<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, 1999
or
( ) 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 or organization) Identification No.)
5501 Frantz Road, Dublin, Ohio
------------------------------
(Address of principal executive offices)
43017-0766
----------
(Zip Code)
(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 10, 1999: 6,293,480
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMINION HOMES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
================================================================================
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(Unaudited)
------------------ ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 410 $ 261
Notes and accounts receivable, net:
Trade 222 133
Due from financial institutions for residential closings 1,405 769
Real estate inventories:
Land and land development costs 82,146 71,404
Homes under construction 61,300 50,843
Other 4,765 2,906
------------------ --------------
Total real estate inventories 148,211 125,153
------------------ --------------
Prepaid expenses and other 3,812 3,111
Deferred income taxes 1,834 1,788
Property and equipment, at cost: 8,224 7,385
Less accumulated depreciation (3,477) (3,244)
------------------ --------------
Total property and equipment 4,747 4,141
------------------ --------------
Total assets $ 160,641 $ 135,356
================== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade $ 8,001 $ 5,520
Deposits on homes under contract 2,468 2,601
Accrued liabilities 11,825 12,131
Note payable, banks 79,392 60,415
Term debt 5,869 4,461
------------------ --------------
Total liabilities 107,555 85,128
------------------ --------------
Commitments and contingencies
Shareholders' equity
Common shares, without stated value, 12,000,000 shares authorized,
6,324,104 and 6,281,504 shares issued and outstanding, respectively 31,119 30,851
Less deferred compensation (372) (371)
Retained earnings 22,339 19,748
------------------ --------------
Total shareholders' equity 53,086 50,228
------------------ --------------
Total liabilities and shareholders' equity $ 160,641 $ 135,356
================== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 3
DOMINION HOMES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
================================================================================
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 72,795 $ 68,031 $ 125,569 $ 122,489
Cost of real estate sold 59,332 55,030 102,118 98,588
--------- --------- --------- ---------
Gross profit 13,463 13,001 23,451 23,901
Selling, general and administrative 8,659 7,071 16,232 13,423
--------- --------- --------- ---------
Income from operations 4,804 5,930 7,219 10,478
Interest expense 1,589 1,311 2,752 2,402
--------- --------- --------- ---------
Income before income taxes 3,215 4,619 4,467 8,076
Provision for income taxes 1,347 1,940 1,876 3,392
--------- --------- --------- ---------
Net income $ 1,868 $ 2,679 $ 2,591 $ 4,684
========= ========= ========= =========
Earnings per share
Basic $0.30 $0.43 $0.41 $0.75
========= ========= ========= =========
Diluted $0.29 $0.41 $0.40 $0.71
========= ========= ========= =========
Weighted average shares outstanding
Basic 6,319,297 6,272,646 6,303,318 6,270,435
========= ========= ========= =========
Diluted 6,527,661 6,608,399 6,540,960 6,594,730
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
DOMINION HOMES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
Common Shares Deferred Compensation
--------------------------- ------------------------------
Retained
Shares Amount Liability Treasury Shares Earnings Total
- ------------------------------------- ------------- ------------- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 6,281,504 $30,851 $853 $(1,224) $19,748 $50,228
Net income 2,591 2,591
Shares awarded and redeemed 42,600 268 (35) 233
Treasury shares held for
deferred compensation plan (27) (27)
Deferred compensation 61 61
- ------------------------------------- ------------- ------------- ------------- ---------------- ------------ ------------
Balance, June 30, 1999 6,324,104 $31,119 $879 $(1,251) $22,339 $53,086
- ------------------------------------- ------------- ------------- ------------- ---------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
DOMINION HOMES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------
1999 1998
----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,591 $ 4,684
Adjustments to reconcile net income to cash
(used in) provided by operating activities:
Depreciation and amortization 706 345
Disposal of property and equipment (6) (7)
Issuance of common shares for compensation 268 106
Deferred income taxes (46) 110
Changes in assets and liabilities:
Notes and accounts receivable (725) (1,031)
Real estate inventories (21,486) (396)
Prepaid expenses and other (910) (1,020)
Accounts payable 2,481 1,191
Deposits on homes under contract (133) 1,046
Accrued liabilities (323) (1,203)
-------------- ---------------
Net cash (used in) provided by operating activities (17,583) 3,825
-------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 10 17
Purchase of property and equipment (624) (839)
-------------- ---------------
Net cash used in investing activities (614) (822)
-------------- ---------------
Cash flows from financing activities:
Proceeds from note payable, banks 142,094 116,827
Payments on note payable, banks (123,117) (116,739)
Prepaid loan fees (1,536)
Payments on term debt (604) (1,805)
Common shares purchased or redeemed (27)
-------------- ---------------
Net cash provided by (used in) financing activities 18,346 (3,253)
-------------- ---------------
Net change in cash and cash equivalents 149 (250)
Cash and cash equivalents, beginning of period 261 252
============== ===============
Cash and cash equivalents, end of period $ 410 $ 2
============== ===============
Supplemental disclosures of cash flow information:
Interest paid (net of amounts capitalized) $ 841 $ 381
============== ===============
Income taxes paid $ 2,530 $ 4,205
============== ===============
Land acquired by seller financing $ 1,572
============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
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.
The December 31, 1998 balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally
accepted accounting principles. These financial statements should be read
in conjunction with the December 31, 1998 audited annual financial
statements of the Company contained in its Annual Report to Shareholders or
in its December 31, 1998 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, 1999 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.
3. CAPITALIZED INTEREST
Interest is capitalized on land during the development period and on
housing construction costs during the construction period. As lots are
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 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 $2.3
million and $1.9 million at June 30, 1999 and June 30, 1998, respectively.
The following table summarizes the activity with respect to capitalized
interest:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Interest incurred $1,661,000 $1,269,000 $3,166,000 $ 2,454,000
Interest capitalized (1,124,000) (1,045,000) (2,268,000) (1,979,000)
----------- ----------- ----------- --------------
Interest expensed directly 537,000 224,000 898,000 475,000
Previously capitalized interest
charged to interest expense 1,052,000 1,087,000 1,854,000 1,927,000
--------- --------- ------------- -------------
Total interest expense $1,589,000 $1,311,000 $2,752,000 $ 2,402,000
========== ========== ============= =============
</TABLE>
6
<PAGE> 7
4. NOTE PAYABLE, BANKS
The Company is currently operating under a $125 million Senior
Unsecured Revolving Credit Facility ("the Facility") that was executed on
May 29, 1998 and is described in the Company's Annual Report and Form 10-K
for the year ended December 31, 1998. The Facility was amended August 9,
1999, to increase to $2.5 million from $500,000, the amount of its Common
Shares that the Company is allowed to redeem or purchase in any year. The
Facility provides for a variable rate of interest on borrowings. In order
to reduce exposure to increasing interest rates, the Company has entered
into interest rate swap contracts that fix the interest rate on $30 million
of borrowings under the Facility. 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%.
As of June 30, 1999, the Company was in compliance with Facility
covenants and had $12.7 million available under its Facility, after
adjustment for borrowing base limitations. Borrowing availability under the
Facility could increase, depending on the Company's utilization of the
proceeds.
5. EARNINGS PER SHARE
A reconciliation of the weighted average shares used in basic and
diluted Earnings Per Share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average shares outstanding
during the period 6,319,297 6,272,646 6,303,318 6,270,435
Assuming exercise of options 208,364 335,753 237,642 324,295
--------- ---------- ---------- ---------
Weighted average shares outstanding
adjusted for common share equivalents 6,527,661 6,608,399 6,540,960 6,594,730
========= ========= ========= =========
</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.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company recorded revenues of $72.8 million from 436 home closings in
second quarter 1999 compared to $68.0 million from 461 home closings in second
quarter 1998. Net income for second quarter 1999 was $1.9 million, or $.29 per
diluted share, compared to $2.7 million, or $.41 per diluted share, for second
quarter 1998. Despite closing 25 fewer homes in second quarter 1999 than second
quarter 1998, revenues and gross profit in second quarter 1999 were higher due
to an increase in the average price of homes closed in second quarter 1999. The
average price of homes closed in second quarter 1999 increased to $166,663 from
$147,278 in second quarter 1998, an increase of $19,385 or 13.2%. The increases
in second quarter 1999 revenues and gross profit, however, were offset by higher
selling, general and administrative expense that increased in second quarter
1999 to $8.7 million from $7.1 million in second quarter 1998, an increase of
$1.6 million or 22.5%.
Selling, general and administrative expense began increasing in the second
half of 1998 as the Company added field personnel and enhanced its operational
systems to meet the approximately 25% growth in its business from the prior
year. This expense level continued during the first half of 1999. Also, the
Company's expenses in 1999 include the impact of the growth in its Louisville,
Kentucky division, which began operations in September 1998.
New home contracts in second quarter 1999 increased to 412 contracts from
402 contracts in second quarter 1998. Due to the record sales experienced during
first quarter 1998, the Company's backlog of sales contracts at June 30, 1999
declined to 849 contracts from 944 contracts at June 30, 1998. However, the
aggregate sales value of the contracts in backlog at June 30, 1999 increased to
$151.5 million from $149.8 million at June 30, 1998, reflecting the increased
sales prices of the Company's homes. The average sales price of homes in backlog
at June 30, 1999 increased to $178,407 from $158,733 at June 30, 1998, an
increase of $19,674 or 12.4%.
8
<PAGE> 9
COMPANY OUTLOOK
The Company expects enhanced deliveries during second half 1999, but
anticipates sales, revenues and net income for the full year to be somewhat less
than reported for 1998. The increased sales price of homes in backlog at June
30, 1999, combined with higher gross margins, are expected to partially mitigate
the effects of fewer closings expected in 1999 compared to 1998. The Company
expects to maintain its selling, general and administrative expenses at the
current level for the balance of the year in order to efficiently meet the
current level of activity in central Ohio and to expand its building capacity in
Louisville, Kentucky, where the Company anticipates future growth.
During second quarter 1999, the Company's customers began to experience
higher mortgage interest rates. Such increases in mortgage interest rates did
not appear to have materially affected the Company's sales during second quarter
1999. However, additional increases in mortgage interest rates could reduce the
demand for the Company's homes.
The Company is optimistic that it will gain market share in Louisville's
strong home buying market but does not expect that the Louisville operation will
be profitable in 1999. In April 1999, the Company began selling homes in two
Louisville communities and has a third community under development. Through June
30, 1999, the Company has sold 23 homes and closed two homes in the Louisville
market.
YEAR 2000 READINESS DISCLOSURE STATEMENT
The Year 2000 problem exists because many computer programs use only the
last two digits to refer to a year. Accordingly, such computer programs do not
distinguish a year that begins with "20" from a year that begins with "19." If
not corrected, these computer programs could fail or create erroneous results.
The Company has developed and is in the process of implementing a plan for
the identification and remediation of Year 2000 issues that could affect its
business. The identification and remediation plan has five categories: (1)
mission critical software, (2) other software, (3) information technology
hardware, (4) non-information technology systems, and (5) third party related
issues.
MISSION CRITICAL SOFTWARE: The Company has identified four mission critical
software systems: homebuilding accounting and job cost, contract administration,
sales management, and lumber division accounting and inventory management. In
January 1998, the Company purchased and began implementation of a JDEdwards
homebuilding and job cost accounting software system. This is the primary
software the Company uses to run its business. The project was completed July 1,
1998 and has been tested as Year 2000 compliant. In August 1998, the Company
completed transition of its contract administration and sales management
software systems to new software systems, which have been tested as Year 2000
compliant. In February 1999, the Company completed implementation of a JDEdwards
accounting and inventory management software system at its lumber division. This
system has been warranted to be Year 2000 compliant. The Company expects to test
the system by the end of third quarter 1999.
OTHER SOFTWARE: The Company maintains and periodically updates an inventory
of all other software utilized by it, such as word processing, spreadsheet, and
database management. During third quarter 1998, the Company began testing this
software for Year 2000 compliance. The Company expects to complete this testing
and transition to Year 2000 compliant software during third quarter 1999.
INFORMATION TECHNOLOGY HARDWARE: The Company maintains and periodically
updates an inventory of all information technology hardware. The Company has
identified and obtained written confirmation from hardware manufacturers that
their hardware is Year 2000 compliant. The Company has tested all hardware and
replaced any that was not Year 2000 compliant.
9
<PAGE> 10
NON-INFORMATION TECHNOLOGY SYSTEMS: The Company has developed an inventory
of all non-information technology systems that are likely to have a material
impact on the Company's ability to conduct business, such as telephones and
security systems. The Company has performed internal testing and has completed
all necessary changes.
THIRD PARTY RELATED ISSUES: The Company has identified those vendors and
subcontractors which have a material effect on the Company's ability to conduct
business. The Company has developed and distributed a questionnaire to all
vendors and subcontractors with respect to their own Year 2000 compliance. The
Company has received responses from the vendors and subcontractors that it
considers to be material to its operations. Based on these responses, the
Company has not identified any anticipated Year 2000 problems that could
materially impact the Company's operations. Nonetheless, the Company expects to
buy additional lumber, prior to December 31, 1999, to help assure an adequate
supply of lumber in the event that its lumber suppliers encounter an
unanticipated Year 2000 problem. In the event that any of the Company's other
vendors or subcontractors encounter a material Year 2000 problem, the Company
will attempt to move its business to alternate vendors or subcontractors. The
Company, however, cannot guarantee that other vendors and subcontractors will be
available or that they will be able to meet the demands of the Company
COSTS TO ADDRESS THE YEAR 2000 ISSUES: The Company has spent approximately
$2.6 million on its Year 2000 compliance plan through June 30, 1999 and has
budgeted a total cost of $2.8 million. These costs include normal system
upgrades and technology improvements that would have been implemented regardless
of the Year 2000 issue.
RISKS: Failure of the Company or its vendors and subcontractors to
adequately address the Year 2000 issues in a timely manner could impede the
Company's ability to build and close homes and thus have a material adverse
affect on the Company's ability to generate revenues. Accordingly, the Company
intends to address all known Year 2000 issues before problems materialize.
Should the efforts on the part of the Company, its vendors, and its
subcontractors fail to adequately address their relevant Year 2000 issues, the
worst case scenario would be an interruption of revenues of an undetermined
length of time. The Company has developed the contingency plan identified above
under "Third Party Related Issues," to deal with any unexpected Year 2000
problems from its vendors and subcontractors. The Company does not expect to
develop any further contingency plans prior to the end of 1999.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This standard is effective for financial
statements for fiscal quarters of fiscal years beginning after June 15, 2000.
The Company will be required to adopt SFAS No. 133 effective January 1, 2001.
SFAS No. 133 standardizes the accounting for derivative instruments by requiring
that all entities recognize them as assets and liabilities in the balance sheet
and subsequently measure them at fair market value. It also prescribes specific
accounting principles to be applied to hedging activities and hedging
transactions, which are significantly different from prior accounting
principles. The Company has not yet determined the impact of SFAS No. 133.
10
<PAGE> 11
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The statements contained in this report under the captions "Company
Outlook" and "Year 2000 Readiness Disclosure Statement" and other provisions of
this report which are not historical facts are "forward looking statements" that
involve various important risks, uncertainties and other factors which could
cause the Company's actual results for 1999 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, 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 or adverse decisions in the
zoning, permitting or inspection processes, adverse decisions or change in
requirements by environmental agencies, 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, problems associated with the Year 2000 issue, problems that could
arise from expansion into the Louisville, Kentucky market and the other risks
described in the Company's Securities and Exchange Commission filings.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company has experienced, and expects to continue to experience,
significant seasonality and quarter-to-quarter variability in homebuilding
activity levels. Typically, closings and related revenues will increase in the
second half of the year. The Company believes that this seasonality reflects the
tendency of 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.
The following table sets forth certain data for each of the last eight
quarters:
<TABLE>
<CAPTION>
THREE SALES BACKLOG
MONTHS REVENUES CONTRACTS CLOSINGS (AT PERIOD END)
ENDED (IN THOUSANDS) (IN UNITS) (1) (IN UNITS) (IN NITS)
==========================================================================================================
<S> <C> <C> <C> <C>
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
Sept. 30, 1998 $67,769 330 437 837
Dec. 31, 1998 $74,679 381 467 751
Mar. 31, 1999 $52,774 453 331 873
June 30, 1999 $72,795 412 436 849
</TABLE>
- -------------------
(1) Net of cancellations
At June 30, 1999, the aggregate sales price of homes in backlog was $151.5
million compared to $149.8 million at June 30, 1998. The average sales price of
homes in backlog at June 30, 1999 increased to $178,407 from $158,733 at June
30, 1998.
11
<PAGE> 12
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:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of real estate sold 81.5 80.9 81.3 80.5
--------- ---------- --------- --------
Gross profit 18.5 19.1 18.7 19.5
Selling, general and
administrative expenses 11.9 10.4 12.9 11.0
---------- ---------- --------- --------
Income from operations 6.6 8.7 5.8 8.5
Interest expense 2.2 1.9 2.2 1.9
---------- ---------- --------- --------
Income before income taxes 4.4 6.8 3.6 6.6
Provision for income taxes 1.8 2.9 1.5 2.8
---------- ---------- --------- --------
Net income 2.6% 3.9% 2.1% 3.8%
========== ============ ========= =========
</TABLE>
12
<PAGE> 13
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1998
REVENUES. Revenues for second quarter 1999 increased to $72.8 million from
$68.0 million for second quarter 1998 despite the Company closing 25 fewer homes
in second quarter 1999. Second quarter 1998 included seven model homes that the
Company sold and leased back for use as sales models. The increase in revenues
is attributable to a higher average home sale price, which increased to $166,663
during second quarter 1999 from $147,278 during second quarter 1998, an increase
of $19,385 or 13.2%. The increase in the average home sale 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 because the Company offered a greater selection of larger homes and
because the FHA mortgage limits were increased, allowing customers to finance
larger homes. Included in revenues were the sale of land and building supplies
to other builders of $130,000 and $180,000 for second quarter 1999 and 1998,
respectively.
GROSS PROFIT. Gross profit for second quarter 1999 increased to $13.5
million from $13.0 million for second quarter 1998, primarily as a result of
closing higher priced homes in second quarter 1999. As a percentage of revenues,
the gross profit margin declined to 18.5% for second quarter 1999 from 19.1% for
second quarter 1998. The decrease in second quarter 1999 gross profit margin is
principally attributed to fewer deliveries and the increased cost of many home
building materials.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for second quarter 1999 increased to $8.7 million from
$7.1 million for second quarter 1998. This $1.6 million increase in selling,
general and administrative expenses is a result of the Company adding personnel
and equipment in Central Ohio in order to expand its building capacity relative
to second quarter 1998 and to invest in its new Louisville, Kentucky market. In
addition, second quarter 1999 selling, general and administrative expenses fully
recognized the amortized expense associated with the investment the Company
previously made in computer systems in order to build homes more efficiently,
distribute materials and components of its homes more effectively, provide
internal and external communication, and address Year 2000 computer hardware and
software concerns. As a percentage of revenues, selling, general and
administrative expenses for second quarter 1999 increased to 11.9% from 10.4%
for second quarter 1998.
INTEREST EXPENSE. Interest expense for second quarter 1999 increased to
$1.6 million from $1.3 million for second quarter 1998. As a percentage of
revenues, interest expense for second quarter 1999 increased to 2.2% from 1.9%
for second quarter 1998. The primary reasons for the increase in interest
expense were higher average revolving line of credit borrowings partially offset
by a lower average interest rate. The average revolving line of credit
borrowings outstanding were $83.7 million and $56.4 million for the second
quarter of 1999 and 1998, respectively. The average revolving line of credit
borrowings were higher in second quarter 1999 than second quarter 1998 in order
to finance increased real estate inventories in second quarter 1999. The
weighted average rate of interest under the Company's revolving line of credit
was 7.1% for second quarter 1999 compared to 8.3% for second quarter 1998. The
Company capitalized $114,000 more net interest expense in second quarter 1999
than second quarter 1998 due to increased development and construction
inventories.
PROVISION FOR INCOME TAXES. Income tax expense for second quarter 1999
decreased to $1.3 million from $1.9 million for second quarter 1998. The
Company's estimated annual effective tax rate was 42.0% for second quarter 1999
and 1998, respectively.
13
<PAGE> 14
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Revenues for the six months ended June 30, 1999 increased to
$125.6 million from $122.5 million for the six months ended June 30, 1998. The
Company closed 767 homes during the first six months of 1999 compared to 831
homes during the first six months of 1998, a decrease of 64 homes or 7.7%.
Closings for the six months ended June 30, 1998 included seven model homes that
the Company sold and leased back to use as sales models. The increase in
revenues is attributable to a higher average home sale price, which increased to
$163,501 during the first six months of 1999 from $147,117 during the first six
months of 1998, an increase of $16,384 or 11.1%. The increase in the average
home sale 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 because the Company offered 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 $160,000 for the first six months of 1999 compared to
$280,000 for the first six months of 1998.
GROSS PROFIT. Gross profit for the first six months of 1999 was $23.5
million compared to $23.9 million for the first six months of 1998, despite
closing 64 fewer homes in the first six months of 1999 than 1998. As a
percentage of revenues, the gross profit margin declined to 18.7% for the first
six months of 1999 from 19.5% for the first six months of 1998. The higher
average home sales price during the first half of 1999 significantly offset the
effects of delivering fewer homes with a lower gross profit margin. The decrease
in first half 1999 gross profit margin is principally attributable to fewer
deliveries and the increased cost of home building materials.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first six months of 1999 increased to $16.2
million from $13.4 million for the first six months of 1998. This $2.8 million
increase in selling, general and administrative expenses is a result of the
Company adding personnel and equipment in Central Ohio in order to expand its
building capacity relative to first half 1998 and to invest in its new
Louisville, Kentucky market. In addition, first half 1999 selling, general and
administrative expenses fully recognized the amortized expense associated with
the investment the Company previously made in computer systems in order to build
homes more efficiently, distribute materials and components of its homes more
effectively, provide internal and external communication, and address Year 2000
computer hardware and software concerns. As a percentage of revenues, selling,
general and administrative expenses for the first six months of 1999 increased
to 12.9% from 11.0% for the first six months of 1998.
INTEREST EXPENSE. Interest expense for the first six months of 1999
increased to $2.8 million from $2.4 million for the first six months of 1998. As
a percentage of revenues, interest expense for the first six months of 1999
increased to 2.2% from 1.9% for the first six months of 1998. The primary
reasons for the increase in interest expense was a higher average revolving line
of credit borrowings partially offset by a lower average interest rate. The
average revolving line of credit borrowings outstanding were $77.7 million and
$54.7 million for the first six months of 1999 and 1998, respectively. The
average revolving line of credit borrowings were higher in the first six months
of 1999 than the first six months of 1998 in order to finance increased real
estate inventories in 1999. The weighted average rate of interest under the
Company's revolving line of credit was 7.2% for the first six months of 1999
compared to 8.4% for the first six months of 1998. The Company capitalized
$362,000 more net interest expense during the first six months of 1999 than the
first six months of 1998 due to increased development and construction
inventories.
