or
Eligible Director the amount of any applicable withholding taxes in
respect of an Award or a Director Option, its exercise, or any payment
or transfer under an Award, under a Director Option or under the Plan
and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes. The
withholding may be in the form of cash, Shares, other securities, other
Awards or other property as the Committee may allow. In addition, a
Participant or Eligible Director shall be entitled to elect to have the
Company or any Subsidiary withhold an amount specified in writing by
the Participant or Eligible Director for federal, state or local income
taxes in respect of an Award or a Director Option, its exercise, or any
payment or transfer under an Award, under a Director Option or under
the Plan, in the form of cash, Shares, other securities, other Awards
or other property as the Committee may allow. The Committee may provide
for additional cash payments to holders of Awards to defray or offset
any tax arising from the grant, vesting, exercise or payments of any
Award."
2. The amendment to the Plan effected by the foregoing provision shall not
be applicable to any Incentive Stock Option outstanding on the date hereof.
3. In all other respects, the Plan as previously approved is hereby
ratified and confirmed.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Amendment
effective the day of July, 1998.
DOMINION HOMES, INC.
By: */s/ROBERT A. MEYER
----------------------------
Robert A. Meyer
<PAGE> 1
EXHIBIT 10.30
AMENDMENT TO
DOMINION HOMES, INC.
AMENDED AND RESTATED
EXECUTIVE DEFERRED COMPENSATION PLAN
The Dominion Homes, Inc. Amended and Restated Executive Deferred
Compensation Plan, as amended to the date hereof (the "Plan"), is hereby amended
in the following respects:
1. Section 8 of the Plan is hereby amended by adding thereto a new Section
8.4 which shall read in its entirety as follows:
"8.4 Withholding
A Participant or Beneficiary may be required to pay
to the Company, and the Company shall have the right
and is hereby authorized to withhold from any payment
of any Deferred Compensation Account the amount of
any applicable withholding taxes in respect of such
payment and to take such other action as may be
necessary in the opinion of the Company to satisfy
all obligations for the payment of such taxes. The
withholding may be in the form of cash, Common
Shares, other securities or other property as the
Committee may allow. In addition, a Participant or
Beneficiary shall be entitled to elect to have the
Company withhold an amount specified in writing by
the Participant or Beneficiary for federal, state or
local income taxes in respect of any payment of his
Deferred Compensation Account, in the form of cash,
Common Shares, other securities or other property as
the Committee may allow."
2. In all other respects, the Plan as previously approved is hereby
ratified and confirmed.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has executed this Amendment
effective the day of July, 1998.
DOMINION HOMES, INC.
By: */s/ROBERT A. MEYER
---------------------------
Robert A. Meyer
<PAGE> 1
EXHIBIT 10.31
SUBLEASE AGREEMENT
THIS SUBLEASE made as of the 31st day of July, 1998, by and between
DOMINION HOMES, INC., an Ohio corporation, P. O. Box 7166, 5501 Frantz Road,
Dublin, Ohio 43017-0766 (hereinafter called "Lessor") and ALLIANCE TITLE AGENCY,
LTD., an Ohio limited liability company (hereinafter called "Lessee").
1. Lease of Premises and Term. In consideration of the rents and
covenants to be performed by Lessee as set forth herein, Lessor hereby leases
unto Lessee, and Lessee hereby hires and takes from Lessor 2730 leasable square
feet (which includes a 12% common area factor) of commercial office space
located on the first floor of Dominion Homes, Inc.'s corporate office building
(the "Building") 5501 Frantz Road, Dublin, Ohio, as shown on the attached
Exhibit "A" (the "Premises") for a term of three (3) years, commencing on August
1, 1998, and ending July 31, 2001.
2. Rent. The total rent for the term of this lease shall be One Hundred
Forty-seven Thousand Four Hundred Twenty Dollars ($147,420.00). Lessee agrees to
pay Lessor said rent in advance in monthly installments of Four Thousand
Ninety-five Dollars ($4,095.00) on or before the first day of each month,
commencing August 1, 1998. Included in the stated rent is Six Dollars ($6.00)
per square foot per year which represents Lessee's proportionate share of the
Premises' real estate tax, insurance, common area maintenance, janitorial
service, telephone equipment, and decorating allowance. All rent installments
shall be due and payable, without demand, deduction, or setoff, to Lessor at the
address provided above.
3. Security Deposit. Lessee and Lessor hereby agree that no security
deposit will be provided to secure the lease.
4. Use of Premises. Lessee shall occupy and use the Premises solely for
office use and for no other purpose. Lessee will comply with all applicable
laws, ordinances, rules and regulations of any duly constituted public authority
relating to its business and the use of the Premises. Lessee shall maintain the
Premises in a clean, sanitary condition at all times and shall not permit
rubbish to accumulate on or about the Premises. Lessee agrees to comply with all
Building rules and regulations which are adopted by Lessor from time to time.
5. Improvements, Repairs and Maintenance. Lessee shall take good care
of the Premises and the fixtures and improvements therein, and all trade
fixtures and/or all alterations or installations installed by Lessee or Lessor,
keeping same in good order and repair and will use the Premises during the term
for the purpose above specified and no other. At the expiration, or earlier
termination in any manner, of the term hereof, Lessee shall quit and surrender
the Premises together with all installations, improvements and alterations
(including partitions) which may have been installed by Lessor or Lessee broom
clean and in as good condition and repair as when possession was delivered,
reasonable use and wear excepted, failing which Lessor may restore the Premises
to such conditions and Lessee shall pay the costs thereof. If Lessee removes any
of its trade fixtures, it shall repair any damage to the Premises caused by such
removal. If Lessee fails to remove Lessee's trade fixtures which it has a right
to remove from the Premises prior to the end of the term, Lessee shall be
conclusively presumed to have abandoned the same and ownership thereof shall
forthwith vest in Lessor without payment or credit to Lessee.
6. Alterations. Lessee shall not make any alteration, additions,
improvements or other changes in or to the Premises or the building, or attach,
affix or build therein any improvement or installation nor do anything to alter
the exterior appearance of the building without Lessor's prior written consent
in each and every instance. If prior to the termination of the Lease, Lessor so
directs Lessee by written notice, Lessee shall promptly remove any specified
alterations, improvements or installations placed in or upon the Premises by
Lessee, the Lessee shall repair any damage occasioned by such removal.
7. Lessee's Acceptance of Premises. Lessor's delivery of the Premises
to Lessee and Lessee's entering onto the Premises for the rental purpose
identified above
<PAGE> 2
shall be deemed acceptance by the Lessee of the Premises in the condition as of
the date of said entering, and Lessee shall take possession of the Premises in
"as is" condition, and Lessee shall be bound by the terms of this Lease.
8. Late Payments. Without limiting the remedies of the Lessor under the
terms of this Lease or the laws of the State of Ohio or of the United States,
any payment of any kind which is to be made by Lessee to Lessor, if not paid
within ten (10) calendar days of the date same is due, shall incur a late charge
equal to Five Percent (5%) of that month's monthly rental.
9. Utilities. Except as otherwise provided herein, Lessor shall furnish
at no cost to Lessee all electric, heat, air conditioning, water, telephone
equipment, elevator services, lavatory and toilets and janitorial service
necessary for the normal use of the Premises during normal and customary working
hours on all weekdays and Saturday mornings, excluding holidays. Lessee shall
reimburse Lessor for its proportionate share of the local and long distance
telephone service contract that Lessor shall in its sole judgment choose to
provide telephone service to the Premises. Lessee and Lessor further agree
Lessee's proportionate share of the telephone service contract shall be One
Thousand Two Hundred Dollars ($1,200.00) per month commencing August 1, 1998, or
as from time to time Lessee and Lessor may agree. Lessee shall not provide any
janitorial service to the Premises without Lessor's prior consent.
Lessor does not warrant that any of the services
above-mentioned will be free from interruptions caused by war, insurrection,
civil commotion, riots, acts of God, or the enemy, or governmental action,
repairs, renewals, improvements, alterations, strikes, lockouts, picketing,
whether legal or illegal, accidents, inability of Lessor to obtain fuel or
supplies, or any other cause or causes beyond the reasonable control of Lessor.
Any such interruption of service shall never be deemed an eviction or
disturbance of the Lessee's use and possession of the Premises or any part
hereof or render the Lessor liable to the Lessee for damages, or relieve the
Lessee from the performance of Lessee's obligations under this lease. Lessor's
obligation to furnish light, heat and power shall be conditioned upon the
availability of adequate energy sources. Lessor shall have the right to reduce
heat and lighting within the Premises and the common areas as required by any
mandatory or voluntary fuel or energy saving, allocation or similar statute,
regulation, order or program.
10. Common Areas. Lessee and Lessee's agents, employees, licensees and
invitees shall have the right to use, in common with Lessor and Lessor's tenants
and the agents, employees, licensees and invitees of each, the public sidewalks
and parking areas, together with the corridors, public toilets and other public
areas located on the first floor of the Building, subject, however, to all
applicable Building rules and regulations.
11. Insurance.
A. Lessee shall, at Lessee's expense, procure and maintain in
force during the term of this lease and any extension thereof, fire and extended
coverage insurance in an amount at least equal to the full insurable value of
Lessee's improvements. A memorandum of insurance providing at least ten (10)
days' written notice in the event of cancellation, if applicable, will be
furnished to Lessor evidencing such coverage.