PROVISION FOR INCOME TAXES. Income tax expense for the first six months of
1999 decreased to $1.9 million from $3.4 million for the first six months of
1998. The Company's estimated annual effective tax rate was 42.0% for the first
six months of 1999 and 1998, respectively.
14
<PAGE> 15
SOURCES AND USES OF CASH
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Operating activities for the first six months of 1999 used cash of $19.2
million compared to providing cash of $3.8 million during the first six months
of 1998. The principal reason for the increased use of cash in first half 1999
was the Company's investment in real estate inventories. The Company invested
$9.1 million in land and land development inventories, $10.5 million in home
construction inventories, and $1.9 million in lumber and building supply
inventories during first half 1999. This represented a total investment of $21.5
million in real estate inventories in first half of 1999 compared to $400,000
invested during first half 1998. In addition to the increased real estate
inventory investment during first half 1999, operating activities generated less
cash as first half 1999 net income decreased to $2.6 million from $4.7 million
for first half 1998. Net cash used in investing activities during first half
1999 was $614,000 compared to $822,000 during first half 1998. The Company
increased its bank and term debt $19.9 million during first half 1999 compared
to reducing bank and term debt by $3.3 million during first half 1998. The
Company increased its bank term debt principally to fund its increased
investment in real estate inventories, which includes homes under construction.
REAL ESTATE INVENTORIES
The Company's practice is to develop most of the lots on 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, 1999, the Company either owned or was under contract to
purchase lots or land that could be developed into approximately 5,500 lots,
including 238 lots in Louisville, Kentucky. The Company controlled through
option agreements an additional 6,200 lots, including 282 lots in Louisville,
Kentucky. During second quarter 1999, the Company exercised options to purchase
473 lots, all of which are located in Central Ohio. Option agreements expire at
varying dates through 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.
Real estate inventories of land and land development costs at June 30, 1999
increased to $82.1 million from $71.4 million at December 31, 1998. Included in
the $82.1 million of real estate inventories at June 30, 1999 are $4.1 million
of real estate inventories located in Louisville, Kentucky. Land and land
development inventories grew because of seasonal development activities and to
replace the record number of lots sold in 1998. Land and land development
inventories also increased because the Company is developing larger communities
with more amenities and up-front development costs, the Company is offering a
wider range of homes and communities, and the Company is acquiring and
developing land inventory in Louisville, Kentucky. Homes under construction
increased $10.5 million to $61.3 million from $50.8 million at December 31,
1998. The principal reasons for this increase are that many of the Company's
homes were at a more advanced stage of construction at June 30, 1999 compared to
June 30, 1998 and because the Company is building more expensive homes.
On June 30, 1999, the Company had 71 single family inventory homes in
various stages of construction, which represented an aggregate investment of
$3.7 million. At June 30, 1998, the Company had 58 inventory homes, in various
stages of construction, which represented an aggregate investment of $3.5
million. Inventory homes are not reflected in sales or backlog.
SELLER-PROVIDED DEBT
Seller-provided term debt was $4.4 million at June 30, 1999 compared to
$3.3 million at June 30, 1998. The Company will repay $1.6 million of the $4.4
million term debt prior to the end of 1999 and the remaining term debt will be
repaid prior to August 2001. Interest rates range from 6.5% to the prime rate.
15
<PAGE> 16
LAND PURCHASE COMMITMENTS
At June 30, 1999, the Company had commitments to purchase 71 residential
lots at an aggregate cost of $1.9 million, net of $112,000 in good faith
deposits. Included in the commitments are 57 lots in Louisville, Kentucky that
have an aggregate cost of $1.5 million. In addition, at June 30, 1999, the
Company had $56.7 million of cancelable obligations to purchase residential lots
and unimproved land, net of $2.2 million in good faith deposits. Included in the
$56.7 million of cancelable commitments are $2.3 million of cancelable
commitments for lots in Louisville, Kentucky. The majority of the land subject
to cancelable obligations is for post 1999 development activities. The Company
expects to fund its 1999 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
The Company is currently operating under a $125 million Senior
Unsecured Revolving Credit Facility ("the Facility") that was executed on May
29, 1998 and is described in the Company's Annual Report and Form 10-K for the
year ended December 31, 1998. The Facility was amended August 9, 1999, to
increase to $2.5 million from $500,000, the amount of its Common Shares that the
Company is allowed to redeem or purchase in any year. The Facility provides for
a variable rate of interest on borrowings. In order to reduce exposure to
increasing interest rates, the Company has entered into interest rate swap
contracts that fix the interest rate on $30 million of borrowings under the
Facility. 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 inception of the
Facility the variable margin has been 1.75%.
As of June 30, 1999, the Company was in compliance with Facility covenants
and had $12.7 million available under its Facility, after adjustment for
borrowing base limitations. Borrowing availability under the credit Facility
could increase, depending on the Company's utilization of the proceeds.
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. While the Company attempts
to maintain costs with subcontractors from the date a sales contract with a
customer is accepted until the date construction is completed, unanticipated
additional costs may be incurred which cannot be passed onto the customer. 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. These costs can
result in lower gross profits.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company has entered into three interest rate swap contracts with
notional amounts of $10,000,000 each, maturing on October 16, 2000, January 14,
2001 and May 6, 2003. These interest rate swap contracts, reflected in aggregate
in the table below, commenced on October 16, 1997, January 14, 1998 and May 6,
1998, respectively, and fix the variable interest rate on the Company's
revolving credit note at 6.125%, 5.475% and 5.960%, respectively. The Company
entered into interest rate swap contracts to achieve an appropriate level of
variable and fixed-rate debt as approved by senior management. Interest rate
swap contracts allow the Company to have variable-rate borrowings and to select
the level of fixed-rate debt for the Company as a whole. The expectation is that
the resulting cost of funds is lower than that available under the variable-rate
borrowings. Under interest rate swap contracts, the Company agrees with other
parties to exchange, at specified intervals, the difference between fixed rate
and floating-rate amounts calculated by reference to an agreed notional amount.
The level of fixed rate debt, after the effect of interest rate swap contracts
have been considered, is maintained at approximately 38% of total borrowings
under the revolving line of credit facility. The Company does not enter into
derivative financial instrument transactions for speculative purposes.
The following table presents descriptions of the financial instruments
and derivative instruments that are held by the Company at June 30, 1999, and
which are sensitive to changes in interest rates. For the liabilities, the table
presents principal calendar year cash flows that exist by maturity date and the
related average interest rate. For the interest rate derivatives, the table
presents the notional amounts and expected interest rates that exist by
contractual dates. The notional amount is used to calculate the contractual
payments to be exchanged under the contract. The variable rates are estimated
based on the three-month forward LIBOR rate plus a variable margin of 1.75%. All
dollar amounts are reflected in U.S. Dollars (thousands).
<TABLE>
<CAPTION>
FAIR
1999 2000 2001 2002 2003 TOTAL VALUE
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities
- -----------
Variable rate $79,392 $79,392 $79,392
Average interest rate 6.750% 6.750%
Interest-Rate Derivatives
- -------------------------
Notional amount $30,000 $30,000 $20,000 $10,000 $10,000 $30,000 $ 74
Average pay rate 5.853% 5.853% 5.718% 5.960% 5.960% 5.869%
Average receive rate 6.750% 6.750% 6.750% 6.750% 6.750% 6.750%
</TABLE>
17
<PAGE> 18
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 April 28, 1999, the Company held its Annual Meeting of
Shareholders. At the Annual Meeting, the shareholders ratified the
selection of PricewaterhouseCoopers L.L.P., as independent public
accountants for the Company in 1999 by the following vote:
<TABLE>
<CAPTION>
Shares For Shares Against Shares Abstaining/Withheld
---------- -------------- --------------------------
<S> <C> <C>
6,224,008 700 850
</TABLE>
The shareholders elected as Class I Directors the three nominees
of the Board of Directors by the following vote:
<TABLE>
<CAPTION>
Shares For Shares Abstaining/Withheld
---------- --------------------------
<S> <C> <C>
Douglas G. Borror 6,212,763 12,795
Jon M. Donnell 6,212,763 12,795
C. Ronald Tilley 6,212,763 12,795
</TABLE>
The term of office of the Class II Directors, Donald A. Borror,
David S. Borror, Peter A. Klisares and Gerald A. Mayo continued
after the meeting.
18
<PAGE> 19
Item 5. Other Information. Not Applicable.
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.
19
<PAGE> 20
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 11, 1999 By: /s/Douglas G. Borror
--------------------
Douglas G. Borror
Chairman,
Chief Executive Officer
Date: August 11, 1999 By: /s/Jon M. Donnell
-----------------
Jon M. Donnell
President
Chief Operating Officer
Date: August 11, 1999 By: /s/Peter J. O'Hanlon
--------------------
Peter J. O'Hanlon
Chief Financial Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Location
- ----------- ----------- --------
<S> <C> <C>
2.1 Corporate Exchange and Subscription Agreement, dated January 20, Incorporated by reference to
1994, between Borror Corporation and Borror Realty Company Exhibit 2.1 to the Company's
Registration Statement on Form S-1
(File No. 33-74298) as filed with the
Commission on January 21, 1994 and as
amended on March 2, 1994 (The "Form
S-1").
2.2 Form of First Amendment to Corporate Exchange and Subscription Incorporated by reference to
Agreement Exhibit 2.2 to Form S-1.
3.1 Amended and Restated Articles of Incorporation of Dominion Homes, Incorporated by reference to
Inc., as amended May 7, 1997 Exhibit 4(a)(3) to the Company's
Registration Statement on Form S-8
(File No. 333-26817) filed with the
Commission on May 9, 1997.
3.2 Amended and Restated Code of Regulations of Borror Corporation Incorporated by reference to
Exhibit 3.2 to Form S-1.
4. Specimen of Stock Certificate of Dominion Homes, Inc. Incorporated by reference to
Exhibit 4 to the Company's March 31,
1997 Form 10-Q.
10.1 Split Dollar Life Insurance Agreement dated July 11, 1999 between Filed herewith
Dominion Homes, Inc. and Douglas G. Borror (which agreement is the
same as Split Dollar Life Insurance Agreements entered into between
the Company and other executive officers of the Company except for
life insurance values for which a supplemental schedule is
attached)
10.2 Stock Option Agreement dated April 29, 1999 between Dominion Filed herewith
Homes, 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, Gerald E. Mayo and C. Ronald
Tilley)
10.3 Assignment and Assumption of Lease dated June 24, 1999 by and Filed herewith
among Rommy K. Chung, Dominion Homes, Inc., and BRC Properties
Inc. (formerly The Borror Corporation)
10.4 Lease dated March 1, 1994 between The Borror Corporation and Rommy Filed herewith
K. Chung
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C> <C>
10.5 Assignment and Assumption of Lease dated June 24, 1999 by and Filed herewith
among Dao Q. Nguyen, Dominion Homes, Inc., and BRC Properties Inc.
(formerly Borror Realty Company)
10.6 Lease dated November 12, 1997 between Borror Realty Company and Filed herewith
Thomas M. Nguyen and assigned on October 2, 1998 to Dao Q. Nguyen
10.7 First Consent Agreement dated August 9, 1999 amending the Loan Filed herewith
Agreement dated May 29, 1998, among Dominion Homes, Inc.,
Huntington Capital Corp. as Syndicating Agent, Huntington National
Bank as Administrative and Issuing Agent and the Lenders listed
therein.
27 Financial Data Schedule Filed herewith
</TABLE>
22
<PAGE> 1
EXHIBIT 10.1
------------
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT, effective January 1, 1999, is made this 11th day of July, 1999,
by and between Dominion Homes, Inc., an Ohio corporation ("Company") and Douglas
G. Borror, who is an employee of Company ("Employee").
WHEREAS, the Employee wants to acquire life insurance protection under the terms
of the policy ("Policy") described in Attachment A to this Agreement;
WHEREAS, the Company and the Employee are willing to pay Policy premiums,
subject to the terms and conditions described in this Agreement;
WHEREAS, the Employee, as owner of the Policy, will hold all incidents of
ownership in and to the Policy; and
WHEREAS, the Company wants the Employee to collaterally assign the Policy to it
to secure the Company's rights under the Policy;
NOW, THEREFORE, in consideration of the premises and mutual promises described
below, the parties agree to the following terms:
1. PURCHASE OF POLICY. The Employee will contract for the Policy described in
Attachment A to this Agreement. Both the Company and the Employee agree to take
all action needed to acquire the Policy and to take any future action needed to
ensure that the terms of the Policy are consistent with this Agreement and with
the collateral assignment filed with the insurance company issuing the Policy
("Insurer").
2. OWNERSHIP OF POLICY. The Employee will be the sole and absolute owner of each
Policy issued to insure his or her life and, except as provided in this
Agreement, may exercise any and all rights and privileges granted under the
terms of the Policy to its owner.
3. POLICY DIVIDENDS. Any dividend declared on the Policy will be applied to
purchase additional paid-up insurance on the Employee's life.
4. PREMIUM PAYMENTS. For periods during which the Policy is outstanding,
premiums will be paid as follows:
(a) The Employee's portion of the premium payment will be the amount
calculated in Attachment B. These amounts may be changed periodically
to reflect updated tables issued by the Internal Revenue Service and
revised rates developed by the Insurer. However, these changes will not
constitute an amendment to this Agreement and will be applied without
the Employee's consent, although the Company will apprise the
<PAGE> 2
Employee of any change in the amounts described in Attachment B as soon
as possible after it becomes aware of the change. The Company will
withhold the appropriate amount (derived from Attachment B) from the
compensation (or bonus) it pays to the Employee. These amounts,
combined with the amount calculated under paragraph 4(b), will be paid
to the Insurer on or before the date the Policy premium is due (or
within any grace period provided under the Policy).
(b) The balance of any premium due will be paid by the Company.
(c) On or before the date it is due (or within any grace period
provided under the Policy), the Company will pay to the Insurer the
full amount of each Policy premium due and, if asked to do so, will
give the Employee evidence that these premiums have been paid.
(d) If any Policy contains any disability waiver of premium or
mortality charge provision, neither the Employee nor the Company will
be required to pay any Policy premium for any period that waiver is in
effect.
(e) As of the end of each calendar year, the Company will give the
Employee a statement of any taxable income arising under this program.
The Employee is solely responsible for calculating and paying his or
her income tax liability on this income.
5. COLLATERAL ASSIGNMENT. At the same time that this Agreement is adopted, the
Employee will assign the Policy to the Company as collateral to secure the
Company's rights described in this Agreement. This assignment must be made on a
form approved by the Insurer and may not be terminated, revoked, amended or
altered in any way without the Company's express agreement.
6. LIMITS ON EMPLOYEES' RIGHTS IN THE POLICY.
(a) Except as specifically provided in this Agreement, the Employee may
not sell, assign, transfer, borrow against, surrender or cancel his or
her rights under the Policy or change the dividend election described
in paragraph 3 without the Company's written consent.
(b) Regardless of any other provision of this Agreement, the Employee
may absolutely and irrevocably transfer his or her rights under the
Policy to a donee, subject to the terms of the collateral assignment
described in paragraph 5. However, this transfer may be made only if
the Employee gives the Company a signed transfer of ownership form
issued by the Insurer for use when making irrevocable gifts of
insurance policies. The Employee must complete this form by naming the
donee and describing the terms of the transfer. Assuming that it is
completed properly, the Company will accept the terms of the transfer
and will treat the donee as the owner of the Policy, subject to this
Agreement and the terms of the collateral assignment described in
paragraph 5. After the
2
<PAGE> 3
Company accepts the transfer, the Employee will have no right, title or
interest in the Policy that has been transferred to his or her donee.
7. COLLECTION OF DEATH BENEFITS.
(a) If the Employee dies while the Policy is in effect and while he or
she is actively employed or during the "Noncompetition Period" defined
in paragraph 9(c)(iv) but without engaging in any conduct prohibited by
paragraph 9(c)(iv), the Employee's beneficiary will receive a death
benefit equal to the amount specified in Attachment C. The balance of
any death benefit payable under any Policy will be paid to the Company.
The Company will cooperate with the named beneficiary to take any
action necessary to collect the death benefit under the Policy. This
Agreement will terminate when that benefit has been collected and paid
as provided in this paragraph.
(b) If, for any reason, no death benefit is payable under the Policy,
the Company will be entitled to all premiums it paid to the Insurer,
reduced by any unpaid debt (plus any unpaid but accrued interest) the
Company secured by the Policy and the balance of any amount refunded by
the Insurer will be paid to the deceased Employee's beneficiary.
8. TERMINATION OF AGREEMENT DURING THE EMPLOYEE'S LIFETIME. This Agreement
will automatically terminate if the Employee terminates employment
(other than because of death) for any reason before the Policy is
distributed to him or her, if the Company terminates the Employee for
"Cause" as defined in paragraph 9(c)(ii) or if the Employee engages in
any activity prohibited under the terms of paragraph 9(c)(iv) during
the "Noncompetition Period" also described in paragraph 9(c)(iv). In
any other cases, benefits will be paid as provided in paragraph 9(d).
9. DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT DURING THE EMPLOYEE'S
LIFETIME. As soon as administratively possible after expiration of the
Noncompetition Period defined in paragraph 9(c)(iv), the Company will
release the collateral assignment made under paragraph 5 and distribute
the entire policy to the Employee but only if:
(a) The Employee terminates employment after:
(i) Completing at least 10 years of participation, calculated
from January 1, 1999;
(ii) The Company's adjusted shareholders' equity (defined in
Section 9(c)(vi)) first exceeds $100,000,000; or
(iii) A "change of control" (as defined in paragraph 9(c)(i))
occurs; and
(b) The Employee terminated for one of the following reasons:
(i) Retirement after the Employee reaches age 55;
3
<PAGE> 4
(ii) Regardless of the Employee's age, the Company terminates
his or her employment without "Cause" (as defined in paragraph
9(c)(ii);
(iii) Regardless of the Employee's age (A) the Employee
terminates for "Good Reason" (as defined in paragraph
9(c)(iii))but only if (B) within 10 days after the occurrence
of the event complained of, the Employee notifies the Company,
in writing, of the date of termination and, with reasonable
specificity, describes the reasons the Employee believes that
the resignation is occasioned by "Good Reason" and (C) within
that same 10-day period, the Company does not cure the "Good
Reason" cited in that notice; or
(iv) For any other reason, if, in its sole discretion, the
Company agrees to release its interest in the Policy.
(c) For purposes of this Plan:
(i) "Change of Control" means the occurrence of any event
which results in either (A) Borror Realty Company's failing to
own at least 30 percent 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.
(ii) "Cause" means a termination of the Employee's employment
for any of the following reasons (A) any unauthorized
disclosure by the Employee of the Company's business practices
or accounts to a competitor which results in serious damage to
the Company, (B) willful and wrongful misappropriation by the
Employee of funds, property or rights of the Company which
results in serious damage to the Company, (C) willful and
wrongful destruction of business records or other property by
the Employee, which results in serious damage to the Company,
(D) 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, (E) gross and willful misconduct by
the Employee which results in serious damage to the Company or
(F) the Employee's material breach of, or inability to perform
his or her regularly assigned duties other than by reason of
Disability.
(iii) "Good Reason" means a termination of employment because
the Company (A) reduced the Employee's base salary for any
reason other than in connection with the termination of his or
her employment, (B) 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
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
4
<PAGE> 5
compensate the Employee for any such material reduction, (C)
the Company assigns the Employee to duties inconsistent in any
respect with his or her position (including, without
limitation, his status, office and title), authority, duties
or responsibilities normally allotted to the Employee or takes
any other action that results in a material diminution in such
position, authority, duties or responsibilities or (D) the
Company otherwise materially breaches or is unable to perform
its normal obligations to the Employee.
(iv) "Noncompetition Period" means the twelve calendar months
beginning after the Employee terminates employment under
circumstances described in paragraph 9(a) and (b). During this
period, the Employee agrees that he or she will 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.
(v) "Disability" means the inability of the Employee due to
illness, accident or otherwise, to perform his or her 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 or
her legal representative), provided that the Employee does not
return to work on a substantially full-time basis within 30
days after the Company notifies the Employee that he will be
terminated on account of Disability.
(vi) "Adjusted Shareholders' Equity" means the consolidated
shareholders' equity of the Company and its consolidated
subsidiaries as of the last day of any fiscal quarter, as
reported in the consolidated balance sheet of the Company and
its consolidated subsidiaries, as adjusted by subtracting
therefrom the net proceeds of the sale by the Company of any
of its equity securities and by adding thereto the fair value
of any dividends or distributions made by the Company to its
shareholders, after the effective date of this Agreement.
(d) If the Employee (i) terminates for any reason not described in
paragraph 9(a) and (b) (other than death), (ii) engages in any conduct
prohibited under paragraph 9(c)(iv)
5
<PAGE> 6
during the Noncompetition Period also defined in paragraph 9(c)(iv), or
(iii) this Agreement terminates under circumstances described in
paragraph 8, the Employee (and the Employee's named beneficiary) will
forfeit any and all rights to any benefit under this Agreement or the
Policy. In this case, the Company itself will be entitled to any and
all rights under the Policy.
10. INSURER NOT A PARTY. The Insurer is not a party to this Agreement and
has no obligation or duty under this Agreement and will have fully
discharged its obligations by paying benefits under the terms of the
Policy. No provision of this Agreement or any modification or amendment
of this Agreement will, in any way, be construed as enlarging, changing
or in any way affecting the Insurer's obligations unless those changes
are made part of the Policy under the terms of the collateral
assignment signed by the Employee and filed with the Insurer as
provided in paragraph 5.
11. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION.
(a) The Company is the named fiduciary under this Agreement and has
authority to control and manage the operation and administration of
this Agreement and must establish a funding policy and method
consistent with the objectives stated in this Agreement.
(b) The Company will apply the following claims procedure to resolve
any disputes under this Agreement.
(i) FILING CLAIMS. The Employee or his or her beneficiary may
file a claim for Plan benefits with the Company.
(ii) NOTIFICATION TO CLAIMANT. If a claim is wholly or
partially denied, the Company will send a written notice of
denial to the claimant. This notice must be sent within 90
days after receipt of the claim, must be written in a manner
calculated to be understood by the claimant and must include
(A) the specific reason or reasons for which the claim was
denied, (B) specific reference to pertinent Plan provisions,
rules, procedures or protocols upon which the Company relied
to deny the claim, (C) a description of any additional
material or information that the claimant may file to perfect
the claim and an explanation of why this material or
information is necessary and (D) a description of the steps
the claimant may take to appeal an adverse determination.