B. Lessee agrees to procure and maintain in force during the
term of this lease and any extensions thereof at their expense, public liability
insurance for damage claims through public use of or arising out of accidents
occurring in or around the Premises, in such amounts as Lessor shall require.
Said insurance shall cover the Premises as well as the sidewalks and driveways
adjoining the Premises. Such insurance policies shall name Lessor as an
additional insured, and shall include a waiver of subrogation clause as to
Lessor. A certificate of insurance with a clause providing at least ten (10)
days written notice to Lessor in the event of cancellation, shall be provided to
Lessor upon execution hereof.
-2-
<PAGE> 3
C. Lessee covenants and agrees to indemnify and save Lessor,
its successors and assigns, harmless from all loss, expense, liability, causes
of action and judgments in any way arising from Lessee's occupancy of the
Premises and conduct of Lessee's business therein, including without limitation
paying Lessor's costs of defending any such claim or action.
D. Lessor shall keep the Premises and the building of which
the Premises are a part, insured against loss due to fire and other casualties
covered under an extended coverage policy in an amount not less than 80% of the
full insurable value thereof.
E. Tenant will not do, or permit to be done, in or upon the
Premises or bring or keep or permit anything to be brought into or kept on the
Premises which shall increase the premiums for fire and extended coverage
insurance on the building of which the Premises form a part or on the property
located thereon. Lessee agrees to pay such increase in premium for fire and
extended coverage insurance that may be charged during the term of this Lease on
the amount of such insurance which may be carried by Lessor on said Premises or
the building of which it is a part, resulting from any of the above omissions or
commissions of Lessee.
12. Casualty Loss. In the event that all or a material portion of
the Premises or building are damaged or destroyed by fire or other casualty or
are taken by condemnation proceeding (including a deed in lieu thereof) then
this lease shall terminate as of the date of damage or destruction or as of the
date possession is required by the condemning authority. In such event, Lessee
shall be liable for all accrued rent and other charges only to such date, and
Lessee shall be released from all future obligations hereunder. All loss
proceeds and condemnation awards shall belong to Lessor. Lessor shall in no
event be obligated to repair or restore the Premises. The foregoing
notwithstanding, in the event of an insubstantial casualty loss or taking
affecting the Premises or the building or land, and in the event that the
Premises can be restored to their former economic utility to Lessee within 60
days after such event, then, at Lessor's option, this lease shall not terminate,
but rather Lessor shall proceed to restore the Premises and Lessee's rent shall
abate for the period and to the extent that use of the Premises is denied Lessee
as a result thereof.
13. Inspection and Maintenance. Lessor reserves the right to enter
the Premises at reasonable times to inspect them, to perform required
maintenance and repairs, to make additions or alterations on any part of the
building in which the Premises are located and Lessee agrees to permit Lessor to
do so. Lessor may, in connection with such alteration additions, or repairs,
erect scaffolding, fences and similar structures, post relevant notices, and
place movable equipment; provided that in so doing Lessor shall use its best
efforts to avoid disturbing Lessee's quiet enjoyment of the Premises, or
interfering with their occupation thereof.
14. Defaults. If Lessee defaults in payment of rent, Lessee's
share of Common Expenses, or in the performance of any of the conditions or
covenants of this lease, or if any bankruptcy, insolvency or similar proceeding
is filed by or against the Lessee, or if Lessee abandons the Premises or ceases
business operations therein for more than 15 days (unless in connection with
restoration after casualty loss) Lessor lawfully may, in addition to any other
remedies available in law or in equity, immediately or at any time thereafter,
and without demand or notice, enter into and upon the Premises and repossess the
same as of its former estate, and expel Lessee and those claiming through or
under it and remove its or their effects (forcibly, if necessary) without being
deemed guilty of any manner of trespass, and without prejudice to any remedies
which might otherwise be used for arrears or rent or preceding breach of
covenant, and upon entry as aforesaid this Lease shall terminate; and Lessee
covenants and agrees, notwithstanding any entry or re-entry by Lessor whether by
summary proceedings, termination or otherwise, to pay and be liable for, on the
days originally fixed herein for the payment thereof, amounts equal to the
several installments of rent and other charges reserved as would, under the
terms of this Lease, become due if this Lease had not been terminated or if
Lessor had not entered or re-entered as aforesaid, and whether the Premises be
relet or remain vacant in whole or
-3-
<PAGE> 4
in part or for a period less than the exceeding amount of any deficiency then
existing, or at the election of Lessor, Lessee will upon such termination pay to
the Lessor as damages such a sum as at the time of such termination represents
the difference between the then rental value of the Premises for the remainder
of the said term and the rent and other payments named herein.