(iii) REVIEW PROCEDURE. If a claim has been wholly or
partially denied, the affected claimant, or his authorized
representative may (A) request that the Company reconsider its
initial denial by filing a written appeal no more than 60 days
after receiving written notice that all or part of the initial
claim was denied, (B) review pertinent documents and other
material upon which the Company relied when denying the
initial claim, and (C) submit a written description of the
6
<PAGE> 7
reasons for which the claimant disagrees with the Company's
initial adverse decision. An appeal of an initial denial of
benefits and all supporting material must be made in writing
and directed to the Company. The Company is solely responsible
for reviewing all benefit claims and appeals and taking all
appropriate steps to implement its decision.
(iv) DECISION ON REVIEW. The Company will render its decision
within 60 days of receiving a benefit appeal. However, if
special circumstances (such as the need to hold a hearing on
any matter pertaining to the denied claim) require additional
time, this decision will be rendered as soon as possible, but,
not later than 120 days after receipt of the claimant's
written appeal and only if the Company notifies the claimant,
in writing, that it needs more time to review an appeal and
why that additional time is needed. If the Company does not
issue its decision within this period, the claim will be
deemed to have been denied. The Company's decision on review
will be sent to the claimant in writing and will include
specific reasons for the decision, written in a manner
calculated to be understood by the claimant, as well as
specific references to the pertinent Plan provisions, rules,
procedures or protocols upon which the Company relied to deny
the appeal.
12. AMENDMENT. This Agreement may not be amended, altered or modified
except by the written agreement of each party or their respective
successors or assigns and may not be terminated except under the terms
specifically provided in this Agreement. However, changes to the rates
stated in Attachment B will not be considered amendments for purposes
of this paragraph (or this Agreement) and will be applied without the
written agreement of the parties to this Agreement or their respective
successors or assigns.
13. BINDING EFFECT. This Agreement is binding upon and will inure to the
benefit of the Company and its successors and assigns and to the
Employee and his or her successors, assigns, heirs, executors,
administrators and beneficiaries.
14. NOTICES. Any notice, consent or demand made under this Agreement must
be written and signed by the party issuing it. If a notice, consent or
demand is mailed, it must be sent by United States certified mail,
postage prepaid, addressed to the recipient's last known address. The
date any notice, consent or demand is mailed will be treated as the
date it is given.
15. MUTUAL COOPERATION. Each party agrees to perform all acts contemplated
under this Agreement, the collateral assignment described in paragraph
5 and the Policy.
16. GOVERNING LAW. This Agreement, and all rights arising under it, will be
governed by the laws of the United States and, where applicable, by the
laws of Ohio.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written above.
DOMINION HOMES, INC.
By: /s/ Robert A. Meyer
--------------------
Robert A. Meyer
Date Signed: _______________
By: /s/ Douglas G. Borror
----------------------
Douglas G. Borror
Date Signed: July 11, 1999
___________________________
<PAGE> 9
ATTACHMENT A
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
DOUGLAS G. BORROR
IDENTIFICATION OF POLICY
The Policy that is the subject of this Agreement is Policy Number 1Y000005 and
will be purchased from the New England Life Insurance Company ("Insurer") in the
amount of $8,500,000.00.
<PAGE> 10
ATTACHMENT B
TO
DOMINION HOMES, INC.
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
FOR
DOUGLAS G. BORROR
CALCULATION OF EMPLOYEE'S SHARE OF PREMIUM
The Employee's share of the Policy premium cost is the smaller of the amount
calculated under Part I or Part II below.
PART I - PS 58 CHARGES
The amount derived from tables produced in Rev. Rul. 55-747, 1955-2, CB 228 or
any superseding tables prepared by the Internal Revenue Service for similar
purposes.
PART II - TERM INSURANCE COSTS
The initial rates applicable are set forth below as the "Economic Benefit from
Split Dollar Agreement." Year 1 is 1999, and subsequent years are numbered
sequentially.
These rates are subject to change in the future by the Insurer. Any changes to
these rates issued by the Insurer will automatically be incorporated herein and
applied as of the effective date specified by the Insurer.
<PAGE> 11
DOMINION HOMES, INC.
Supplemental Schedule
Executive Officers? Split Dollar Life Insurance Values
<TABLE>
<CAPTION>
Name Policy Amount Death Benefit
- ---- ------------- -------------
<S> <C> <C>
Douglas G. Borror $8,500,000 $8,000,000
Jon M. Donnell $6,500,000 $6,000,000
David S. Borror $1,500,000 $1,200,000
Robert A. Meyer $ 900,000 $ 775,000
Peter J. O'Hanlon $ 500,000 $ 420,000
</TABLE>
<PAGE> 1
EXHIBIT 10.2
------------
STOCK OPTION AGREEMENT
(Eligible Director Option)
--------------------------
THIS AGREEMENT is made to be effective as of April 29, 1999 (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, the PLAN was amended as of December 5, 1995, May 7, 1997, and
July 28, 1998, to, among other things, change the name of the PLAN to the
Dominion Homes, Inc. Incentive Stock Plan; 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.
<PAGE> 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 Eight and
50/100 Dollars ($8.50) per SHARE, being 100% of the Fair Market Value (as that
term is defined in the PLAN) of the SHARES on the GRANT DATE.
(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.
2
<PAGE> 3
(J)
(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
3
<PAGE> 4
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 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.
4
<PAGE> 5
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.
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.
5
<PAGE> 6
31. DOMINION HOMES, INC.
32.
33.
34. By: /s/ Robert A. Meyer
-------------------
35. Robert A. Meyer, Jr.
36. Senior Vice President
37.
38.
39. OPTIONEE:
---------
40.
41.
42. /s/ Pete A. Klisares
--------------------
Pete A. Klisares
6
<PAGE> 1
EXHIBIT 10.3
------------
ASSIGNMENT AND ASSUMPTION OF LEASE
----------------------------------
ASSIGNMENT AND ASSUMPTION OF LEASE, dated June 24, 1999 (the
"Assignment"), by and among Rommy K. Chung (the "Assignor"), Dominion Homes,
Inc., an Ohio corporation ("Assignee"), and BRC Properties Inc., an Ohio
corporation (formerly known as "Borror Realty Company" and "The Borror
Corporation," "Landlord").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Assignor entered into that certain Karric Square
at Dublin Lease Agreement, dated on or about March 1, 1994 (the "Lease
Agreement"), with respect to certain property located at 5767 and 5769 Karric
Square Drive, Columbus, Ohio (the "Premises"); and
WHEREAS, Assignor desires to assign the Lease Agreement to Assignee;
and
WHEREAS, the Lease Agreement provides, among other things, that the
Lease Agreement shall not be assigned without the prior written consent of
Landlord;
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth below, the parties agree as follows:
1. Effective as of August 31, 1999 (the "Effective Date"), Assignor
assigns to Assignee all of Assignor's right, title and interest in and to the
Lease Agreement, including all rights to the Two Thousand Two Hundred Fifty and
00/100 Dollars ($2,250.00) security deposit provided to Landlord pursuant to
Section 49 of the Lease Agreement. Assignor shall deliver possession of the
Premises to Assignee on or before the Effective Date.
2. Assignor covenants, warrants and represents to Assignee that: (a)
the Lease Agreement is in full force and effect; (b) the Renewal Rider to the
Lease Agreement has been duly and validly exercised by Tenant extending the term
of the Lease Agreement through August 31, 2004 at a Fixed Base Rent (as defined
in the Lease Agreement) equal to (i) $11.00 per square foot ($2,475.00 monthly
payment) from the Effective Date through August 31, 2002, and (ii) $11.50 per
square foot ($2,587.50 monthly payment) from September 1, 2002 through August
31, 2004; (c) Assignor has performed, and will continue to perform up to and
including the Effective Date, all of Assignor's obligations under the Lease
Agreement; (d) Assignor has full right and power to execute, deliver and perform
this Assignment; (e) no defaults or events of default have occurred and are
continuing under the Lease Agreement; and (f) the Lease Agreement has not been
modified, supplemented or amended.
<PAGE> 2
3. As of the Effective Date, Assignee assumes and agrees to be bound by
and pay and perform all of the obligations, terms, covenants and conditions
under the Lease Agreement which, pursuant to the Lease Agreement, are to be
observed, kept and/or performed by Assignor on and after the Effective Date.
4. Prior to delivering possession of the Premises to Assignee, Assignor
shall remove all equipment and trade fixtures of Assignor from the Premises in
accordance with the terms and conditions of the Lease Agreement, and Assignor
shall cause the Premises to be in a "broom clean" condition at the time Assignor
delivers possession of the Premises to the Assignee.
5. In consideration of the assignment of the Lease Agreement by the
Assignor to Assignee, and subject to the last sentence of this Section 5,
Assignee shall pay Assignor Fifty Thousand and 00/100 Dollars ($50,000.00) as
follows: (a) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be paid
to Assignor by Assignee on the date all parties hereto have duly executed this
Assignment; and (b) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall
be paid to Assignor by Assignee on the date Assignor delivers possession of the
Premises to Assignee (the "Second Installment"). Notwithstanding the foregoing,
Assignee shall have no obligation to deliver the Second Installment to Assignor
in the event that Assignor fails to deliver the Premises to Assignee on or
before the Effective Date.
6. The amounts to be paid by Assignee to Assignor pursuant to Section 5
above may be offset for any costs or expenses incurred by Assignee arising,
directly or indirectly, as a result of Assignor's breach of any of the
provisions of this Assignment.
7. Landlord hereby consents to this Assignment, and the transactions
contemplated hereby, and further consents to Assignee's use of the Premises as a
real estate sales and training center and also for general office purposes.
Except with respect to Assignor's duties and obligations under this Assignment,
Landlord hereby releases Assignor from any and all obligations under the Lease
Agreement, effective as of the Effective Date. Landlord further releases Rommy
K. Chung from any and all obligations under that certain Guaranty, dated March
1, 1994, by Rommy K. Chung in favor of Landlord.
8. Landlord hereby acknowledges and agrees that (a) the Renewal Rider
to the Lease Agreement has been duly and validly exercised by Tenant, (b) the
term of the Lease Agreement has been extended through August 31, 2004, and (c)
the Fixed Base Rent (as defined in the Lease Agreement) is (i) $11.00 per square
foot ($2,475.00 monthly payment) from the Effective Date through August 31,
2002, and (ii) $11.50 per square foot ($2,587.50 monthly payment) from September
1, 2002 through August 31, 2004.
9. Landlord hereby waives the Fixed Base Rent due from Assignor under
the Lease Agreement for the months of July and August, 1999, and agrees that
Assignee shall
2
<PAGE> 3
have no obligation to pay such amounts before or after the Effective Date.
Assignor shall remain liable for all other amounts due Landlord under the Lease
Agreement for July and August, 1999 and otherwise.
10. Assignee's obligations under this Assignment and the Lease
Agreement are expressly conditioned on all of Assignor's covenants, warranties
and representations contained in Section 2 above being true and correct on and
as of the Effective Date.
11. This Assignment shall be binding upon and shall inure to the
benefit to the parties hereto and their successors and permitted assigns. This
Assignment constitutes the entire agreement of the parties with respect to the
subject matter hereof and may not be modified or amended except by a writing
signed by all parties hereto. The provisions of this Assignment shall survive
the closing of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption of Lease as of the date first above written.
SIGNED IN THE PRESENCE OF: ASSIGNOR:
Jane Chung /s/ Rommy K. Chung
- ----------------------------- ------------------
Rommy K. Chung
Terry George
- -----------------------------
(Witnesses as to Assignor)
ASSIGNEE:
Tamara S. Hardy DOMINION HOMES, INC.
- -----------------------------
Dona S. Krebs By: /s/ Denis G. Connor
- ----------------------------- --------------------
(Witnesses as to Assignee) Denis G. Connor, Senior Vice President
LANDLORD:
BRC PROPERTIES INC.
(formerly known as "Borror Realty
Tamara S. Hardy Company" and "The Borror Corporation")
- -----------------------------
Dona S. Krebs By: /s/ Randolph B. Robert
- ----------------------------- -----------------------
(Witnesses as to Landlord) Randolph B. Robert, Vice President
3
<PAGE> 1
EXHIBIT 10.4
------------
LEASE AGREEMENT
---------------
This Lease, made and entered into this 1st day of March, 1994 by and
between THE BORROR CORPORATION, an Ohio corporation, hereinafter called
"Landlord," and Rommy K. Chung, an individual, hereinafter called "Tenant".
WITNESSETH:
In consideration of the mutual covenants and agreements set forth in
this Lease, Landlord and Tenant do hereby covenant and agree as follows:
1. DESCRIPTION OF PREMISES
Landlord does hereby lease to Tenant, and Tenant does hereby rent from
Landlord, upon and subject to the terms, conditions, covenants and agreements
set forth in this Lease, the premises, hereinafter referred to as the "Premises"
consisting of approximately 2,700 square feet of space in the shopping center
known as Karric Square at Dublin Shopping Center located in the City of
Columbus, County of Franklin, State of Ohio, hereinafter referred to as the
"Shopping Center," said Premises being highlighted in yellow on Exhibit "A"
attached hereto for the purpose of more specifically locating the Premises in
said Shopping Center and being further identified as 5767 and 5769 Karric Square
Drive.
The term "Shopping Center" wherever used herein shall be deemed to mean
the entire area owned by Landlord as shown on said Exhibit "A," as the same may
from time to time be increased by the addition of the other lands, and the
entire development on said area, including any and all structures, parking
facilities and common facilities built thereon, or as the same may from time to
time be reduced by eminent domain takings or dedication to public authorities.
2. TERM
(a) This Lease shall continue in force for a term of 60 months (the
"Term") commencing on the day the store opens for business and ending sixty
months later.
3. RENT
(a) Fixed Base Rent - Tenant hereby covenants and agrees to pay to
Landlord as "Fixed Base Rent" for the Premises during the entire Term, without
any deductions or setoff whatsoever, monthly installments in advance, on the
first day of each and every calendar month throughout the Term as set forth
below. Rent payments shall commence sixty (6) days after the expiration of the
"fixturing period" is defined as the sixty (60) day period from the date Tenant
has received all necessary building permits.
<TABLE>
<CAPTION>
Period Rent Per Monthly Annual
Square Foot Payment Payment
----------- ------- -------
<S> <C> <C> <C>
Year 1 $10.00 $2,250.00 $27,000.00
Year 2 $10.00 $2,250.00 $27,000.00
Year 3 $10.00 $2,250.00 $27,000.00
Year 4 $11.00 $2,475.00 $29,700.00
Year 5 $11.50 $2,587.00 $31,050.00
Total rent for term of Lease $141,750.00
</TABLE>
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(b) The first fixed base rent payment shall be due and owing on the
acceptance of this Lease by Landlord. In the event of default on the Lease by
Tenant prior to the Commencement Date, the first month's rent will be applied
against leasehold improvement expenses incurred by landlord in preparing store
for Tenant's use.
4. LANDLORD'S AND TENANT'S IMPROVEMENTS
Landlord agrees that it shall, at its own cost and expense perform the
work and make the installations in the Premises which are designated as
Landlord's Improvements in Exhibit "B" attached hereto and made a part hereof.
5. USE OF PREMISES
(a) The Premises shall be used and occupied by Tenant during the entire
Term hereof, subject to the conditions herein contained for a convenience retail
store selling gourmet ice cream, prepared food for take-out, soft drinks,
general groceries, beer and wind, baked goods, snacks such as chips and
pretzels, paper products, tobacco products, pet supplies, health and beauty
aids, packaged ice cream, and us of lottery machine.
(b) Tenant agrees that it will not use, or permit or suffer the use of
the Premises, or any part thereof, for any other business or purpose.
(c) Tenant further agrees that in the use and occupation of the
Premises and in the prosecution or conduct of its business therein, Tenant shall
comply with all requirements of all laws, ordinances, orders and regulations of
the federal, state, county and municipal authorities now in force, or which
hereinafter may be in force, and with any direction or certificate of occupancy
issued pursuant to any law by any public officer or officers. Tenant further
covenants and agrees that it will comply with and abide by all protective
covenants, restrictions, and other recorded documents pertaining to the Shopping
Center and the Premises, and the Tenant's use of the Premises is limited by all
such protective covenants, restrictions, and other recorded documents Tenant
covenants and agrees that it shall not use or permit to be used any part of the
Premises for any dangerous, noxious or offensive trade or business and will not
cause or maintain any nuisance in, at or on the Premises, and the land upon
which it is situated.
(d) Tenant shall use and occupy the Premises in a careful, safe and
proper manner and shall keep the Premises in a clean and safe condition in
accordance with this Lease and local ordinances and the lawful directions of
proper public officers. Tenant shall use and maintain the Premises consistent
with reasonable standards of good shopping center operations, and Tenant shall
not permit solicitations, demonstrations, itinerant vending or any other
activities inconsistent with such standards. Tenant shall not use or permit the
Premises to be used for any disreputable or immoral purpose or in any way that
will injure the reputation of the Shopping Center. Tenant agrees that it will
not do or suffer to be done, or keep or suffer to be kept, anything in, upon or
about the Premises which will contravene Landlord's policies insuring against
loss or damage by fire or other hazards, or which will prevent Landlord from
procuring such policies in companies acceptable to Landlord or cause
cancellation of insurance of Landlord or any other tenant of the Shopping
Center; and if anything done, omitted to be done or suffered to be done by the
Shopping Center or any part thereof to be increased beyond the minimum rate
which would be applicable for the least hazardous use of the Premises permitted
by law, Tenant shall pay the amount of such increase to Landlord promptly upon
Landlord's demand.
(e) Tenant shall not obstruct the Common Areas (hereinafter defined)
and shall refrain from committing any act or thing upon the Premises or the
Common Areas which disturbs the quiet enjoyment of any other tenant of the
Shopping Center or inhibits or detracts from Landlord's ability to lease other
parts of the Shopping Center.
(f) Tenant shall not permit the accumulation of rubbish, trash, garbage
and other refuse in and around the Premises. Garbage and trash receptacles may
be placed only in areas designated by Landlord and Landlord shall have the right
to designate and control the type and size of such garbage and trash receptacles
that may be used by Tenant.
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(g) Tenant shall be required to install an exterior sign on the
Premises which conforms to the sign criteria attached hereto as Exhibit "C", and
which sign shall be placed only in such locations as are previously approved in
writing by Landlord. Notwithstanding the specifications in Exhibit "C", attached
hereto, all signs to be installed by Tenant are subject to the prior written
approval of Landlord, and plans and specifications for each sign must be
submitted to Landlord in quadruplicate for each approval. The plans and
specifications for Tenant's canopy sign must be submitted within thirty (30)
days after execution of this Lease by Tenant. It is understood and agreed that
the approved canopy sign must be installed and operational prior to Tenant
opening to the public for business. Tenant shall not place, erect or maintain,
or suffer to be placed, erected or maintained on the doors or on any exterior
surface of the Premises, or in any vestibule, or anywhere in the Shopping Center
outside of the Premises, nor in any area inside the Premises which can be seen
from the outside of the Premises, any sign, lettering, decoration or advertising
without the prior written consent of Landlord.
(h) Tenant shall permit no waste, damage or injury to the Premises and
Tenant shall initiate and carry out a program of regular maintenance of the
Premises including the painting or refinishing of all areas of the interior and
store front so as to impede, to the extent possible, deterioration by ordinary
wear and tear and to keep the same in attractive condition.
(i) Tenant shall at all times during the Term observe and comply with
the rules, regulations and covenants as may be published and amended from time
to time by Landlord for the safety, care and cleanliness of the Shopping Center
and the Premises and the preservation of good order therein.
(j) Tenant shall refrain from distributing any handbills or other
advertising matter on or about any part of the Shopping Center, and shall not
use any sidewalks, walkways or areaways of the Shopping Center for the sale of
merchandise or any business, occupation or undertaking.
6. COMMON AREAS
(a) The term "Common Areas" shall be deemed to mean such areas,
improvements, space, equipment and special services in or at the Shopping Center
as determined by Landlord from time to time to be devoted to the general usage
of all the tenants of the Shopping Center and their employees, customers and
other invitees.
(b) The use by Tenant of the Premises shall include the use, in common
with the others entitled thereto, of the Common Areas as may be designated from
time to time by Landlord, subject however to the terms and conditions of this
Lease and to rules and regulations for the use thereof as prescribed from time
to time by the Landlord.
(c) In addition to the Fixed Base Rent set herein, Tenant agrees to pay
to Landlord at the times and in the manner hereinafter provided, a pro rata
share of the Net Costs (hereinafter defined) paid or incurred by Landlord or its
designated agent in the operation, direct management, maintenance and repair of
the Common Areas, including, but not limited to, parking areas, roofs, canopies,
exterior of outside walls of building(s), access roads, driveways, entrances and
exits, landscaped areas, pathways, storm water system, accommodation areas such
as sidewalks, grass plots, ornamental planting, entry monuments and signs,
directional signals, public lighting and the like; and any and all additional
maintenance costs including utilities, wages, accounting costs, management fees,
electric, security, cleaning, snow removal and trash removal. The Common Areas
shall not include the foundation or structural portions of the buildings located
within the Shopping Center.
Tenant's pro rata share of such Net Costs shall be that percentage
factor computed by dividing the total square feet of the Premises by the total
square feet of leasable space in the Shopping Center.
(d) For the purpose of this Section 6 the term "Net Costs" is hereby
defined to mean Landlord's total costs incurred in operating, managing,
equipping, lighting, repairing, insuring and maintaining the Common Areas plus a
reasonable amount for depreciation of equipment actually used and excluding (if
otherwise included therein) capital costs, interest and real property taxes or
assessments.
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(e) Tenant's pro rata share of such Net Costs shall be determined on an
annual basis for each twelve (12) month period ending on December 31st,
prorating fractional years. Tenant's pro rata share of such annual Net Costs
shall be estimated by Landlord at the beginning of the Term hereof, and at the
beginning of each calendar year thereafter and a monthly rate determined, and
Tenant shall pay to Landlord such estimated charge in advance on the first day
of each month throughout the Term of this Lease; provided however that within
sixty (60) days after the end of each calendar year the Landlord or its
designated agent shall determine its costs for such calendar year (and Tenant's
share thereof), and furnish a copy of such computations in writing to the
Tenant. If the payments made by the Tenant in such calendar year exceed Tenant's
pro rata portion of such Net Costs, Tenant shall be credited the amount of any
overpayment, such credit to be applied against the estimated Net Costs for the
then-current year. If Tenant's pro rata portion of such Net Costs exceeds the
payments made in such calendar year by the Tenant, then Tenant shall pay the
difference to the Landlord or its designated agent. Such payment to the Landlord
or its designated agent shall be made within fourteen (14) days after Tenant's
receipt of Landlord's written statement of the Tenant's share of Net Costs for
the preceding year.
(f) Landlord shall have the right to close any or all portions of the
Common Areas to such extent as may, in the opinion of Landlord's counsel, be
legally sufficient to prevent a dedication thereof or the accrual of any rights
to any person or to the public therein and to close temporarily, if necessary,
any part of the Common Areas in order to discourage noncustomer parking.
Landlord shall have the right from time to time to establish, modify and enforce
rules and regulations with respect to all Common Areas. Tenant agrees to abide
by and conform with such rules and regulations, including, but not limited to,
rules and regulations as to parking of employees' cars, making deliveries, and
traffic control.
7. TAXES AND INSURANCE
(a) Taxes
(1) Tenant covenants and agrees to pay to Landlord its
proportionate share of all real property taxes and special assessments, which
may be levied or assessed for each calendar year during the entire Term, against
the land and buildings comprising the Shopping Center or relating to the
operation or use thereof and service and/or special payments in lieu of taxes
required to be paid by Landlord. Tenant's proportionate share shall be equal to
that portion of such taxes and assessments equal to the product obtained by
multiplying such taxes, assessments and payments by a fraction, the numerator of
which shall be the number of square feet of space in the Premises and the
denominator of which shall be the total number of square feet of leasable space
in the Shopping Center. Should the state in which the Shopping Center is located
or any political subdivision thereof or any governmental authority having
jurisdiction over the Shopping Center impose a tax or assessment (other than an
income or franchise tax) either upon or against the rentals payable by tenants
in the Shopping Center to Landlord or upon or against the business of renting
land or buildings, either by way of substitution for the taxes and assessments
levied or assessed against such land and buildings, or in addition thereto, such
tax or assessment shall be deemed to constitute a tax or assessment against such
land and buildings for the purpose of this Section 7.
(2) Tenant's proportionate share of all such taxes and
assessments during the Term shall be paid to Landlord, as additional rent, in
monthly installments on or before the first day of each calendar month, in
advance, in an amount estimated by Landlord. Upon receipt of all tax bills and
assessments attributable to any calendar year during the Term, Landlord shall
furnish Tenant with a written statement of the actual amount of Tenant's
proportionate share of taxes and assessments for such year. If the total amount
paid by Tenant under this Section 7 for any calendar year during the Term shall
be less than the actual amount due from Tenant for such year, as shown on such
statement, Tenant shall pay to Landlord the difference between the amount paid
by Tenant and the actual amount due, such deficiency to be paid within ten (10)
days after demand therefor by Landlord; and if the total amount paid by Tenant
hereunder for any calendar year shall exceed such actual amount due from Tenant
for such calendar year, Tenant shall be credited the amount of any overpayment,
such credits to be applied against the estimated taxes and assessments for the
then-current year. All amounts due hereunder shall be payable to Landlord at the
place where the Fixed Base Rent is payable. For the calendar years in which this
Lease commences and terminates the provisions of this Section 7 shall apply, and
Tenant's liability for its proportionate share of any taxes and assessments for
such years shall be subject to
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a pro rata adjustment based on the number of days of said calendar years. A copy
of a tax bill or assessment bill submitted by Landlord to Tenant shall at all
times be sufficient evidence of the amount of taxes or assessments assessed or
levied against the property to which such bill relates. At or about the
Commencement Date of this Lease and from time to time thereafter throughout the
Term, Landlord shall notify Tenant in writing of Landlord's estimate of Tenant's
monthly installment due hereunder.
(b) Insurance
(1) Tenant covenants and agrees to pay to Landlord its
proportionate share of the following types of insurance:
(i) Fire, lightening, windstorm, hail, explosion,
earthquake and extended coverage insurance with such
other endorsements as Landlord shall deem appropriate
in such amounts as Landlord shall deem sufficient up
to one hundred percent (100%) of the full replacement
cost of the building(s) and service equipment in the
Shopping Center. Such policy or policies may also
include rents insurance coverage for a six (6) month
period; and
(ii) Public liability and property damage insurance
insuring Landlord against claims for personal injury,
death or property damage occurring upon, in or about
the Shopping Center in such amounts as Landlord
deemed appropriate.
(2) Tenant's proportionate share of such insurance premiums
shall be paid to Landlord, as additional rent, in monthly installments on or
before the first day of each calendar month throughout the Term, in advance, in
an amount estimated by Landlord. Such estimate shall be furnished in writing by
Landlord prior to the Commencement Date of the Term and at the beginning of each
calendar year thereafter and at a monthly rate determined. Within sixty (60)
days after the end of each calendar year, Landlord shall furnish Tenant with a
written statement of the actual amount of Tenant's proportionate share of such
insurance premiums for such calendar year. If the total amount paid by Tenant
under this Section 7 for any calendar year shall be less than the actual amount
due from Tenant for such year, as shown on such statement, Tenant shall pay
Landlord the difference between the amount paid by Tenant and the actual amount
due, such deficiency to be paid within ten (10) days after demand therefor by
Landlord; and if the total amount paid by Tenant hereunder for such calendar
year shall exceed such actual amount due from Tenant for such year, Tenant shall
be credited the amount of any overpayment, such credits to be applied against
the estimated insurance premiums for the then-current calendar year. All amounts
due hereunder shall be payable to Landlord at the place where the Fixed Base
Rent is payable. Landlord agrees to use its best efforts to obtain competitive
rates for said insurance coverage.
(3) Tenant's proportionate share of such insurance premiums
shall be equal to the product obtained by multiplying such insurance premiums by
a fraction, the numerator of which shall be the number of square feet of space
in the Premises and the denominator of which shall be the total number of square
feet of leasable space in the Shopping Center.
8. OPERATION OF BUSINESS
During the entire Term, Tenant shall keep the Premises open for
business continuously during all regular and customary hours for such type of
business and on all business days, and will conduct such business in a lawful
manner, in good faith with such business practice, and in such a manner that the
Landlord may at all times receive the maximum amount of rent from the operation
of such business in the Premises. Tenant further agrees to carry a reasonably
complete stock of merchandise and to fully and adequately staff the Premises
with sufficient employees for the purpose of selling said merchandise at retail.
Tenant shall not open any additional business within a two (2) mile radius of
the Shopping Center which shall, in the sole opinion of Landlord, compete with
Tenant's business in the Premises or otherwise reduce Tenant's Gross Receipts
from the Premises. In order to establish and preserve the character of the
Shopping Center as a high quality retail development, Tenant shall not conduct
any auction, fire, bankruptcy or close out sales, provided however that this
provision shall not preclude the conduct of periodic seasonal, promotional, or
clearance sales nor be deemed to give Landlord a
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right to approve or disapprove the price at which Tenant shall offer its
merchandise for sale. Tenant shall not utilize any unethical method of business
operations. Tenant shall not use or permit the use of any equipment or apparatus
producing, reproducing, or transmitting sound, which is audible beyond the
interior of the Premises.
9. BUSINESS HOURS
Notwithstanding the provisions set forth in Section 8 of this Lease,
the Tenant agrees during the entire Term to open for business not later than
10:00 a.m. and to remain open for business until 5:00 p.m. Monday through
Saturday. Sundays, national holidays excluded, which holidays shall not exceed
eight (8) in any Lease Year.
10. UTILITIES
Tenant shall be solely responsible for and promptly pay all charges for
heat, water, gas, electricity and other utilities used or consumed on the
Premises, and any and all tap-in or connection charges in connection therewith.
Landlord shall not be liable to Tenant for interference in or interruption of
any utility service nor shall any curtailment or interruption constitute a
constructive eviction or grounds for rental abatement in whole or in part
hereunder. In the event utilities are not separately metered to Tenant, then
Tenant shall reimburse Landlord, upon demand, for the cost to Landlord of
utilities used or consumed on the Premises.
11. MAINTENANCE
(a) Subject to the provisions of Section 18, Tenant shall, at Tenant's
sole cost and expense, during the entire Term, keep and maintain in good order,
condition and repair the Premises and every part thereof, including, but not
limited to, all plumbing, sewage, fixtures, interior walls, storefront(s),
showcases, skylights, all electrical facilities and equipment, lighting
fixtures, lamping, fans and electrical motors, all other appliances and
equipment of every kind and nature, sprinkler equipment (if any), and any other
mechanical systems in the Premises. Tenant's obligations shall include, but
shall not be limited to, the obligation to replace when necessary any of the
items required to be maintained by Tenant at its sole cost and expense. Such
replacement items shall be of comparable quality to those that they are
replacing. If Tenant fails to perform Tenant's obligations under this Section
11, Landlord may, at Landlord's option enter upon the Premises and put the same
in good order, condition and repair and make such replacements as may be
necessary, and the cost thereof shall become due and payable as additional rent
by Tenant to Landlord upon demand, but nothing in this sentence contained shall
be deemed to impose a duty upon Landlord or affect in any manner the obligations
placed upon Tenant by this Section 11. Any such entry by Landlord shall not be
deemed to be an eviction of Tenant.
(b) Tenant shall provide for (at Tenant's cost and expense as
hereinafter set forth) the maintenance, repair and replacement of the heating,
ventilating and air conditioning equipment (HVAC) in the Premises.
(c) Tenant shall furnish (at Tenant's costs and expense as hereinafter
set forth) trash and garbage receptacles and the removal of trash and garbage
from said receptacles.
12. EXAMINATION OF PREMISES
The Tenant has had or will have prior to the Commencement Date hereof
full opportunity to examine the herein Premises or plans thereof, including the
sidewalks adjacent to said Premises, and the Tenant's occupancy shall be an
acknowledgment that there is in and about them nothing dangerous to life, limb,
health or property, and Tenant hereby waives any claim for damages that may
arise from defects of that character after occupancy, and the Tenant takes the
Premises as they will be when completed. All personal property of any kind or
description whatsoever in the Premises shall be at the Tenant's sole risk, and
the Landlord shall not be liable for any damages done to, or loss to, such
personal property; or for damage or loss suffered by the business or occupation
of the Tenant arising from any act or neglect of co-tenants or other persons, or
from bursting, overflowing, or leaking of water, sewer or steam pipes, or from
the heating, air conditioning or plumbing fixtures, or from electric wires, or
from roof, wall and floor leaks, or from gas, or odors, or caused in any other
manner whatsoever.
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13. ACCEPTANCE OF PREMISES
It is agreed that by occupying said Premises as Tenant, the Tenant
formally accepts the same and acknowledges that the Landlord has complied with
all requirements imposed upon it under the terms of this Lease, to render the
Premises ready for occupancy, aside from minor details of construction,
decoration, or mechanical adjustment. Within ten (10) days after occupancy of
the Premises, Tenant shall provide Landlord with a detailed list of such minor
construction, decoration, or mechanical adjustments, and Landlord shall complete
such adjustments as promptly thereafter as reasonably possible. It is understood
and agreed by the Tenant that no minor changes from the plans that have been
agreed upon between both parties hereto that might be necessary during the
preparation of this space for Tenant or during construction, will affect or
change this Lease, or invalidate same.
14. INDEMNIFICATION OF LANDLORD AND LIABILITY INSURANCE
(a) Tenant agrees to indemnify and save harmless Landlord, its
officers, agents, employees and servants, from and against any and all claims by
or on behalf of any persons, firms or corporations, arising from the use,
occupancy, conduct, management of, or from the use, or from any work or thing
whatsoever done in or about, the Premises during the entire Term, and will
further indemnify and save harmless Landlord, its officers, agents, servants and
employees, from and against any and all claims arising during the entire Term
from any conditions of the Premises, or arising from any breach or default on
the part of Tenant in the performance of any covenant or agreement on the part
of Tenant to be performed pursuant to the terms of this Lease, or arising from
any act or negligence of Tenant, or any of Tenant's agents, contractors,
servants, employees or licensees, or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation occurring during the entire
Term of this Lease, in or about the Premises and from and against all costs,
counsel fees, expenses and liabilities incurred in connection with any such
claim or action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord covenants to resist or defend such action or proceeding by
counsel satisfactory to Landlord.
(b) Tenant agrees to carry at its own expense throughout the Term
comprehensive public liability insurance covering the Premises and Tenant's use
thereof, in companies and in form satisfactory to Landlord, in the amount of at
least Five Hundred Thousand Dollars ($500,000.00) on account of bodily injury to
or death of one person and One Million Dollars ($1,000,000.00) on account of
bodily injuries to or death of more than one person as a result of any
occurrence and with Two Hundred Fifty Thousand Dollars ($250,000.00) coverage
for property damage, and to deposit said policy or policies (or certificates
thereof) with Landlord prior to the date of any use or occupancy of the Premises
by Tenant and thereafter not less than thirty (30) days prior to the expiration
of any such policy; said policy or policies shall name Landlord and Tenant as
insured and shall bear endorsements to the effect that the insurer agrees to
notify Landlord not less than thirty (30) days in advance of any modification or
cancellation thereof. Should Tenant fail to carry such public liability
insurance, Landlord may at its option (but shall not be required so to do) cause
public liability insurance as aforesaid to be issued, and in such event Tenant
agrees to pay the premium for such insurance as additional rent promptly upon
Landlord's demand.
15. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
Tenant covenants and agrees that if Tenant shall at any time fail to
perform any of the covenants on its part to be made or performed under this
Lease, the Landlord may, but shall not be obligated, and without notice or
demand and without waiving or releasing the Tenant from any obligation of the
Tenant under this Lease, perform such act to the extent that the Landlord may
deem desirable. All expenses incurred by Landlord in connection therewith shall
be deemed additional rent hereunder and be payable to the Landlord on demand and
the Landlord shall have the same rights and remedies for the nonpayment thereof
as in the case of default in the payment of any other rent or charges to be paid
by Tenant hereunder. Landlord shall have the right to enter the Premises for the
purpose of performing any maintenance or making any repairs as Landlord may
elect to perform or make pursuant to this Section 15 and such entry shall not
constitute an eviction of Tenant. Nothing in this Section 15 shall be construed
to or deemed to impose any duties upon Landlord.
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16. CONDEMNATION
(a) If the whole, or any part of the Premises shall be taken by any
public, or quasi-public authority under any statute or by power or right of
eminent domain, the Term shall cease on that part of the Premises so taken or
conveyed (hereinafter referred to as the "Condemned Portion") from the day the
possession of the Condemned Portion shall be taken by the condemning authority.
Unless this Lease is cancelled as hereinafter provided, the Fixed Base Rent
provided for herein commencing with the date possession is acquired by the
condemning authority, shall be reduced in proportion to the amount of the
Premises taken. If less than the entire Premises shall be taken by such
condemning authority, and in the event, and only in the event, that the
remainder of the Premises not so taken is not, in Landlord's judgment,
reasonably fit or suited to being used by Tenant to enable Tenant to discharge
and satisfy the purposes for which the Premises are leased hereunder to Tenant
and to carry on its business therein, Tenant, provided that Tenant is not in
default under this Lease, may in such event terminate this Lease as to the
remainder of the Premises by giving written notice to Landlord not later than
fifteen (15) days after the vesting of title in the condemning authority or the
date possession of the Condemned Portion shall be taken by the condemning
authority, whichever shall first occur, specifying as the date of termination a
date not later than thirty (30) days after the giving of such notice. Upon the
date specified in such notice, the Term and all right, title, and interest of
Tenant hereunder shall cease and come to an end, provided Tenant is not in
default under this Lease on such date, and Fixed Base Rent, Percentage Rent and
other charges shall be apportioned as of the date of such termination.
(b) If less than the entire Premises shall be taken by such condemning
authority and this Lease is not terminated as hereinabove provided, Landlord
covenants and agrees at Landlord's cost and expense to restore that portion of
the Premises no so taken to a complete architectural unit, in which event (i)
the Fixed Base Rent shall be reduced by an amount based upon the proportion
which the square feet of usable floor space of the Premises, including space
occupied by interior walls and columns remaining after the taking, bears to the
total floor space of the Premises prior to the taking, and (ii) the Base Sales
Amount of Gross Sales in excess of which Percentage Rent shall be due and
payable as provided in Section 3, paragraph (c) shall be reduced by the same
percentage as the percentage of reduction in usable floor space in the Premises
after restoration thereof. In the event Landlord is obligated to restore the
Premises to a complete architectural unit as above provided, Landlord shall not
be required to spend for such work an amount in excess of the amount received by
Landlord as damages for the part of the Premises so taken, less any amount paid
to Landlord's mortgagee from such award.
(c) The entire compensation award for any taking shall belong to and be
the property of Landlord, including, but not limited to, all damages as
comprehensive for diminution in value of the leasehold, reversion, and fee,
without any deduction therefrom for any present or future estate of Tenant, and
Tenant hereby assigns such award to landlord, except that Tenant shall be
entitled to receive such portion thereof as may be allocated to compensation
paid for Tenant's trade fixtures and cost of removal of stock, provided that
Tenant so proves in any such condemnation proceeding.
(d) Anything in this Section 16 to the contrary notwithstanding, if a
portion of the Premises shall be taken by any public or quasi-public authority
under the power of eminent domain, the Landlord shall have the option of
terminating this Lease as of the date of vesting of title in the condemning
authority by written notice to Tenant given within fifteen (15) days after
vesting of title in the condemning authority, in which event Landlord shall make
a proportionate refund to Tenant of such rent as may have been paid in advance.
(e) For the purpose of this Section 16 a sale to such public or
quasi-public authority under threat of condemnation shall constitute a vesting
of title and shall be construed as a taking by such condemning authority.
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17. QUIET ENJOYMENT
Landlord covenants and agrees that the Tenant upon paying the Fixed
Base Rent, additional rent and all other charges herein provided for and
performing and fulfilling the covenants, agreements, and conditions of this
Lease on the Tenant's part to be performed and fulfilled, shall peaceably and
quietly hold, occupy and enjoy the Premises during the Term without hindrance or
molestation by the Landlord or any person (s) claiming under the Landlord,
subject, however, to the terms and conditions of this Lease.
18. DAMAGE OR DESTRUCTION
(a) If the Premises are damaged by fire or other casualty, the damage
shall be repaired by and at the expense of Landlord, provided such repairs can
be made within ninety (90) days after the occurrence of such damage without the
payment of overtime or other premiums, and until such repairs are completed, the
rent shall be abated in proportion to the part of the Premises which is unusable
by Tenant in the conduct of its business (but there shall be no abatement of
rent by reason of any portion of Premises being unusable if the damage is due to
the act or negligence of the Tenant, its employees, agents or invitees or if the
Premises are unusable for a period equal to one day or less).
(b) If such repairs cannot be made within ninety (90) days, Landlord
may, at its option, make such repairs within a reasonable time, and in such
event this Lease shall continue in effect and the rent shall be abated in the
manner provided above. Landlord's election to make repairs must be evidenced by
written notice to Tenant within thirty (30) days after the occurrence of the
damage. If Landlord does not so elect to make such repairs which cannot be made
within ninety (90) days, then either party may, by written notice to the other,
cancel this Lease.
(c) Anything in this Section 18 to the contrary notwithstanding, if the
Premises or the Shopping Center shall be substantially damaged or destroyed by
fire or otherwise, Landlord shall have the option to terminate this Lease as of
the date of such damage or destruction by written notice to Tenant within thirty
(30) days after such damage or destruction.
19. EXTERIOR AND WINDOW LIGHTING
The Tenant agrees to keep the display windows in the Premises and
Tenant's exterior canopy sign well lighted from dusk until 10:00 p.m. (local
time) Monday through Saturday and from dusk until 6:00 p.m. (local time) on
Sunday during the Term.
20. SUBORDINATION TO MORTGAGE
This Lease is and shall be subject and subordinate to any and all
mortgages, deeds of trust and land leases now existing upon or that may be
hereafter placed upon the Premises and the real estate upon which they are
situated, and to all advances made or to be made thereon, and all renewals,
modifications, consolidations, replacement, or extensions thereof, and the lien
of any such mortgages, deeds of trust and land leases shall be superior to all
rights hereby or hereunder vested in Tenant, to the full extent of all sums
secured thereby; provided however, that each such mortgage or deed of trust now
or hereafter encumbering the Premises and real estate upon which they are
situated shall provide by its terms, or the holder of such mortgage or deed of
trust shall, by a separate agreement, agree that in the event of foreclosure of
such mortgage or deed of trust, Tenant shall remain undisturbed under this Lease
so long as Tenant complies with all of the terms, obligations and conditions
hereunder. This provision shall be self-operative and no further instrument of
subordination shall be necessary to effectuate such subordination, and the
recording of any such mortgage or deed of trust shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording. In confirmation of such subordination, Tenant shall on
request of Landlord or the holder of any such mortgage or deed of trust execute
and deliver to Landlord within ten (10) days any instrument that Landlord or
such holder may reasonably request.
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21. SURRENDER OF PREMISES
At the expiration of the Term, whether by forfeiture or expiration of
time, Tenant shall surrender the Premises to Landlord in as good condition as
when received by Tenant from Landlord except for reasonable use, wear and damage
by fire or the elements.
22. DEFAULT BY TENANT
(a) This Lease is made upon the condition that the Tenant shall
punctually and faithfully perform all of the covenants and agreements by it to
be performed as herein set forth. If any of the following events shall occur,
to-wit: (i) if any installment of Fixed Base Rent, Percentage Rent, or any other
sums required to be paid by Tenant hereunder, or any part thereof, shall at any
time be in arrears and unpaid for ten (10) days after the date due, or (ii) if
there be any default on the part of the Tenant in the observance or performance
of any of the other covenants, agreements or conditions of said Lease on the
part of Tenant to be kept and performed and said default shall continue for a
period of fifteen (15) days after written notice thereof from Landlord to Tenant
(unless such default cannot reasonably be cured within fifteen (15) days and in
such case, Tenant shall have commenced to cure said default within said fifteen
(15) days and thereafter continues diligently to pursue to completion the curing
of same) or (iii) if Tenant shall file a petition in bankruptcy or be
adjudicated a bankrupt, or file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for itself under any present or future federal, state or other
statute, law or regulation, or make an assignment for the benefit of creditors,
or (iv) if any trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties shall be appointed in any action, suit or
proceeding by or against Tenant and such proceeding or action shall not have
been dismissed within thirty (30) days after such appointment, or (v) if the
leasehold estate hereby created shall be taken by execution or by other process
of law, or (vi) if Tenant shall fail to operate and conduct business as required
in Section 8 hereinabove, then, in any such event, Landlord, at Landlord's
option and without limiting Landlord in the exercise of any other right or
remedy Landlord may have on account of any default by Tenant, may either:
(1) re-enter the Premises, take possession of all buildings,
improvements, additions, alterations, equipment and fixtures thereon, and eject
all parties in possession therefrom, using such force for that purpose as may be
necessary, without being liable to any prosecution for said re-entry or the use
of such force, and, without terminating this Lease, at anytime and from time to
time relet the Premises or any part or parts thereof for the account of Tenant
or otherwise, receive and collect the rents therefor, applying the same first to
payment of such expenses as Landlord may have paid, assumed or incurred in
recovering possession of the Premises, including costs, expenses and reasonable
attorney's fees and brokerage, paid, assumed or incurred by Landlord in
connection with reletting the Premises, and then to the fulfillment of the
covenants of Tenant. Any such reletting as provided for herein may be for the
remainder of the Term as originally granted or for a longer or shorter period.