15. Holding Over. It is hereby agreed that in the absence of a written
lease extension as described in Paragraph One of this Lease, upon termination of
the initial lease term or any renewal hereof, Lessee shall occupy the Premises
solely as a tenant from month to month under the same terms and conditions as
are then in effect.
16. Subordination. Lessee shall, upon the request of Lessor in writing,
subordinate this Lease and the lien hereof by executing promptly, without cost,
any instruments which may be necessary or desirable to evidence such
subordination, to the lien of any present or future mortgage or mortgages upon
the Premises or any property of which the Premises are a part irrespective of
the time of execution or the time of recording of any such mortgage or
mortgages, provided that the holder of any such mortgage shall enter into a
written agreement with Lessee to the effect that in the event of foreclosure or
other action taken under the mortgage by the holder thereof this Lease and the
rights of Lessee hereunder shall not be disturbed but shall continue in full
force and effect so long as Lessee shall not be in default hereunder. The word
"mortgage" as used herein includes mortgages, other similar instruments and
modifications, extensions, renewals and replacements thereof, and any and all
advances thereunder.
17. Notices. All notices required or agreed to be given hereunder by
either party shall be in writing and sent by registered or certified mail with
postage prepaid to Lessor at 5501 Frantz Road, Dublin, Ohio 43017, or to Lessee
at 5501 Frantz Road, Dublin, Ohio 43017, or to such other person or place as the
parties may direct in writing from time to time. Any notice to Lessee or Lessor
addressed to any other address or city shall be of no force and effect. Date of
service of notice shall be the date such notice is deposited in a post office of
the U. S. Postal Service.
18. Waiver. No waiver of any covenant of this lease or a breach of such
covenant shall constitute a waiver of any other covenant or the continued breach
of said covenant.
19. Authority and Peaceable Enjoyment. Lessor represents that it
maintains a master lease of the Premises that has the right to lease the same.
If Lessee performs the covenants herein agreed to be performed by it, Lessor
shall warrant and defend Lessee in the enjoyment and peaceful possession of the
Premises during the term hereof.
20. Assignment. Lessee shall not assign or sublease the Premises, or
any part thereof, or to allow any other person, to occupy the Premises or any
part thereof, without first obtaining Lessor's advance written consent. If
Lessor consents to any assignment or subletting, Lessee shall nevertheless
remain primarily liable for Lessee's obligations under the Lease. Any such
unauthorized assignment, sublease or license to occupy shall be void and shall
terminate the lease at the Lessor's sole option.
21. Miscellaneous. This lease and covenants and conditions hereof apply
to and are binding upon the heirs, successors, executors, administrators and
assigns of the parties hereto. This instrument is the entire agreement and
understanding between Lessor and Lessee with respect to the subject matter
hereof. It may be amended only in a writing signed by the party to be charged.
This lease shall be governed by and construed in accordance with the laws of the
State of Ohio. If a court of competent jurisdiction subsequently declares any
provision hereof to be invalid or unenforceable, the remaining provisions hereof
shall remain in full force and effect to the maximum extent possible. This lease
shall not be recorded, but Lessor agrees to execute a memorandum hereof upon
Lessee's request.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties to these presents have hereunder set
their hands and seals the day and year first above written.
Signed and acknowledged DOMINION HOMES, INC., an Ohio
in the presence of: corporation
________________________________________ By: */s/TERRY E. GEORGE
-----------------------------
Print Name: ____________________________ Terry E. George
Senior Vice President
________________________________________
Print Name:_____________________________
ALLIANCE TITLE AGENCY, LTD., an
Ohio limited liability company
By:CC, I LTD., an Ohio limited
liability company, Manager
________________________________________ By: */s/ DENIS G. CONNOR
-----------------------------
Print Name:_____________________________ Denis G. Connor
Member
________________________________________
Print Name:_____________________________
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this day of
July, 1998, by Terry E. George, Senior Vice President of Dominion Homes, Inc.,
an Ohio corporation, on behalf of the corporation.
---------------------------------
Notary Public
STATE OF OHIO,
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this day of
July, 1998, by Denis G. Connor, Member of CC, I Ltd., an Ohio limited liability
company, Manager of Alliance Title Agency, Ltd., an Ohio limited liability
company, on behalf of the limited liability company.
------------------------------
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998 AND STATEMENTS OF INCOME FOR THE SIX MONTHS ENDING
JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
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<CASH> 2
<SECURITIES> 0
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<ALLOWANCES> (61)
<INVENTORY> 113,399
<CURRENT-ASSETS> 0
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0
0
<COMMON> 30,779
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<TOTAL-LIABILITY-AND-EQUITY> 121,906
<SALES> 122,489
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<CGS> 98,588
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 2,402
<INCOME-PRETAX> 8,076
<INCOME-TAX> 3,392
<INCOME-CONTINUING> 4,684
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<NET-INCOME> 4,684
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