Landlord may execute any Lease made pursuant to the terms hereof in Landlord's
own name, and Tenant shall have no right or authority whatever to collect any
rent from such subtenant. In any case and whether or not the Premises or any
part thereof be relet, Tenant shall pay to Landlord all sums required to be paid
by Tenant up to the time of re-entry by Landlord, and thereafter Tenant shall,
if required by Landlord, pay to Landlord until the end of the Term the
equivalent amount of all rent and other charges required to be paid by Tenant
under the terms of this lease, less the avails of such reletting during the
Term, if any, after payment of the expenses of Landlord as aforesaid, and the
same shall be due and payable on the several rent days herein specified. No such
re-entry by Landlord shall constitute an election to terminate this Lease unless
and until Landlord thereafter gives Tenant notice of Landlord's election to
terminate; or
(2) terminate this Lease, and with or without process of law,
expel and remove Tenant, or any other person or persons in occupancy from the
Premises, together with their goods and chattels, using such force as may be
necessary in the judgment of Landlord or his agents in so doing, and repossess
and enjoy said Premises together with all improvements, additions, alterations,
equipment and fixtures thereon, and in addition to any other remedy it may have,
Landlord may recover from Tenant all damages it may incur by reason of such
breach by Tenant.
(b) All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other remedies allowed at law or in
equity.
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23. TENANT'S PROPERTY
If for any reason Landlord obtains possession of the Premises, Tenant's
property not removed shall be deemed to have been abandoned and shall become the
property of the Landlord and may be used or disposed of by Landlord as it sees
fit.
24. HOLDING OVER
No receipt of money by the Landlord from the Tenant after termination
of this Lease, or after the service of any notice, or after the commencement of
any suit, or after final judgment for possession of the Premises shall
reinstate, continue or extend the Term or affect any such notice, demand or
suit, or imply consent for any action for which Landlord's consent is required.
In the event Tenant remains in possession of the Premises after termination of
this Lease, and without the execution of a new lease, Tenant, at the option of
Landlord shall be deemed to be occupying the Premises as a tenant from month to
month, at twice the Fixed Base Rent subject to all the other conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
month-to-month tenancy.
25. ACCESS FOR RE-LETTING
The Landlord may at any time within one hundred eighty (180) days
before the expiration date of this Lease enter the Premises at all reasonable
hours for the purpose of offering the same for rent and may place and keep on
the windows and doors of said Premises signs advertising the Premises for rent.
26. DEFAULT OF LANDLORD - CURE PERIOD
Landlord shall not be deemed to be in default in the observance or
performance of any of the covenants, conditions, agreements or provisions of
this Lease on its part to be observed or performed unless Landlord shall fail to
remedy such default within thirty (30) days after written notice from Tenant
specifying the nature of such default, or, if default cannot be reasonably
remedied within the said thirty (30) day period, Landlord shall not be deemed to
be in default unless Landlord shall fail to initiate action to remedy such
default within thirty (30) days after such written notice and to prosecute the
same to completion with due diligence.
27. FORCE MAJEURE
In the event Landlord shall be delayed or hindered in or prevented from
the performance of any obligation required under this Lease by reason of
strikes, lockouts, inability to procure labor or materials, failure of power,
fire or other casualty, acts of God, restrictive governmental laws or
regulations, riots, insurrection, war or any other reason not within the
reasonable control of Landlord, then the performance of such obligation shall be
excused for a period of such delay, and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
28. RELEASE AND WAIVER OF SUBROGATION
Landlord shall not be liable for any damage or loss to fixtures,
equipment, merchandise or other personal property of Tenant located anywhere in
or upon the Premises caused by fire, water, explosion, sewer backup or any other
insurable hazards, regardless of the cause thereof, and Tenant does hereby
expressly release Landlord of and from any and all liability for such damage or
loss. Landlord shall not be liable for any damage or loss resulting from
business interruption at the Premises arising out of or incident to the
occurrence of any of the perils which can be covered by a business interruption
policy, and Tenant does hereby expressly release Landlord of and from any
liability for such damage or loss. Tenant shall not be liable for any damages to
the Premises or any part thereof caused by fire or other insurable hazards,
regardless of the cause thereof, and Landlord does hereby expressly release
Tenant of and from any and all liability for such damages or loss. To the extent
that any of the risks or perils described in this Section 28 are in fact covered
by insurance, each party shall cause its insurance carriers to waive all rights
of subrogation against the other party.
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29. ESTOPPEL CERTIFICATES
The Tenant shall, within ten (10) days after written request of
Landlord, execute, acknowledge, and deliver to the Landlord or to Landlord's
mortgagee, proposed mortgagee land lessor or proposed purchaser of the Shopping
Center or any part thereof, any estoppel certificates requested by Landlord,
from time to time, which estoppel certificates shall show whether the Lease is
in full force and effect and whether any changes may have been made to the
original Lease; whether the Term of the Lease has commenced and full rental is
accruing; whether there are any defaults by Landlord and, if so, the nature of
such defaults; whether possession has been assumed and all improvements to be
provided by Landlord have been completed; whether rent has been paid more than
thirty (30) days in advance; that there are no liens, charges, or offsets
against rental due or to become due; and that the address shown on such estoppel
is accurate.
30. LIMITATION OF LANDLORD'S LIABILITY
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owners at the time in question of an interest in this Lease,
and in the event of transfer of said interest in this Lease, then the party
conveying said interest in this Lease shall be automatically relieved after the
date of such transfer, of all personal liability with respect to the performance
of any obligations on the part of Landlord contained in this Lease, arising out
of acts thereafter occurring or covenants thereafter to be performed, it being
intended hereby that all the obligations contained in this Lease on the part of
Landlord shall be binding upon Landlord, its successors and assigns, only during
and in respect of their respective periods of ownership of an interest in this
Lease.
31. ALTERATIONS OR IMPROVEMENTS BY TENANT
Tenant covenants and agrees that it will not alter or change the
Premises or any part thereof without the written consent of Landlord, and Tenant
agrees to indemnify and save harmless Landlord from all liens, claims or demands
arising out of any work performed, materials furnished, or obligations incurred
by or for Tenant upon said Premises during the Term of this Lease. Tenant hereby
waives any right to make repairs at Landlord's expense. Tenant shall not make
changes to locks on doors or add, disturb or in any way change any plumbing or
wiring without first obtaining written consent of Landlord. At the termination
of this Lease, whether by expiration of time or forfeiture, Tenant shall, if
requested by Landlord in writing, restore the Premises at Tenant's sole cost and
expense, to the condition that the Premises were in prior to the making of any
alterations or improvements, normal wear and tear, fire and acts of God
excepted. At the termination of this Lease, whether by expiration of time or
forfeiture, Tenant shall remove all of its personal property from the Premises
and upon failure to do so, such property shall be deemed to be abandoned and of
no value to Tenant and shall become the sole property of Landlord for disposal
as it sees fit. Tenant further agrees to pay to Landlord the cost of removal of
any such property so abandoned by Tenant.
32. ACCESS TO PREMISES
The Landlord shall have the right if it so elects to enter upon the
Premises at all reasonable hours for the purpose of inspecting the same and for
the purpose of maintenance, repair, and for making additions to any running
pipes, conduits and ducts through the Premises, and Tenant hereby waives any
claim against Landlord for damage or inconvenience caused by any of the above.
Nothing in this Section 32 shall be construed to or deemed to impose any duties
upon Landlord.
33. EXCEPTIONS TO DEMISE
Notwithstanding anything to the contrary herein contained, this Lease
is subject to utility easements, both recorded and unrecorded, all protective
and restrictive covenants and all other recorded documents pertaining to or
affecting the Premises, the Shopping Center of which the Premises are a part, or
the real estate upon which the Shopping Center and Premises are situated; this
Lease is also subject to all governmental laws, ordinances, orders, regulations,
codes, directives, variances, permits, and all orders, permits, rules and
regulations issued by or at the direction of any such governmental agency or
authority or any board or instrumentality thereof.
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34. OPERATIONS OF TENANT'S HEATING AND AIR CONDITIONING SYSTEM
Tenant agrees to provide at Tenant's cost its heating or air
conditioning in the Premises so as to adequately heat and cool the same, as the
case may be, during the hours that Tenant's store is open for business; and to
maintain at all times sufficient heat in the Premises to prevent pipes from
freezing.
35. ATTORNMENT
In the event any proceedings are brought for the foreclosure of, or in
the event of the exercise of the power of sale under any mortgage covering the
Premises, or in the event of any other transfer or sale of Landlord's title to
the Premises, Tenant shall attorn to the purchaser under any such sale, transfer
or foreclosure and recognize such purchaser or transferee at the Landlord under
this Lease.
36. PARTIAL INVALIDITY
If any term, covenant or condition of this Lease, or the application
thereof, to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Lease or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected thereby and each term,
covenant and condition of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
37. WAIVER OF JURY TRIAL
So far as permitted by law, Landlord and Tenant waive and will waive
any and all right to a trial by jury in the event that summary dispossession
proceedings shall be instituted by Landlord.
38. LEASE BINDING UPON ASSIGNEES
Except at provided in Section 30, this Lease and all covenants,
provisions and conditions herein contained shall inure to the benefit of and be
binding upon the heirs, executors, administrators, personal representatives,
successors and assigns, respectively of the parties thereto, provided however,
that no sublease, assignment or transfer by, from, through or under Tenant in
violation of the provisions hereof shall vest in the sublessee, assignee or
transferee any right, title or interest whatever.
39. ALTERATIONS, ADDITIONS AND CONSTRUCTION OF NEW BUILDING
Landlord hereby reserves the right at any time to make alterations or
additions to the building in which the Premises are located. Landlord also
reserves the right to construct other buildings or improvements in the Shopping
Center from time to time and to make alterations thereof or additions thereto.
40. LANDLORD'S OPTION TO EXPAND SHOPPING CENTER
Landlord shall have the right, but not the obligation, to expand the
Shopping Center.
41. PARTNERSHIP
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating a relationship between the parties
hereto other than the relationship of Landlord and Tenant.
42. WAIVER
The failure of Landlord to insist in any one or more cases upon the
strict performance of observance of any of the covenants, agreements or
conditions of this Lease or to exercise any option herein contained shall not be
construed as a waiver or relinquishment for the future performance, observance
or exercise of such covenant, agreement, condition or option. No waiver of any
default hereunder shall be implied from any omission by Landlord to take any
action on account of such default or to declare a forfeiture if such default
persists or is repeated, and no
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condition or covenant shall be deemed waived by Landlord unless such waiver be
in writing signed by Landlord. The acceptance by Landlord of rent with knowledge
of the breach of any of the covenants or conditions of this Lease by Tenant
shall not be deemed a waiver of any such breach. One or more waivers of any
breach of any covenant, term or condition of this Lease by Landlord shall not be
construed as a waiver of any subsequent breach of the same covenant, term or
condition.
43. PARKING OF CARS
The Tenant and his employees shall not park cars on the street or
internal drives in the Shopping Center of which the herein Premises are a part,
or in any alley or court in the center of which the herein Premises are a part.
When there is a rear entrance, all loading and unloading of goods shall be made
at the rear entrance. The Tenant and his employees shall park their cars in
areas as designated by the Landlord from time to time. The Landlord does not
agree to reserve or permanently maintain any parking stations which are now
built or may hereafter be built in said Shopping Center. Failure of the Tenant
and his employees to park cars in such designated areas shall be an event of
default by Tenant. The Tenant further agrees that upon written notice from the
Landlord he will, within five (5) days, furnish the state automobile license
numbers assigned to his car and the cars of all his employees.
44. NO ACCORD AND SATISFACTION
No acceptance by Landlord of a lesser sum than the Fixed Base Rent,
Percentage Rent, additional rent or any other charge then due shall be deemed to
be other than on account of the earliest installment of such rent or charge due,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent or other charge be deemed in accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or charge or any
other monies owing by Tenant or pursue any other remedy in this Lease provided.
45. BANKRUPTCY
Neither this Lease, nor any interest therein, nor any estate hereby
created shall pass to any trustee or receiver in bankruptcy, or to any other
receiver or assignee for the benefit of creditors or otherwise by operation of
law.
46. CORPORATE OWNERSHIP
If the Tenant herein is a corporation and if, by sale or other
disposition, the control thereof changes at any time during the Term hereof,
then, at the option of the Landlord, this Lease may be cancelled by the Landlord
upon giving sixty (60) days prior written notice of its intention so to do.
Written notice of any such intended sale must be given to Landlord at least
twenty (20) days prior to the effective date thereof.
47. ADVERTISING
During each Lease Year Tenant agrees to spend a minimum of Fifty Cents
($.50) per square foot of gross area of the Premises or One Thousand Dollars
($1,000.00), whichever is greater, to advertise and promote the Tenant's
business in the Shopping Center. Only expenditures for advertising which
specifically features Tenant's location in the Shopping Center and which
contains the name "Karric Square at Dublin Shopping Center" prominently featured
therein shall be credited to satisfy the foregoing requirement. Tenant agrees,
upon the Landlord's request, to furnish invoices, copies of advertisements or
such other documents or information as Landlord shall reasonably request to
verify that Tenant has complied with this Section 47.
48. ASSIGNMENT AND SUBLETTING
Tenant shall not assign this Lease in whole or in part, nor sublet all
or part of the Premises, without the prior written consent of Landlord in each
instance. It is the intention of the parties that Landlord shall have the
absolute right to withhold its consent to an assignment or subletting for any
reason, and no standard of "reasonableness" shall be applicable or implied in
construing this Section 48. The consent by Landlord to any assignment or
subletting shall not
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constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. Notwithstanding any assignment or sublease, Tenant
shall remain fully liable on this Lease and shall not be released from
performing any of the terms, covenants and conditions of this Lease.
49. SECURITY DEPOSIT
Tenant has deposited with Landlord the sum of TWO THOUSAND, TWO
HUNDRED, FIFTY DOLLARS, ($2,250.00) as security for the full and faithful
performance of every provision of this Lease to be performed by Tenant. If
Tenant defaults with respect to any provision of this Lease, including, but not
limited to the provisions relating to the payment of Fixed Base Rent, additional
rent and other charges, Landlord may use, apply or retain all or any part of
this security deposit for payment of any such rent or other sum in default, or
for the payments of any other amount which Landlord may spend or become
obligated to spend by reason of Tenant's default. If any portion of said deposit
is so used or applied, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount, and Tenant's failure to do so shall be
a breach of this Lease. Landlord shall not be required to keep this security
deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant without interest at the expiration
of the Lease Term and upon Tenant's vacation of the Premises.
50. ENTIRE AGREEMENT AND MODIFICATIONS
This Lease and the covenants and agreements set forth herein are and
shall constitute the entire agreement between the parties. Each party to this
Lease hereby acknowledges and agrees that the other party has made no
warranties, representations, covenants or agreements, expressed or implied, to
such party other than those expressly set forth herein and that each party, in
entering into and executing this Lease, has relied upon no warranties,
representations, covenants or agreements, express or implied, to such party
other than those expressly set forth herein. None of the terms, covenants and
agreements of this Lease shall in any manner be altered, waived or changed,
except by written instrument signed and delivered by the parties hereto.
51. SURVIVAL OF TENANT'S OBLIGATIONS
All obligations of Tenant which by their nature involve performance, in
any particular, after the end of the Term of which cannot be ascertained to have
been fully performed until after the end of the Term, shall survive the
expiration or sooner termination of the Term.
52. BROKER'S COMMISSION
Tenant warrants that there are no claims for broker's commissions or
finder's fees in connection with Tenant's execution of this Lease other than the
claim of CASE BOWEN. Tenant agrees to indemnify and save Landlord harmless from
any liability that may arise from the claim of any other person, including, but
not limited to, reasonable attorney's fees.
53. ATTORNEY'S FEES AND COSTS
In the event Landlord shall have to file any proceeding, whether at law
or in equity, to enforce collection of any rent, charge or other payment to be
borne, kept or paid by Tenant hereunder, or in the event Tenant shall be in
default hereunder and Landlord employs counsel to enforce performance of any of
the obligations of Tenant hereunder, Landlord shall be entitled to recover from
Tenant, and Tenant agrees to pay to Landlord an amount of money equal to all
reasonable expenses including reasonable attorney's fees incurred by Landlord in
enforcing the covenants hereof and securing to it the performance of obligations
of Tenant hereunder, in addition to all sums to which Tenant shall otherwise be
obligated hereunder. Said fees and costs shall be additional rent hereunder.
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54. NOTICES
All notices provided for in this Lease shall be in writing and shall be
delivered personally or deposited in the United States mail, registered or
certified, return receipt requested, postage prepaid, addressed to Landlord at
5501 Frantz Road, P.O. Box 7166, Dublin, Ohio 43017-0766, or at such other
address as the Landlord may from time to time designate by notice in writing to
Tenant and to Tenant at 5767 KARRIC SQUARE DRIVE, DUBLIN, OHIO 43017 , or at
such other address as the Tenant may from time to time designate by notice in
writing. Notice shall be deemed given when deposited in the United States mail
as aforesaid. Notice need be sent to only one person where the Tenant is more
than one person.
55. RECORDING
Neither party shall record this Lease in its entirety. However, upon
the request of either party, the other party shall join in the execution of a
memorandum or so called "short form" of this Lease for the purpose of
recordation.
56. NO OPTION
The submission of this Lease for examination does not constitute a
reservation of or option for the Premises or any other space within the Shopping
Center and shall vest no right in either party. This Lease shall become
effective as a lease only upon execution and delivery thereof by the parties
hereto, and upon Landlord's receipt of the Security Deposit.
57. HEADINGS AND INTERPRETATIONS
The paragraph headings used throughout this instrument are for
convenience and reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions of this Lease.
Whenever herein the masculine gender is used, the same shall include
the feminine and neuter genders.
58. NON-DISCRIMINATION
Neither Tenant nor anyone claiming under Tenant shall discriminate upon
the basis of race, color, creed or national origin in the use or occupancy of
the Premises or any part thereof.
59. INTEREST AND PAST-DUE OBLIGATION
Other remedies for default in this Lease notwithstanding, any sum
accruing to Landlord or Tenant under the terms and provisions of this Lease
which is not paid when due shall bear interest at the rate of one and one-half
percent (1-1/2%) per month, but in no event more than the maximum amount allowed
by law, from the date when any such sum becomes due and payable under the terms
and provisions of this Lease until paid. In addition, and not by way of
limitation to the preceding sentence, if any Base Rent, Percentage Rent and/or
additional rent payment is not received by Landlord on or before the ninth day
of the month for which such payment is due, a service charge of five percent
(5%) of such past-due amount shall become due and payable in addition to such
amounts owed under this Lease.
60. MISCELLANEOUS
This Lease has been negotiated by Landlord and Tenant, and this Lease,
together with all of the terms and provisions hereof, shall not be deemed to
have been prepared by either Landlord or Tenant, but by both equally. Wherever
in this Lease any printed portion or part thereof has been stricken, whether or
not any relative provisions have been added, this Lease shall be read and
construed as if the material stricken was never included herein, and no
implication shall be drawn from the text of the material so stricken which would
be inconsistent in any way with the construction or interpretation which would
be appropriate if such material were never contained herein.
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61. RIDER
A rider consisting of 1 page, with paragraphs numbered consecutively 1
through 3 , plus Exhibits A, B and C are attached hereto and made a part hereof.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the
day and year first above written.
Signed and acknowledged in
the presence of: BORROR REALTY COMPANY, LANDLORD
Denise G. Gray By: /s/ Terry E.George
- ----------------------------- ------------------------------
Terry E. George
Vice President
Jennifer A. Sirak
- -----------------------------
TENANT
Robert B. Bowen By: /s/ Rommy Chung
- ----------------------------- ------------------------------
Rommy K. Chung
Franceen Devon
- -----------------------------
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 1st day of
March, 1994, by Terry E George, Vice President of The Borror Corporation, an
Ohio corporation, on behalf of the corporation.
Bonnie A. Castle
-----------------------------
Notary Public
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 1st day of
March, 1994, by Rommy K. Chung.
Leslie A. Kramer
-----------------------------
Notary Public
18
<PAGE> 19
RENEWAL RIDER
-------------
As additional consideration for the covenants of Tenant hereunder, Landlord does
hereby grant to Tenant an option to extend the term of this Lease for an
additional period of three (5) years (hereafter "Extended Term") on the
following terms and conditions:
1. Written notice of Tenant's exercise of said option shall be
given to Landlord not less than One Hundred Twenty (120) days,
nor more than One Hundred Eighty (180) days, prior to the
expiration of the Term.
2. Tenant shall not be in default under this Lease at the time it
exercises its option or at the time of the commencement of the
Renewal Term.
3. The Renewal Term shall be on the same terms and conditions as
set forth in this Lease, provided, however, the Fixed Base
Rent shall be in such amount as the parties shall mutually
agree. If One Hundred Twenty (120) days prior to the
expiration of the Term Landlord and Tenant have not agreed
upon the new Fixed Base Rent and all other provisions for the
Renewal Term for any reason whatsoever, then this option shall
lapse and be null and void and of no further effect.
Signed and acknowledged in
the presence of: BORROR REALTY COMPANY,
LANDLORD
Denis G. Gray By: /s/ Terry E. George
- ----------------------- ------------------------
Terry E. George
Jennifer A. Sirak
- -----------------------
TENANT:
Robert B. Bowen By: /s/ Rommy K. Chung
- ----------------------- ------------------------
Rommy K. Chung
Franceen Devon
- -----------------------
<PAGE> 20
EXHIBIT A
---------
Site Plan
<PAGE> 21
EXHIBIT B
---------
Landlord's Improvements
-----------------------
Landlord shall be responsible for the following:
- - Ceiling dropped, to include 2' x 4' acoustical tiles
- - Lighting, to include 2' x 4' recessed fixtures
- - Restrooms, by code
- - Electric outlets, by code
- - Rear access
- - HVAC, including distribution and air returns
- - Side and front perimeter walls drywalled, spackled and ready for paint
- - Concrete floor poured and ready for covering
- - Standard lighting
Tenant shall be responsible for the following:
- - Painting and decorating of Premises
- - Floor covering
- - Plumbing, electrical or gas line work required specifically for the Tenant
- - Store fixturing is general
<PAGE> 22
EXHIBIT C
---------
Sign Standards
--------------
Landlord will provide a sign casing with appropriate electrical service
permanently mounted on the canopy of the building facing the parking lot
immediately adjacent to and in front of Tenant's storeroom.
Tenant is responsible for design and cost of the insert and light bulbs and
design cost. Maintenance of the sign and mechanical equipment after the
storeroom is delivered to Tenant shall be Tenant's responsibility and expense.
Tenant agrees to repair any damaged or malfunctioning sign in as timely a manner
as possible. Signage will be provided only by Landlord's approved subcontractor.
Landlord reserves the right to approve all sign designs prior to installation.
<PAGE> 1
EXHIBIT 10.5
------------
ASSIGNMENT AND ASSUMPTION OF LEASE
----------------------------------
ASSIGNMENT AND ASSUMPTION OF LEASE, dated June 24, 1999 (the
"Assignment"), by and among Dao Q. Nguyen (the "Assignor"), Dominion Homes,
Inc., an Ohio corporation ("Assignee"), and BRC Properties Inc., an Ohio
corporation (formerly known as "Borror Realty Company" and "The Borror
Corporation," "Landlord").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Thomas M. Nguyen ("Original Tenant") entered into
that certain Lease Agreement, dated November 12, 1997 (the "Lease Agreement"),
with respect to certain property located at 5773 Karric Square Drive, Columbus,
Ohio (the "Premises"); and
WHEREAS, Original Tenant, Assignor and Landlord entered into that
certain Lease Assignment, executed on or about October 2, 1998, pursuant to
which Original Tenant assigned the Lease Agreement to Assignor; and
WHEREAS, Assignor desires to assign the Lease Agreement to Assignee;
and
WHEREAS, the Lease Agreement provides, among other things, that the
Lease Agreement shall not be assigned without the prior written consent of
Landlord;
NOW, THEREFORE, in consideration of the foregoing and the provisions
set forth below, the parties agree as follows:
1. Effective as of August 31, 1999 (the "Effective Date"), Assignor
assigns to Assignee all of Assignor's right, title and interest in and to the
Lease Agreement, including all rights to the One Thousand and 00/100 Dollar
($1,000.00) security deposit provided to Landlord pursuant to Section 49 of the
Lease Agreement. Assignor shall deliver possession of the Premises to Assignee
on or before the Effective Date.
2. Assignor covenants, warrants and represents to Assignee that: (a)
the Lease Agreement is in full force and effect; (b) Assignor has performed, and
will continue to perform up to and including the Effective Date, all of
Assignor's obligations under the Lease Agreement; (c) Assignor has full right
and power to execute, deliver and perform this Assignment; (d) no defaults or
events of default have occurred and are continuing under the Lease Agreement;
and (e) the Lease Agreement has not been modified, supplemented or amended.
3. As of the Effective Date, Assignee assumes and agrees to be bound by
and pay and perform all of the obligations, terms, covenants and conditions
under the Lease
1
<PAGE> 2
Agreement which, pursuant to the Lease Agreement, are to be observed, kept
and/or performed by Assignor on and after the Effective Date.
4. Prior to delivering possession of the Premises to Assignee, Assignor
shall remove all equipment and trade fixtures of Assignor from the Premises in
accordance with the terms and conditions of the Lease Agreement, and Assignor
shall cause the Premises to be in a "broom clean" condition at the time Assignor
delivers possession of the Premises to the Assignee.
5. In consideration of the assignment of the Lease Agreement by the
Assignor to Assignee, and subject to the last sentence of this Section 5,
Assignee shall pay Assignor Twenty Thousand and 00/100 Dollars ($20,000.00) as
follows: (a) Ten Thousand and 00/100 Dollars ($10,000.00) shall be paid to
Assignor by Assignee on the date all parties hereto have duly executed this
Assignment; and (b) Ten Thousand and 00/100 Dollars ($10,000.00) shall be paid
to Assignor by Assignee on the date Assignor delivers possession of the Premises
to Assignee (the "Second Installment"). Notwithstanding the foregoing, Assignee
shall have no obligation to deliver the Second Installment to Assignor in the
event that Assignor fails to deliver the Premises to Assignee on or before the
Effective Date.
6. The amounts to be paid by Assignee to Assignor pursuant to Section 5
above may be offset for any costs or expenses incurred by Assignee arising,
directly or indirectly, as a result of Assignor's breach of any of the
provisions of this Assignment.
7. Landlord hereby consents to this Assignment, and the transactions
contemplated hereby, and further consents to Assignee's use of the Premises as a
real estate sales and training center and also for general office purposes.
Except with respect to Assignor's duties and obligations under this Assignment,
Landlord hereby releases Assignor from any and all obligations under the Lease
Agreement, effective as of the Effective Date.
8. Assignee's obligations under this Assignment and the Lease Agreement
are expressly conditioned on all of Assignor's covenants, warranties and
representations contained in Section 2 above being true and correct on and as of
the Effective Date.
9. This Assignment shall be binding upon and shall inure to the benefit
to the parties hereto and their successors and permitted assigns. This
Assignment constitutes the entire agreement of the parties with respect to the
subject matter hereof and may not be modified or amended except by a writing
signed by all parties hereto. The provisions of this Assignment shall survive
the closing of the transactions contemplated hereby.
2
<PAGE> 3
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption of Lease as of the date first above written.
SIGNED IN THE PRESENCE OF: ASSIGNOR:
Traz Nguyen /s/ Dao Q. Nguyen
- ------------------------------ -----------------
Dao Q. Nguyen
Terry George
- ------------------------------
(Witnesses as to Assignor)
ASSIGNEE:
Tamara Hardy DOMINION HOMES, INC.
- ------------------------------
Dona Krebs By: /s/ Denis G. Connor
(Witnesses as to Assignee) Denis G. Connor, Senior Vice President
LANDLORD:
BRC PROPERTIES INC.
(formerly known as "Borror Realty
Tamara Hardy Company" and "The Borror Corporation")
- ------------------------------
Dona Krebs By: /s/ Randolph B. Robert
- ------------------------------ ----------------------
(Witnesses as to Landlord) Randolph B. Robert, Vice President
3
<PAGE> 1
EXHIBIT 10.6
------------
LEASE AGREEMENT
---------------
This Lease, made and entered into this 12th day of November, 1997 by and
between Borror Realty Company, an Ohio corporation, hereinafter called
"Landlord," and Thomas M. Nguyen, personally, hereinafter called 'Tenant'.
WITNESSETH:
In consideration of the mutual covenants and agreements set forth in this Lease,
Landlord and Tenant do hereby covenant and agree as follows:
1. DESCRIPTION OF PREMISES
Landlord does hereby lease to Tenant, and Tenant does hereby rent from Landlord,
upon and subject to the terms, conditions, covenants and agreements set forth in
this Lease, the premises, hereinafter referred to as the "Premises" consisting
of approximately 1,200 square feet of space in the shopping center known as
Karric Square at Dublin Shopping Center located in the City of Columbus, County
of Franklin, State of Ohio, hereinafter referred to as the "Shopping Center,"
said Premises being highlighted in yellow on Exhibit "A" attached hereto for the
purpose of more specifically locating the Premises in said Shopping Center and
being further identified as 5773 Karric Square Drive.
The term "Shopping Center' wherever used herein shall be deemed to mean
the entire area owned by Landlord AS shown on said Exhibit "A," AS the same may
from time to time be increased by the addition of the other lands, and the
entire development on said area, including any and all structures, parking
facilities and common facilities built thereon, or AS the same may from time to
time be reduced by eminent domain takings or dedication to public authorities.
2. TERM
(a) This Lease shall continue in force for a term of SIXTY (60) months
(the "Term") commencing: SIXTY (60) days after the date on which Landlord
delivers the Premises to Tenant for fixturing; and ending on the last day of
SIXTIETH (60TH) month following the Commencement Date,-unless sooner terminated
as provided herein.
(b) Tenant shall at the request of Landlord execute a declaration
specifying the Commencement Date of the Term. Rental under this Lease shall not
commence until such Commencement Date, as specified in said declaration of
commencement.
3. RENT
(a) Fixed Base Rent - Tenant hereby covenants and agrees to pay to
Landlord as "Fixed Base Rent" for the Premises during the entire Term, without
any deductions or set off whatsoever, the sum of (SEE RENT INDICATED BELOW)
Dollars ($-) per year, in equal monthly installments of Dollars ($-) in advance,
on the first day of each and every calendar month throughout the Term. All
payments required to be made by Tenant to Landlord, under this Lease shall be
made to Karric Square Shopping Center, c/o Mathews Click & Associates, Inc.,
P.O. Box 182039, Department 129, Columbus, Ohio 43218-2039 or at such other
place as Landlord may from time to time designate in writing.
1
<PAGE> 2
<TABLE>
<CAPTION>
Year Rate/SF Annual Monthly
<S> <C> <C> <C>
1 $10.00 $12,000.00 $1,000.00
2 $10.50 $12,600.00 $1,050.00
3 $11.50 $13,800.00 $1,150.00
4 $12.00 $14,400.00 $1,200.00
5 $12.50 $15,000.00 $1,250.00
</TABLE>
(b) The first fixed base rent payment shall be due and owing on the
acceptance of this Lease by Landlord. In the event of default on the Lease by
Tenant prior to the Commencement Date, the first month's rent will be applied
against leasehold improvement expenses incurred by Landlord in preparing store
for Tenant's use.
(c) Base Rent Abatement: notwithstanding the above, Landlord agrees to
abate base rent for the first two (2) months of the Lease Term; however payment
of "Additional Charges" (common area maintenance, taxes and insurance) shall
remain payable at all times.
4. LANDLORD'S AND TENANT'S IMPROVEMENTS
Landlord agrees that it shall, at its own cost and expense perform the work and
make the installations in the Premises which are designated AS Landlord's
Improvements in Exhibit "B" attached hereto and made a part hereof.
Tenant shall prepare and submit to Landlord, for approval, preliminary
design drawings of Tenant's Work as provided in Exhibit "B". If Landlord shall
notify Tenant of any objections to such design drawings, Tenant shall make the
necessary revisions to Landlord's reasonable satisfaction and promptly resubmit
the same after such notice. Landlord's approval shall be evidenced by
endorsement to that effect on one (1) set of the design drawings, one (1) set to
be retained by Landlord and one (1) set by Tenant.
Tenant agrees to require his subcontractor(s) to provide for removal of
construction debris at Tenant's sole expense and in a manner consistent with any
directives provided by Landlord or Landlord's construction supervisory
personnel.
5. USE OF PREMISES
(a) The Premises shall be used and occupied by Tenant during the entire
Term hereof, subject to the conditions herein contained for:
NAIL SALON
(b) Tenant agrees that it will not use, or permit or suffer the use of
the Premises, or any part thereof, for any other business or purpose.
(c) Tenant further agrees that in the use and occupation of the
Premises and in the prosecution or conduct of its business therein, Tenant shall
comply with all requirements of all law, ordinances, orders and regulations of
the federal, state, county and municipal authorities now in force, or which
hereinafter may be in force and with any direction or certificate of occupancy
issued pursuant to any law by any public officer or officers. Tenant further
covenants and agrees that it will comply with an abide by all protective
covenants, restrictions, and other recorded documents pertaining to the Shopping
Center and the Premises, and the Tenant's use of the Premises is limited by all
such protective covenants, restrictions and other recorded documents Tenant
covenants and agrees that it shall not use or permit to be used any part of the
Premises for any dangerous, noxious or offensive trade or business and will not
cause or maintain any nuisance in, at or on the Premises, and the land upon
which it is situated.
2
<PAGE> 3
(d) Tenant shall use and occupy the Premises in a careful, safe and
proper manner and shall keep the Premises in a clean and safe condition in
accordance with this Lease and local ordinances and the lawful directions of
proper public officers. Tenant shall use and maintain the Premises consistent
with reasonable standards of good shopping center operations, and Tenant shall
not permit solicitations, demonstrations, itinerant vending or any other
activities inconsistent with such standards. Tenant shall not use or permit the
Premises to be used for any disreputable or immoral purpose or in any way that
will injure the reputation of the Shopping Center. Tenant agrees that it will
not do or suffer to be done, or keep or suffer to be kept, anything in, upon or
about the Premises which will contravene Landlord's policies insuring against
loss or damage by fire or other hazards, or which will prevent Landlord from
procuring such policies in companies acceptable to Landlord or cause
cancellation of insurance of Landlord or any other tenant of the Shopping
Center; and if anything done, omitted to be done or suffered to be done by the
Shopping Center or any part thereof to be increased beyond the minimum rate
which would be applicable for the least hazardous use of the Premises permitted
by law, Tenant shall pay the amount of such increase to Landlord promptly upon
Landlord's demand,
(e) Tenant shall not obstruct the Common Areas (hereinafter defined)
and shall refrain from committing any act or thing upon the Premises or the
Common Areas which disturbs the quiet enjoyment of any other tenant of the
Shopping Center or inhibits or detracts from Landlord's ability to lease other
parts of the Shopping Center.
(f) Tenant shall not permit the accumulation of rubbish, trash, garbage
and other refuse in and around the Premises. Garbage and trash receptacles may
be placed only in areas designated by Landlord and Landlord shall have the right
to designate and control the type and size of such garbage and trash receptacles
that may be used by Tenant.
(g) Tenant shall be required to install an exterior sign on the
Premises which conforms to the sign criteria attached hereto as Exhibit "D", and
which sign shall be placed only in such locations as are previously approved in
writing by Landlord. Notwithstanding the specifications in Exhibit "D", attached
hereto, all signs to be installed by Tenant are subject to the prior written
approval of Landlord, and plans and specifications for each sign must be
submitted to Landlord in quadruplicate for each approval. The plans and
specifications for Tenant's canopy sign must be submitted within thirty (30)
days after execution of this Lease by Tenant. It is understood and agreed that
the approved canopy sign must be installed and operational prior to Tenant
opening to the public for business. TENANT SHALL NOT PLACE, ERECT OR MAINTAIN,
OR SUFFER TO BE PLACED, ERECTED OR MAINTAINED ON THE DOORS OR ON ANY EXTERIOR
SURFACE OF THE PREMISES, OR IN ANY VESTIBULE, OR ANYWHERE IN THE SHOPPING CENTER
OUTSIDE OF THE PREMISES, NOR IN ANY AREA INSIDE THE PREMISES WHICH CAN BE SEEN
FROM THE OUTSIDE OF THE PREMISES, ANY SIGN, LETTERING, DECORATION OR ADVERTISING
WITHOUT THE PRIOR WRITTEN CONSENT OF LANDLORD.
(h) Tenant shall permit no waste, damage or injury to the Premises and
Tenant shall initiate and carry out a program of regular maintenance of the
Premises including the painting or refinishing of all areas of the interior and
store front so as to impede, to the extent possible, deterioration by ordinary
wear and tear and to keep the same in attractive condition.
(i) Tenant shall at all times during the Term observe and comply with
the rules, regulations and covenants as may be published and amended from time
to time by Landlord for the safety, care and cleanliness of the Shopping Center
and the Premises and the preservation of good order therein.
(j) Tenant shall refrain from distributing any handbills or other
advertising matter on or about any part of the Shopping Center, and shall not
use any sidewalks, walkways or areaways of the Shopping Center for the sale of
merchandise or any business, occupation or undertaking.
3
<PAGE> 4
6. COMMON AREAS
(a) The term "Common Areas" shall be deemed to mean such areas,
improvements, space, equipment and special services in or at the Shopping Center
as determined by Landlord from time to time to be devoted to the general usage
of all the tenants of the Shopping Center and their employees, customers and
other invitees.
(b) The use by ' Tenant of the Premises shall include the use, in
common with the others entitled thereto, of the Common Areas as may be
designated from time to time by Landlord, subject however to the terms and
conditions of this Lease and to rules and regulations for the use thereof as
prescribed from time to time by the Landlord.
(c) In addition to the Fixed Base Rent set herein, Tenant agrees to pay
to Landlord at the times and in the manner hereinafter provided, a pro rata
share of the Net Costs (hereinafter defined) paid or incurred by Landlord or its
designated agent in the operation, direct management, maintenance and repair of
the Common Areas, including, but not limited to, parking areas, roofs, canopies,
exterior of outside walls of building(s), access roads, driveways, entrances and
exits, landscaped areas, pathways, storm water system, accommodation areas such
as sidewalks, grass plots, ornamental planting, entry monuments and signs,
directional signals, public lighting and the like; and any and all additional
maintenance costs including utilities, wages, accounting costs, management fees,
electric, security, cleaning, snow removal and trash removal. The Common Areas
shall not include the foundation or structural portions of the buildings located
within the Shopping Center.
Tenant's pro rata share of such Net Costs shall be that percentage
factor computed by dividing the total square feet of the Premises by the total
square feet of leasable space in the Shopping Center.
(d) For the purpose of this Section 6 the term "Net Costs" is hereby
defined to mean Landlord's total costs incurred in operating, managing,
equipping, lighting, repairing, insuring and maintaining the Common Areas plus a
reasonable amount for depreciation of equipment actually used and excluding (if
otherwise included therein) capital costs, interest and real property taxes or
assessments.
(e) Tenant's pro rata share of such Net Costs shall be determined on an
annual basis for each twelve (1 2) month period ending on December 31st,
prorating fractional years. Tenant's pro rata share of such annual Net Costs
shall be estimated by Landlord at the beginning of the Term hereof, and at the
beginning of each calendar year thereafter and a monthly rate determined, and
Tenant shall pay to Landlord such estimated charge in advance on the first day
of each month throughout the Term of this Lease; provided however that within
sixty (60) days after the end of each calendar year the Landlord or its
designated agent shall determine its costs for such calendar year (and Tenant's
share thereof, and furnish a copy of such computations in writing to the Tenant.
If the payments made by the Tenant in such calendar year exceed Tenant's pro
rata portion of such Net Costs, Tenant shall be credited the amount of any
overpayment, such credit to be applied against the estimated Net Costs for the
then-current year. If Tenant's pro rata portion of such Net Costs exceeds the
payments made in such calendar year by the Tenant, then Tenant shall pay the
difference to the Landlord or its designated agent. Such payment to the Landlord
or its designated agent shall be made within fourteen (14) days after Tenant's
receipt of Landlord's written statement of the Tenant's share of Net Costs for
the preceding year.
(f) Landlord shall have the right to close any or all portions of the
Common Areas to such extent as may, in the opinion of Landlord's counsel, be
legally sufficient to prevent a dedication thereof or the accrual of any rights
to any person or to the public therein and to close temporarily, if necessary,
any part of the Common Areas in order to discourage noncustomer parking.
Landlord shall have the right from time to time to establish, modify and enforce
rules and regulations with respect to all Common Areas. Tenant agrees to abide
by and conform with such rules and regulations, including, but not limited to,
rules and regulations as to parking of employees' cars, making deliveries, and
traffic control.
4
<PAGE> 5
7. TAXES AND INSURANCE
(a) Taxes
(1) Tenant covenants and agrees to pay to landlord is
proportionate share of all real property taxes and special assessments, which
may be levied or assessed for each calendar year during the entire term, against
the land and buildings comprising the Shopping Center or relating to the
operation or use thereof and service and/or special payments in lieu of taxes
required to be paid by Landlord. Tenant's proportionate share shall be equal to
that portion of such taxes and assessments equal to the product obtained by
multiplying such taxes, assessments and payments by a fraction, the numerator of
which shall be the number of square feet of space in the Premises and the
denominator of which shall be the total number of square feet of leasable space
in the Shopping Center. Should the state in which the Shopping Center is located
or any political subdivision thereof or any governmental authority having
jurisdiction over the Shopping Center impose a tax or assessment (other than an
income or franchise tax) either upon or against the rentals payable by tenants
in the Shopping Center to Landlord or upon or against the business of renting
land or buildings, either by way of substitution for the taxes and assessments
levied or assessed against such land and buildings, or in addition thereto, such
tax or assessment shall be deemed to constitute a tax or assessment against such
land and buildings for the purpose of this Section 7.
(2) Tenant's proportionate share of all such taxes and
assessments during the Term shall be paid to Landlord, as additional rent, in
monthly installments on or before the first day of each calendar month, in
advance, in an amount estimated by Landlord. Upon receipt of all tax bills and
assessments attributable to any calendar year during the Term, Landlord shall
furnish Tenant with a written statement of the actual amount of Tenant's
proportionate share of taxes and assessments for such year. If the total amount
paid by Tenant under this Section 7 for any calendar year during the Term shall
be less than the actual amount due from Tenant for such year, as shown on such
statement, Tenant shall pay to Landlord the difference between the amount paid
by Tenant and the actual amount due, such deficiency to be paid within ten (10)
days after demand therefor by Landlord; and if the total amount paid by Tenant
hereunder for any calendar year shall exceed such actual amount due from Tenant
for such calendar year, Tenant shall be credited the amount of any overpayment,
such credits to be applied against the estimated taxes and assessments for the
then-current year. All amounts due hereunder shall be payable to Landlord at the
place where the Fixed Base Rent is payable. For the calendar years in which this
Lease commences and terminates the provisions of this Section 7 shall apply, and
Tenant's liability for its proportionate share of any taxes and assessments for
such years shall be subject to a pro rata adjustment based on the number of days
of said calendar years, A copy of a tax bill or assessment bill submitted by
Landlord to Tenant shall at all times be sufficient evidence of the amount of
taxes or assessments assessed or levied against the property to which such bill
relates. At or about the Commencement Date of this Lease and from time to time
thereafter throughout the Term, Landlord shall notify Tenant in writing of
Landlord's estimate of Tenant's monthly installment due hereunder.
(b) Insurance
(1) Tenant covenants and agrees to pay to Landlord its
proportionate share of the following types of insurance:
(i) Fire, lightening, windstorm, hail, explosion,
earthquake and extended coverage insurance with such
other endorsements as Landlord shall deem appropriate
in such amounts as Landlord shall deem sufficient up
to one hundred percent (100%) of the full replacement
cost of the building(s) and service equipment in the
Shopping Center. Such policy or policies may also
include rents insurance coverage for a six (6) month
period; and
(ii) Public liability and property damage insurance
insuring Landlord against claims for personal injury,
death or property damage occurring upon, in or
5
<PAGE> 6
about the Shopping Center in such amounts as Landlord
deemed appropriate.
(2) Tenant's proportionate share of such insurance premiums
shall be paid to the landlord, as additional rent, in monthly installments on or
before the first day of each calendar month throughout the Term, in advance, in
an amount estimated by Landlord. Such estimate shall be furnished in writing by
Landlord prior to the Commencement Date of the Term and at the beginning of each
calendar year thereafter and at a monthly rate determined. Within sixty (60)
days after the end of each calendar year, landlord shall furnish Tenant with a
written statement of the actual amount of Tenant's proportionate share of such
insurance premiums for such calendar year. If the total amount paid by Tenant
under this Section 7 for any calendar year shall be less than the than the
actual amount due from Tenant for such year, as shown on such statement, Tenant
shall pay Landlord the difference between the amount paid by Tenant and the
actual amount due, such deficiency to be paid within ten (10) days after demand
therefor by Landlord; and if the total amount paid by Tenant hereunder for such
calendar year shall exceed such actual amount due from Tenant for such year,
Tenant shall be credited the amount of any overpayment, such credits to be
applied against the estimated insurance premiums for the then-current calendar
year. All amounts due hereunder shall be payable to Landlord at the place where
the Fixed Base Rent is payable. Landlord agrees to use its best efforts to
obtain competitive rates for said insurance coverage.
(3) Tenant's proportionate share of such insurance premiums
shall be equal to the product obtained by multiplying such insurance premiums by
a fraction, the numerator of which shall be the number of square feet of space
in the Premises and the denominator of which shall be the total number of square
feet of leasable space in the Shopping Center.
8. OPERATION OF BUSINESS
During the entire Term, Tenant shall keep the Premises open for
business continuously during all regular and customary hours for such type of
business and on all business days, and will conduct such business in a lawful
manner, in good faith with such business practice, and in such a manner that the
Landlord may at all times receive the maximum amount of rent from the operation
of such business in the Premises. Tenant further agrees to carry a reasonably
complete stock of merchandise and to fully and adequately staff the Premises
with sufficient employees for the purpose of selling said merchandise at retail.
Tenant shall not open any additional business within a two (2) mile radius of
the Shopping Center which shall, in the sole opinion of Landlord, compete with
Tenant's business in the Premises or otherwise reduce Tenant's Gross Receipts
from the Premises. In order to establish and preserve the character of the
Shopping Center as a high quality retail development, Tenant shall not conduct
any auction, fire, bankruptcy or close out sales, provided however that this
provision shall not preclude the conduct of periodic seasonal, promotional, or
clearance sales nor be deemed to give Landlord a right to approve or disapprove
the price at which Tenant shall offer its merchandise for sale. Tenant shall not
utilize any unethical method of business operations. Tenant shall not use or
permit the use of any equipment or apparatus producing, reproducing, or
transmitting sound, which is audible beyond the interior of the Premises.
9. BUSINESS HOURS
Notwithstanding the provisions set forth in Section 8 of this Lease,
the Tenant agrees during the entire Term to open for business not later than
10:00 a.m. and to remain open for business until 9:00 p.m. Monday through
Saturday and noon to 5:00 p.m. Sundays, national holidays excluded, which
holidays shall not exceed eight (8) in any Lease Year.
10. UTILITIES
Tenant shall be solely responsible for and promptly pay all charges for
heat, water, gas, electricity and other utilities used or consumed on the
Premises, and any and all tap-in or connection charges in connection therewith.
Landlord shall not be liable to Tenant for interference in or interruption of
any utility service nor shall any curtailment or interruption constitute a
constructive eviction or grounds for rental abatement in whole or in part
hereunder.
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In the event utilities are not separately metered to Tenant, then Tenant shall
reimburse Landlord, upon demand, for the cost to Landlord of utilities used or
consumed on the Premises.
11. MAINTENANCE
(a) Subject to the provisions of Section 18, Tenant shall, at Tenant's
sole cost and expense, during the entire term, keep and maintain in good order,
condition and repair the Premises and every part thereof, including, but not
limited to, all plumbing, sewage, fixtures, interior walls, Storefront(s),
showcases, skylights, all electrical facilities and equipment, lighting
fixtures, lamping, fans and electrical motors, all other appliances and
equipment of every kind and nature, sprinkler equipment (if any), and any other
mechanical systems in the Premises. Tenant's obligations shall include, but
shall not be limited to, the obligation to replace when necessary any of the
items required to be maintained by Tenant at it sole cost and expense. Such
replacement of items shall be of comparable quality to those that they are
replacing. If Tenant fails to perform Tenant's obligations under this Section
11, Landlord may, at Landlord's option enter upon the Premises and put the same
in good order, condition and repair and make such replacements as may be
necessary, and the cost thereof shall become due and payable as additional rent
by Tenant to Landlord upon demand, but nothing in this sentence contained shall
be deemed to impose a duty upon Landlord or affect in any manner the obligations
placed upon Tenant by this Section 11. Any such entry by Landlord shall not be
deemed to be an eviction of Tenant.
(b)Tenant shall provide for (at Tenant's cost and expense as hereinafter
set forth) the maintenance, repair and replacement of the heating, ventilating
and air conditioning equipment (HVAC) in the Premises. Tenant shall perform or
contract with independent contractors for such maintenance, repair and
replacement,
(c) Tenant shall furnish (at Tenant's costs and expense as hereinafter set
forth) trash and garbage receptacles and the removal of trash and garbage from
said receptacles and the removal of trash and garbage from said receptacles.
Tenant shall itself furnish, or shall contract with independent contractors for
such receptacles and trash and garbage removal.
12. EXAMINATION OF PREMISES
The Tenant has had or will have prior to the Commencement Date hereof full
opportunity to examine the herein Premises or plans thereof, including the
sidewalks adjacent to said Premises, and the Tenant's occupancy shall be an
acknowledgment that there is in and about them nothing dangerous to life, limb,
health or property, and Tenant hereby waives any claim for damages that may
arise from defects of that character after occupancy, and the Tenant takes the
Premises as they will be when completed. All personal property of any kind or
description whatsoever in the Premises shall be at the Tenant's sole risk, and
the Landlord shall not be liable for any damages done to, or loss to, such
personal property; or for damage or loss suffered by the business or occupation
of the Tenant arising from any act or neglect of co-tenants or other persons, or
from bursting, overflowing, or leaking of water, sewer or steam pipes, or from
the heating, air conditioning or plumbing fixtures, or from electric wires, or
from roof, wall and floor leaks or from gas, or odors, or caused in any other
manner whatsoever.
13. ACCEPTANCE OF PREMISES
Tenant that no minor changes from the plans that have been agreed upon
between both parties hereto that might be necessary during the preparation of
this space for Tenant or during construction, will affect or change this Lease,
or invalidate same.
14. INDEMNIFICATION OF LANDLORD AND LIABILITY INSURANCE
(a) Tenant agrees to indemnify and save harmless Landlord, its
officers, agents, employees and servants, from and against any and all claims by
or on behalf of any persons, firms or corporations, arising from the use,
occupancy, conduct, management of, or from the use, or from any work or thing
whatsoever done in or about, the Premises during the entire Term, and will
further indemnify and save harmless Landlord, its officers, agents, servants and
employees,
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from and against any and all claims arising during the entire Term from any
conditions of the Premises, or arising from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Lease, or arising from any act or
negligence of Tenant, or any of Tenant's agents, contractors, servants,
employees or licensees, or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation occurring during the entire
Term of this Lease, in or about the Premises and from and against all costs,
counsel fees, expenses and liabilities incurred in connection with any such
claim or action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord covenants to resist or defend such action or proceeding by
counsel satisfactory to Landlord.
(b) Tenant agrees to carry at its own expense throughout the Term
comprehensive public liability insurance covering the Premises and Tenant's use
thereof, in companies and in form satisfactory to Landlord, in the amount of at
least Five Hundred Thousand Dollars ($500,000.00) on account of bodily injury to
or death of one person and One Million Dollars ($1 000,000.00) on account of
bodily injuries to or death of more than one person as a result of any
occurrence and with Two Hundred Fifty Thousand Dollars ($250,000.00) coverage
for property damage, and to deposit said policy or policies (or certificates
thereof with Landlord prior to the date of any use or occupancy of the Premises
by Tenant and thereafter not less than thirty (30) days prior to the expiration
of any such policy; said policy or policies shall name Landlord and Tenant as
insured and shall bear endorsements to the effect that the insurer agrees to
notify Landlord not less than thirty (30) days in advance of any modification or
cancellation thereof. Should Tenant fail to carry such public liability
insurance, Landlord may at its option (but shall not be required so to do) cause
public liability insurance as aforesaid to be issued, and in such event Tenant
agrees to pay the premium for such insurance as additional rent promptly upon
Landlord's demand.
15. LANDLORD'S RIGHT TO PERFORM TENANTS COVENANTS
Tenant covenants and agrees that if Tenant shall at any time fail to
perform any of the covenants on its part to be made or performed under this
Lease, the Landlord may, but shall not be obligated, and without notice or
demand and without waiving or releasing the Tenant from any obligation of the
Tenant under this Lease, perform such act to the extent that the Landlord may
deem desirable. All expenses incurred by Landlord in connection therewith shall
be deemed additional rent hereunder and be payable to the Landlord on demand and
the Landlord shall have the same rights and remedies for the nonpayment thereof
as in the case of default in the payment of any other rent or charges to be paid
by Tenant hereunder. Landlord shall have the right to enter the Premises for the
purpose of performing any maintenance or making any repairs as Landlord may
elect to perform or make pursuant to this Section 15 and such entry shall not
constitute an eviction of Tenant. Nothing in this Section 15 shall be construed
to or deemed to impose any duties upon Landlord.
16. CONDEMNATION
(a) If the whole, or any part of the Premises shall be taken by any
public, or quasi-public authority under any statute or by power or right of
eminent domain, the Term shall cease on that part of the Premises so taken or
conveyed (hereinafter referred to as the "Condemned Portion") for the day to day
possession of the Condemned Portion shall be taken by the condemning authority.
Unless this Lease is cancelled as hereinafter provided, the Fixed Base Rent
provided for herein commencing with the date possession is acquired by the
condemning authority, shall be reduced in proportion to the amount of the
Premises taken. If less than the entire Premises shall be taken by such
condemning authority, and in the event, and only in the event, that the
remainder of the Premises not so taken is not, in Landlord's judgment,
reasonably fit or suited to being used by Tenant to enable Tenant to discharge
and satisfy the purposes for which the Premises are leased hereunder to Tenant
and to carry on its business therein, Tenant, provided that Tenant is not in
default under this Lease, may in such event terminate this Lease as to the
remainder of the Premises by giving written notice to Landlord not later than
fifteen (15) days after the vesting of title in the condemning authority or the
date possession of the Condemned Portion shall be taken by the condemning
authority, whichever shall first occur,
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specifying as the date of termination a date not later than thirty (30) days
after the giving of such notice. Upon the date specified in such notice, the
Term and all right, title, and interest of Tenant hereunder shall cease and come
to an end, provided Tenant is not in default under this Lease on such date, and
Fixed Base Rent, Percentage Rent and other charges shall be apportioned as of
the date of such termination.
(b) If less than the entire Premises shall be taken by such condemning
authority and this Lease is not terminated as hereinabove provided, Landlord
covenants and agrees at Landlord's cost and expense to restore that portion of
the Premises no so taken to a complete architectural unit, in which event (i)
the Fixed Base Rent shall be reduced by an amount based upon the proportion
which the square feet of usable floor space of the Premises, including space
occupied by interior walls and columns remaining after the taking, bears to the
total floor space of the Premises prior to the taking, and (ii) the Base Sales
Amount of Gross Sales in excess of which Percentage Rent shall be due and
payable as provided in Section 3, paragraph (c) shall be reduced by the same
percentage as the percentage of reduction in usable floor space in the Premises
after restoration thereof. In the event Landlord is obligated to restore the
Premises to a complete architectural unit as above provided, Landlord shall not
be required to spend for such work an amount in excess of the amount received by
Landlord as damages for the part of the Premises so taken, less any amount paid
to Landlord's mortgagee from such award.
(c) The entire compensation award for any taking shall belong to and be
the property of Landlord, including, but not limited to, all damages as
comprehensive for diminution in value of the leasehold, reversion, and fee,
without any deduction therefrom for any present or future estate of Tenant, and
Tenant hereby assigns such award to landlord, except that Tenant shall be
entitled to receive such portion thereof as may be allocated to compensation
paid for Tenant's trade fixtures and cost of removal of stock, provided that
Tenant so proves in any such condemnation proceeding.
(d) Anything in this Section 16 to the contrary notwithstanding, if a
portion of the Premises shall be taken by any public or quasi-public authority
under the power of eminent domain, the Landlord shall have the option of
terminating this Lease as of the date of vesting of title in the condemning
authority by written notice to Tenant given within fifteen (15) days after
vesting of title in the condemning authority, in which event Landlord shall make
a proportionate refund to Tenant of such rent as may have been paid in advance.
(e) For the purpose of this Section 16 a sale to such public or
quasi-public authority under threat of condemnation shall constitute a vesting
of title and shall be construed as a taking by such condemning authority.
17. QUIET ENJOYMENT
Landlord covenants and agrees that the Tenant upon paying the Fixed
Base Rent, additional rent and all other charges herein provided for and
performing and fulfilling the covenants, agreements, and conditions of this
Lease on the Tenant's part to be performed and fulfilled, shall peaceably and
quietly hold, occupy and enjoy the Premises during the Term without hindrance or
molestation by the Landlord or any person(s) claiming under the Landlord,
subject, however, to the terms and conditions of this Lease.
18. DAMAGE OR DESTRUCTION
(a) If the Premises are damaged by fire or other casualty, the damage
shall be repaired by and at the expense of Lanlord, provided such repairs can be
made within ninety (90) days after the occurance of such damage without the
payment of overtime or other premiums, and until such repairs are completed, the
rent shall be abated in proportion to the part of the Premises which is unusable
by Tenant in the conduct of its business (but there shall be no abatement of
rent by reason of any portion of Premises being unusable if the damage is due to
the act or negligence of the Tenant, its employees, agents or invitees or if the
Premises are unusable for a period equal to one day or less).
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(b) If such repairs cannot be made within ninety (90) days, Landlord
may, at its option, make such repairs within a reasonable time, and in such
event this Lease shall continue in effect and the rent shall be abated in the
manner provided above. Landlord's election to make repairs must be evidenced by
written notice to Tenant within thirty (30) days after the occurrence of the
damage. If Landlord does not so elect to make such repairs which cannot be made
within ninety (90) days, then either party may, by written notice to the other,
cancel this Lease.
(c) Anything in this Section 18 to the contrary
notwithstanding,; if the Premises or the Shopping Center shall be substantially
damaged or destroyed by fire or otherwise, Landlord shall have the option to
terminate this Lease as of the date of such damage or destruction by written
notice to Tenant within thirty (30) days after such damage or destruction.
19. EXTERIOR AND WINDOW LIGHTING
The Tenant agrees to keep the display windows in the Premises and
Tenant's exterior canopy sign well lighted from dusk until 10:00 p.m. (local
time) Monday through Saturday and from dusk until 6:00 p.m. (local time) on
Sunday during the Term.
20. SUBORDINATION TO MORTGAGE
This Lease is and shall be subject and subordinate to any and all
mortgages, deeds of trust and land leases now existing upon or that may be
hereafter placed upon the Premises and the real estate upon which they are
situated, and to all advances made or to be made thereon, and all renewals,
modifications, consolidations, replacement, or extensions thereof, and the lien
of any such mortgages, deeds of trust and land leases shall be superior to all
rights hereby or hereunder vested in Tenant, to the full extent of all sums
secured thereby; provided however, that each such mortgage or deed of trust now
or hereafter encumbering the Premises and real estate upon which they are
situated shall provide by its terms, or the holder of such mortgage or deed of
trust shall, by a separate agreement, agree that in the event of foreclosure of
such mortgage or deed of trust, Tenant shall remain undisturbed under this Lease
so long as Tenant complies with all of the terms, obligations and conditions
hereunder. This provision shall be self-operative and no further instrument of
subordination shall be necessary to effectuate such subordination, and the
recording of any such mortgage or deed of trust shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording. In confirmation of such subordination, Tenant shall on
request of Landlord or the holder of any such mortgage or deed of trust execute
and deliver to Landlord within ten (10) days any instrument that Landlord or
such holder may reasonably request.
21. SURRENDER OF PREMISES
At the expiration of the Term, whether by forfeiture or expiration of
time, Tenant shall surrender the Premises to Landlord in as good condition as
when received by Tenant from Landlord except for reasonable use, wear and damage
by fire or the elements.
22. DEFAULT BY TENANT
(a) This lease is made upon the condition that the Tenant shall
punctually and faithfully perform all of the covenants and agreements by it to
be performed as herein set forth. If any of the following events shall occur,
to-wit (i) if any installment of Fixed Base Rent, Percentage Rent, or any other
sums required to be paid by the Tenant hereunder, or any part thereof, shall at
any time be in arrears and unpaid for ten (10) days after the date due, or (ii)
if there be any default on the part of the Tenant in the observance or
performance or any of the other covenants, agreements or conditions of said
Lease on the part of Tenant to be kept and performed and said default shall
continue for a period of fifteen (15) days after written notice thereof from
Landlord to Tenant (unless such default cannot reasonably be cured within
fifteen (15) days and in such case, Tenant shall have commenced to cure said
default within said fifteen (15) days and thereafter continues diligently to
pursue to completion the curing of same) or (iii) if Tenant shall file a
petition in bankruptcy or be adjudicated a bankrupt, or file any petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute,
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law or regulation, or make an assignment for the benefit of creditors, or (iv)
if any trustee, receiver or liquidator of Tenant or of all or any substantial
part of its properties shall be appointed in any action, suit or proceeding by
or against Tenant and such proceeding or action shall not have been dismissed
within thirty (30) days after such appointment, or (v) if the leasehold estate
hereby created shall be taken by execution or by other process of law, or (vi)
if Tenant shall fail to operate and conduct business as required in Section 8
hereinabove, then, in any such event, Landlord, at Landlord's option and without
limiting Landlord in the exercise of any other right or remedy Landlord may have
on account of any default by Tenant, may either:
(1) re-enter the Premises, take possession of all buildings,
improvements, additions, alterations, equipment and fixtures thereon, and eject
all parties in possession therefrom, using such force for that purpose as may be
necessary, without being liable to any prosecution for said re-entry or the use
of such force, and, without terminating this Lease, at anytime and from time to
time relet the Premises or any part or parts thereof for the account of Tenant
or otherwise, receive and collect the rents therefor, applying the same first to
payment of such expenses as Landlord may have paid, assumed or incurred in
recovering possession of the Premises, including costs, expenses and reasonable
attorney's fees and brokerage, paid, assumed or incurred by Landlord in
connection with reletting the Premises, and then to the fulfillment of the
covenants of Tenant. Any such reletting as provided for herein may be for the
remainder of the Term as originally granted or for a longer or shorter period.
Landlord may execute any Lease made pursuant to the terms hereof in Landlord's
own name, and Tenant shall have no right or authority whatever to collect any
rent from such subtenant. In any case and whether or not the Premises or any
part thereof be relet, Tenant shall pay to Landlord all sums required to be paid
by Tenant up to the time of re-entry by Landlord, and thereafter Tenant shall,
if required by Landlord, pay to Landlord until the end of the Term the
equivalent amount of all rent and other charges required to be paid by Tenant
under the terms of this lease, less the avails of such relating during the Term,
if any, after payment of the expenses of Landlord as aforesaid, and the same
shall be due and payable on the several rent days herein specified. No such
reentry by Landlord shall constitute an election to terminate this Lease unless
and until Landlord thereafter gives Tenant notice of Landlord's election to
terminate; or
(2) terminate this Lease, and with or without process of law,
expel and remove Tenant, or any other person or persons in occupancy from the
Premises, together with their goods and chaftels, using such force as may be
necessary in the judgment of Landlord or his agents in so doing, and repossess
and enjoy said Premises together with all improvements, additions, alterations,
equipment and fixtures thereon, and in addition to any other remedy it may have,
Landlord may recover from Tenant all damages it may incur by reason of such
breach by Tenant.
(b) All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other remedies allowed at law or in
equity.
23. TENANT'S PROPERTY
If for any reason Landlord obtains possession of the Premises, Tenant's
property not removed shall be deemed to have been abandoned and shall become the
property of the Landlord and may be used or disposed of by Landlord as it sees
fit.
24. HOLDING OVER
No receipt of money by the Landlord from the Tenant after termination
of this Lease, or after the service of any notice, or after the commencement of
any suit, or after final judgement for possession for the Premises shall
reinstate, continue or extend the Term or affect any such notice, demand or
suit, or imply consent for any action for which Landlord's consent if required.
In the event Tenant remains in possession of the Premises after termination of
this Lease, and without the execution of a new lease, Tenant, at the option of
Landlord shall be deemed to be occupying the Premises as a tenant from month to
month, at twice the Fixed Base Rent subject to all the other conditions,
provisions and obligations of this Lease insofar as the same are applicable to a
month-to-month tenancy.
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25. ACCESS FOR RE-LETTING
The Landlord may at any time within one hundred eighty (180) days
before the expiration date of this Lease enter the Premises at all reasonable
hours for the purpose of offering the same for rent and may place and keep on
the windows and doors of said Premises signs advertising the Premises for rent.
26. DEFAULT OF LANDLORD - CURE PERIOD
Landlord shall not be deemed to be in default in the observance or
performance of any of the covenants, conditions, agreements or provisions of
this Lease on its part to be observed or performed unless Landlord shall fail to
remedy such default within thirty (30) days after written notice from Tenant
specifying the nature of such default, or, if default cannot be reasonably
remedied within the said thirty (30) day period, Landlord shall not be deemed to
be in default unless Landlord shall fail to initiate action to remedy such
default within thirty (30) days after such written notice and to prosecute the
same to completion with due diligence.
27. FORCE MAJEURE
In the event Landlord shall be delayed or hindered in or prevented from
the performance of any obligation required under this Lease by reason of
strikes, lockouts, inability to procure labor or materials, failure of power,
fire or other casualty, acts of God, restrictive governmental laws or
regulations, riots, insurrection, war or any other reason not within the
reasonable control of Landlord, then the performance of such obligation shall be
excused for a period of such delay, and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
28. RELEASE AND WAIVER OF SUBROGATION
Landlord shall not be liable for any damage or loss to fixtures,
equipment, merchandise or other personal property of Tenant located anywhere in
or upon the Premises caused by fire, water, explosion, sewer backup or any other
insurable hazards, regardless of the cause thereof, and Tenant does hereby
expressly release Landlord of and from any and all liability for such damage or
loss. Landlord shall not be liable for any damage or loss resulting from
business interruption at the Premises arising out of or incident to the
occurrence of any of the perils which can be covered by a business interruption
policy, and Tenant does hereby expressly release Landlord of and from any
liability for such damage or loss. Tenant shall not be liable for any damages to
the Premises or any part thereof caused by fire or other insurable hazards,
regardless of the cause thereof, and Landlord does hereby expressly release
Tenant of and from any and all liability for such damages or loss. To the extent
that any of the risks or perils described in this Section 28 are in fact covered
by insurance, each party shall cause its insurance carriers to waive all rights
of subrogation against the other party.
29. ESTOPPEL CERTIFICATES
The Tenant shall, within ten (10) days after written request of
Landlord, execute, acknowledge, and deliver to the Landlord or to Landlord's
mortgagee, proposed mortgagee land lessor or proposed purchaser of the Shopping
Center or any part thereof, any estoppel certificates requested by Landlord,
from time to time, which estoppel certificates shall show whether the Lease is
in full force and effect and whether any changes may have been made to the
original Lease; whether the Term of the Lease has commenced and full rental is
accruing; whether there
30. LIMITATION OF LANDLORD'S LIABILITY
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owners at the time in question of an interest in this Lease,
and in the event of transfer of said interest in this Lease,
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then the party conveying said interest in this Lease shall be automatically
relieved after the date of such transfer, of all personal liability with respect
to the performance of any obligations on the part of Landlord contained in this
Lease, arising out of acts thereafter occurring or covenants thereafter to be
performed, it being intended hereby that all the obligations contained in this
Lease on the part of Landlord shall be binding upon Landlord, its successors and
assigns, only during and in respect of their respective periods of ownership of
an interest in this Lease.
31. ALTERATIONS OR IMPROVEMENTS BY TENANT
Tenant covenants and agrees that it will not alter or change the Premises or any
part thereof without the written consent of Landlord, and Tenant agrees to
indemnify and save harmless Landlord from all liens, claims or demands arising
out of any work performed, materials furnished, or obligations incurred by or
for Tenant upon said Premises during the Term of this Lease. Tenant hereby
waives any right to make repairs at Landlord's expense. Tenant shall not make
changes to locks on doors or add, disturb or in any way change any plumbing or
wiring without first obtaining written consent of Landlord. At the termination
of this Lease, whether by expiration of time or forfeiture, Tenant shall, if
requested by Landlord in writing, restore the Premises at Tenant's sole cost and
expense, to the condition that the Premises were in prior to the making of any
alterations or improvements, normal wear and tear, fire and acts of God
excepted. At the termination of this Lease, whether by expiration of time or
forfeiture, Tenant shall remove all of its personal property from the Premises
and upon failure to do so, such property shall be deemed to be abandoned and of
no value to Tenant and shall become the sole property of Landlord for disposal
as it sees fit. Tenant further agrees to pay to Landlord the cost of removal of
any such property so abandoned by Tenant.
32. ACCESS TO PREMISES
The Landlord shall have the right if it so elects to enter upon the
Premises at all reasonable hours for the purpose of inspecting the same and for
the purpose of maintenance, repair, and for making additions to any running
pipes, conduits and ducts through the Premises, and Tenant hereby waives any
claim against Landlord for damage or inconvenience caused by any of the above.
Nothing in this Section 32 shall be construed to or deemed to impose any duties
upon Landlord.
33. EXCEPTIONS TO DEMISE
Notwithstanding anything to the contrary herein contained, this Lease
is subject to utility easements, both recorded and unrecorded, all protective
and restrictive covenants and all other recorded documents pertaining to or
affecting the Premises, the Shopping Center of which the Premises are a part, or
the real estate upon which the Shopping Center and Premises are situated; this
Lease is also subject to all governmental laws, ordinances, orders, regulations,
codes, directives, variances, permits, and all orders, permits, rules and
regulations issued by or at the direction of any such governmental agency or
authority or any board or instrumentality thereof.
34. OPERATIONS OF TENANT'S HEATING AND AIR CONDITIONING SYSTEM Tenant
agrees to provide at Tenant's cost its heating or air conditioning in
the Premises so as to adequately heat and cool the same, as the case may be,
during the hours that Tenant's store is open for business; and to maintain at
all times sufficient heat in the Premises to prevent pipes from freezing.
35. ATTORNMENT
In the event any proceedings are brought for the foreclosure of, or in
the event of the exercise of the power of sales under any mortgage covering the
Premises, or in the event of any other transfer or sale of landlord's title to
Premises, Tenant shall attorn to the purchaser under any such sale, transfer or
foreclosure and recognize such purchaser or transferee at the Landlord under
this Lease.
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36. PARTIAL INVALIDITY
If any term, covenant or condition of this Lease, or the application
thereof, to any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Lease or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected thereby and each term,
covenant and condition of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
37. WAIVER OF JURY TRIAL
So far as permitted by law, Landlord and Tenant waive and will waive
any and all right to a trial by jury in the event that summary dispossession
proceedings shall be instituted by Landlord.
38. LEASE BINDING UPON ASSIGNEES
Except at provided in Section 30, this Lease and all covenants,
provisions and conditions herein contained shall inure to the benefit of and be
binding upon the heirs, executors, administrators, personal representatives,
successors and assigns, respectively of the parties thereto, provided however,
that no sublease, assignment or transfer by, from, through or under Tenant in
violation of the provisions hereof shall vest in the sublessee, assignee or
transferee any right, title or interest whatever,
39. ALTERATIONS, ADDITIONS AND CONSTRUCTION OF NEW BUILDING
Landlord hereby reserves the right at any time to make alterations or
additions to the building in which the Premises are located. Landlord also
reserves the right to construct other buildings or improvements in the Shopping
Center from time to time and to make alterations thereof or additions thereto.
40. LANDLORD'S OPTION TO EXPAND SHOPPING CENTER
Landlord shall have the right, but not the obligation, to (a) expand
the Shopping Center.
41. PARTNERSHIP
Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating a relationship between the parties
hereto other than the relationship of Landlord and Tenant.
42. WAIVER
The failure of Landlord to insist in any one or more cases upon the
strict performance of observance of any of the covenants, agreements or
conditions of this Lease or to exercise any option herein contained shall not be
construed as a waiver or relinquishment for the future performance, observance
or exercise of such covenant, agreement, condition or option. No waiver of any
default hereunder shall be implied from any omission by Landlord to take any
action on account of such default or to declare a forfeiture if such default
persists or is repeated, and no condition or covenant shall be deemed waived by
Landlord unless such waiver be in writing signed by Landlord. The acceptance by
Landlord of rent with knowledge of the breach of any of the covenants or
conditions of this Lease by Tenant shall not be deemed a waiver of any such
breach. One or more waivers of any breach of any covenant, term or condition of
this Lease by Landlord shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition.
43. PARKING OF CARS
14
<PAGE> 15
The Tenant and his employees shall not park cars on the street or
internal drives in the Shopping Center of which the herein Premises are a part,
or in any alley or court in the center of which the herein premises are a part.
When there is a rear entrance, all loading and unloading of goods shall be made
at the rear entrance. The Tenant and his employees shall park their cars in
areas as designated by the Landlord from time to time. The Landlord does not
agree to reserve or permanently maintain any parking stations which are now
built or may hereafter be built in said Shopping Center. Failure of the Tenant
and his employees to park cars in such designated areas shall be an event of
default by Tenant. The Tenant further agrees that upon written notice from the
Landlord he will, within five (5) days, furnish the state automobile license
numbers assigned to his car and the cars of all his employees.
44. NO ACCORD AND SATISFACTION
No acceptance by Landlord of a lesser sum than the Fixed Base Rent,
Percentage Rent, additional rent or any other charge then due shall be deemed to
be other than on account of the earliest installment of such rent or charge due,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment as rent or other charge be deemed in accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or charge or any
other monies owing by Tenant or pursue any other remedy in this Lease provided.
45. BANKRUPTCY
Neither this Lease, nor any interest therein, nor any estate hereby
created shall pass to any trustee or receiver in bankruptcy, or to any other
receiver or assignee for the benefit of creditors or otherwise by operation of
law.
46. CORPORATE OWNERSHIP
If the Tenant herein is a corporation and if, by sale or other
disposition, the control thereof changes at any time during the Term hereof,
then, at the option of the Landlord, this Lease may be cancelled by the Landlord
upon giving sixty (60) days prior written notice of its intention so to do.
Written notice of any such intended sale must be given to Landlord at least
twenty (20) days prior to the effective date thereof.
47. ADVERTISING
During each Lease Year Tenant agrees to spend a minimum of Fifty Cents
($.50) per square foot of gross area of the Premises or One Thousand Dollars
($1,000.00), whichever is greater, to advertise and promote the Tenant's
business in the Shopping Center. Only expenditures for advertising which
specifically features Tenant's location in the Shopping Center and which
contains the name "Karric Square at Dublin Shopping Center' prominently featured
therein shall be credited to satisfy the foregoing requirement. Tenant agrees,
upon the Landlord's request, to furnish invoices, copies of advertisements or
such other documents or information as Landlord shall reasonably request to
verify that Tenant has complied with this Section 47.
48. ASSIGNMENT AND SUBLETTING
Tenant shall not assign this Lease in whole or in part, nor sublet all
or part of the Premises, without the prior written consent of Landlord in each
instance. It is the intention of the parties that Landlord shall have the
absolute right to withhold its consent to an assignment or subletting for any
reason, and no standard of "reasonableness" shall be applicable or implied in
construing this Section 48. The consent by Landlord to any assignment or
subletting shall not constitute a waiver of the necessity for such consent to
any subsequent assignment or subletting. Notwithstanding any assignment or
sublease, Tenant shall remain fully liable on this Lease and shall not be
released from performing any of the terms, covenants and conditions of this
Lease.
15
<PAGE> 16
49. SECRITY DEPOSIT
Tenant has deposited with Landlord the sum of One thousand Dollars
($1,000) as security for the full and faithful performance of every provision of
this Lease to be performed by Tenant. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to the provisions relating
to the payment of Fixed Base Rent, additional rent or other charges, Landlord
may use, apply or retain all or any part of this security deposit for payment of
any such rent or other sum in default, of for the payments of any other amount
which Landlord may spend or become obligated to spend by reason of Tenant's
default. If any portion of said deposit is so used or applied, Tenant shall,
within five (5) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the security deposit to its original amount,
and Tenant's failure to do so shall be a breach of this Lease. Landlord shall
not be required to keep this security deposit separate from its general funds,
and Tenant shall not be entitled to interest on such deposit. If Tenant shall
fully and faithfully perform every provision of this Lease to be performed by
it, the security deposit or any balance thereof shall be returned to Tenant
without interest at the expiration of the Lease Term and upon Tenant's vacation
of the Premises.
50. ENTIRE AGREEMENT AND MODIFICATIONS
This Lease and the covenants and agreements set forth herein are and
shall constitute the entire agreement between the parties. Each party to this
Lease hereby acknowledges and agrees that the other party has made no
warranties, representations, covenants or agreements, expressed or implied, to
such party other than those expressly set forth herein and that each party, in
entering into and executing this Lease, has relied upon no warranties,
representations, covenants or agreements, express or implied, to such party
other than those expressly set forth herein. None of the terms, covenants and
agreements of this Lease shall in any manner be altered, waived or changed,
except by written instrument signed and delivered by the parties hereto.
51. SURVIVAL OF TENANT'S OBLIGATIONS
All obligations of Tenant which by their nature involve performance, in
any particular, after the end of the Term of which cannot be ascertained to have
been fully performed until after the end of the Term, shall survive the
expiration or sooner termination of the Term.
52. BROKER'S COMMISSION
Tenant warrants that there are no claims for broker's commissions or
finder's fees in connection with Tenant's execution of this Lease other than the
claim of MATHEWS CLICK & ASSOCIATES, INC.. Tenant agrees to indemnify and save
Landlord harmless from any liability that may arise from the claim of any other
person, including, but not limited to, reasonable attorney's fees.
53. ATTORNEY'S FEES AND COSTS
In the event Landlord shall have to file any proceeding, whether at law
or in equity, to enforce collection of any rent, charge or other payment to be
borne, kept or paid by Tenant hereunder, or in the event Tenant shall be in
default hereunder and Landlord employs counsel to enforce performance of any of
the obligations of Tenant hereunder, Landlord shall be entitled to recover from
Tenant, and Tenant agrees to pay to Landlord an amount of money equal to all
reasonable expenses including reasonable attorney's fees incurred by Landlord in
enforcing the covenants hereof and securing to it the performance of obligations
of Tenant hereunder, in addition to all sums to which Tenant shall otherwise be
obligated hereunder. Said fees and costs shall be additional rent hereunder.
54. NOTICES
All notices provided for in this Lease shall be in writing and shall be
delivered personally or deposited in the United States mail, registered or
certified, return receipt requested, postage prepaid, addressed to Landlord c/o
Mathews Click Bauman, Inc., 100 East Wilson Bridge Road, Suite 100, Worthington,
Ohio 43085, or at such other address as the Landlord may from time
16
<PAGE> 17
designate by notice in writing. Notice shall be deemed given when deposited in
the United States mail as aforesaid. Notice need be sent to only one person
where the Tenant is more than one person.
55. RECORDING
Neither party shall record this Lease in its entirety, However, upon
the request of either party, the other party shall join in the execution of a
memorandum or so called "short form" of this Lease for the purpose of
recordation.
56. NO OPTION
The submission of this Lease for examination does not constitute a
reservation of or option for the Premises or any other space within the Shopping
Center and shall vest no right in either party. This Lease shall become
effective as a lease only upon execution and delivery thereof by the parties
hereto, and upon Landlord's receipt of the Security Deposit.
57. HEADINGS AND INTERPRETATIONS
The paragraph headings used throughout this instrument are for
convenience and reference only, and the words contained therein shall in no way
be held to explain, modify, amplify or aid in the interpretation, construction
or meaning of the provisions of this Lease.
Whenever herein the masculine gender is used, the same shall include the
feminine and neuter genders.
58. NON-DISCRIMINATION
Neither Tenant nor anyone claiming under Tenant shall discriminate upon
the basis of race, color, creed or national origin in the use or occupancy of
the Premises or any part thereof.
59. INTEREST AND PAST-DUE OBLIGATION
Other remedies for default in this Lease notwithstanding, any sum
accruing to Landlord or Tenant under the terms and provisions of this Lease
which is not paid when due shall bear interest at the rate of one and one-half
percent (1-1/2%) per month, but in no event more than the maximum amount allowed
by law, from the date when any such sum becomes due and payable under the terms
and provisions of this Lease until paid. In addition, and not by way of
limitation to the preceding sentence, if any Base Rent, Percentage Rent and/or
additional rent payment is not received by Landlord on or before the ninth day
of the month for which such payment is due, a service charge of five percent
(5%) of such past-due amount shall become due and payable in addition to such
amounts owed under this Lease.
60. MISCELLANEOUS
This Lease has been negotiated by Landlord and Tenant, and this Lease,
together with all of the terms and provisions hereof, shall not be deemed to
have been prepared by either Landlord or Tenant, but by both equally. Wherever
in this Lease any printed portion or part thereof has been stricken, whether or
not any relative provisions have been added, this Lease shall be read and
construed as if the material stricken was never included herein, and no
implication shall be drawn from the text of the material so stricken which would
be inconsistent in any way with the construction or interpretation which would
be appropriate if such material were never contained herein.
61. RIDER
Exhibits A, B, C and D are attached hereto and made a part hereof..
17
<PAGE> 18
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the
day and year first above written.
Signed and acknowledged in
the presence of: BORROR REALTY COMPANY, LANDLORD
Tamara S. Hardy By: /s/ Terry E. George
- --------------- --------------------
Terry E. George
Christy L. Cain Its:
- --------------- -----------------------------
Vice President & Treasurer
TENANT
Traci L. Petrides By: /s/ Thomas M. Nguyen
- ----------------- ---------------------
Thomas M. Nguyen
Douglas S. Wilson
- -----------------
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 12th day of
November 1997, by Terry E George, the Senior Vice President of Borror Realty
Company, an Ohio corporation, on behalf of the corporation.
Tamara S. Hardy
---------------
Notary Public
STATE OF OHIO
COUNTY OF FRANKLIN, SS:
The foregoing instrument was acknowledged before me this 4th day of
November, 1997 by Thomas M. Nguyen, Personally.
Traci L. Petrides
-----------------
Notary Public
18
<PAGE> 19
EXHIBIT A
---------
SITE PLAN
19
<PAGE> 20
EXHIBIT B
---------
Landlord's Improvements
-----------------------
Landlord's responsibility is to provide a storeroom with fully functional
mechanical systems (heating, cooling, plumbing and electrical systems).
Otherwise, Tenant accepts Premises in "as is' condition.
If items provided by Landlord need to be upgraded or modified because of
tenant's requirements, changes must be submitted to Landlord, and at Landlord's
discretion the changes will be either:
Provided as additional cost paid by Tenant.
20
<PAGE> 21
EXHIBIT C
---------
Tenant's Work
-------------
In accordance with the terms of this Lease, Tenant shall perform any and all
additional tenant finish work for the Leased Premises over and above the items
of Landlord's Work listed in Exhibit B at Tenant's sole cost and expense, unless
Landlord and Tenant agree that Landlord is to perform certain of said items at
Tenant's expense. Any such agreement shall be in writing and shall specify the
items to be completed by Landlord on behalf of Tenant and the cost to be paid by
Tenant for said tenant finish work. It is understood and agreed that the cost
for any such tenant finish work completed by Landlord on behalf of Tenant shall
be paid for in full prior to the time Tenant opens the Leased Premises to the
public for business.
Any and all alterations and improvements made by Tenant shall be made in
accordance with applicable laws and building codes, and in a good and
workmanlike manner. All plans and specifications for any such tenant finish
work, and the name of the contractor who is to perform same, must be submitted
to Landlord for its written approval prior to commencement of any such tenant
finish work. Tenant shall fully and completely indemnify, defend and hold
Landlord harmless from and against any and all mechanic's lien or other liens or
claims in connection with any tenant finish work performed by Tenant or a third
party, or for which Tenant has not yet paid. All tenant finish work to be
performed by Tenant shall be completed within SIXTY (60) days from the date
Landlord substantially completes Landlord's Work and notifies Tenant of such
substantial completion. Tenant shall provide Landlord with full and complete
mechanic's lien waivers from all persons furnishing labor and material for
completion of Tenant's Work.
Failure to perform any of the covenants contained herein shall constitute a
default under the terms of this Lease, and if such default is not cured within
ten (10) days after written notice thereof to Tenant, Landlord shall have all of
the rights and remedies provided under this Lease, as well as any other rights
afforded to landlord at law or in equity.
All utility charges for the Leased Premises accruing during the period in which
Tenant is performing its tenant finish work prior to the commencement of the
term of this Lease shall be borne by Tenant.
21
<PAGE> 22
EXHIBIT D
---------
Sign Standards
--------------
Landlord will provide a sign casing with appropriate electrical service
permanently mounted on the canopy of the building facing the parking lot
immediately adjacent to and in front of Tenant's storeroom.
Tenant is responsible for design and cost of the insert and light bulbs and
design cost. Maintenance of the sign and mechanical equipment after the
storeroom is delivered to Tenant shall be Tenant's responsibility and expense.
Tenant agrees to repair any damaged or malfunctioning sign in as timely a manner
as possible. Signage will be provided only by Landlord's approved subcontractor.
Landlord reserves the right to approve all sign designs prior to installation.
22
<PAGE> 1
EXHIBIT 10.7
------------
FIRST CONSENT AGREEMENT
-----------------------
THIS FIRST CONSENT AGREEMENT (this "Consent") is entered into as of the
9th day of August, 1999, by, between and among (a) the financial institutions
from time to time party hereto, as lenders (collectively the "Lenders" and
individually a "Lender"), (b) The Huntington National Bank ("Huntington"), as
Administrative Agent for the Lenders (Huntington with its successors in such
capacity, the "Administrative Agent"), and (c) Dominion Homes, Inc. (the
"Company").
RECITALS:
A. As of May 29, 1998, the Company, the Lenders, the Administrative
Agent and Huntington Capital Corp., in its capacity as Syndication Agent for the
Lenders (the "Syndication Agent") executed a certain Credit Agreement as
amended, modified and supplemented from time to time (as so amended, modified
and supplemented, the "Credit Agreement"), setting forth the terms of certain
extensions of credit to the Company; and
B. As of May 29, 1998, the Company executed and delivered to the
Lenders, inter alia, certain Revolving Credit Notes in the aggregate principal
sum of One Hundred Twenty Five Million Dollars ($125,000,000.00) ( the "Notes");
and
C. In connection with the Credit Agreement and the Notes, the Company
executed and delivered to the Administrative Agent certain other loan documents,
consents, assignments, agreements, certificates, and instruments in connection
with the indebtedness referred to in the Credit Agreement (all of the foregoing,
together with the Notes and the Credit Agreement, are hereinafter collectively
referred to as the "Credit Documents"); and
D. The Company has requested, with respect to its fiscal year ending
December 31, 1999, that the Required Lenders and the Administrative Agent,
pursuant to Section 13.4 of the Credit Agreement, consent to allow the Company
to redeem or purchase for fair market value up to $2,500,000 of its capital
common stock during its fiscal year ending December 31, 1999, and the Required
Lenders and the Administrative Agent are willing to provide such consent upon
the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and promises contained herein, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereto for
themselves and their successors and assigns do hereby agree, represent and
warrant as follows:
1. DEFINITIONS. This consent is provided pursuant to the terms of the
Credit Agreement, and all capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
-1-
<PAGE> 2
2. Notwithstanding the limitations set forth in Section 8.8 of the
Credit Agreement, "ACQUISITION OF CAPITAL STOCK," the Required Lenders and the
Administrative Agent, with respect to the Company's fiscal year ending December
31, 1999, hereby consent to the Company's redemption or purchase for fair market
value of up to $2,500,000 of its capital common stock during such fiscal year
ending December 31, 1999.
3. This Consent shall become effective as of August 9, 1999, upon
satisfaction of all of the following conditions precedent: the Administrative
Agent shall have received six duly executed copies of this Consent and such
other certificates, instruments, documents, agreements, and opinions of counsel
as may be required by the Administrative Agent, each of which shall be in form
and substance satisfactory to the Administrative Agent and its counsel.
4. Except as modified herein, all of the representations, warranties,
terms, covenants and conditions of the Credit Agreement, the Credit Documents
and all other agreements executed in connection therewith shall remain as
written originally and in full force and effect in accordance with their
respective terms, and nothing herein shall affect, modify, limit or impair any
of the rights and powers which the Administrative Agent, Syndication Agent or
the Lenders may have thereunder. The agreement set forth herein shall be limited
precisely as provided for herein, and shall not be deemed to be a waiver of,
amendment of, consent to or modification of any of the rights of the
Administrative Agent, they Syndication Agent or the Lenders under or of any
other term or provisions of the Credit Agreement, any Credit Document, or other
agreement executed in connection therewith, or of any term or provision of any
other instrument referred to therein or herein or of any transaction or future
action on the part of the Company which would require the consent of the
Administrative Agent, the Lenders, or the Syndication Agent, including, without
limitation, waivers of Events of Default which may exist after giving effect
hereto. The Company ratifies and confirms each term, provision, condition and
covenant set forth in the Credit Agreement and the Credit Documents and
acknowledges that the agreement set forth therein continue to be legal, valid
and binding agreements, and enforceable in accordance with their respective
terms.
5. The Company hereby represents and covenants that (a) no Event of
Default will exist upon execution of this Consent, and nothing in this Consent
shall be construed to waive, modify, or cure any default or Event of Default
that exists or may exist under the Credit Agreement or the Credit Documents; (b)
each and every one of the representations and warranties made in the Credit
Agreement or the Credit Documents executed and delivered to the Administrative
Agent and the Lenders is true and correct in all respects on and as of the date
hereof, except to the extent that any such representations and warranties
related, by the express terms thereof, solely to a date prior hereto; and (c)
the Company has duly and properly performed, complied with and observed each of
its covenants, agreements and obligations contained in the Credit Agreement and
the Credit Documents. The Company further acknowledges that the representations
and covenants contained herein are a material inducement to the Administrative
Agent and the Lenders, to execute and deliver this Consent. The Administrative
Agent, the Lenders, and the Syndication Agent reserve and retain all rights and
remedies available to it under the Credit Agreement, the Credit Documents, and
applicable law.
-2-
<PAGE> 3
6. This Consent may be executed in two or more counterparts, each of
which, when so executed and delivered, shall be an original, but all of which
together shall constitute one and the same document. Separate counterparts may
be executed with the same effect as if all parties had executed the same
counterparts.
7. This Consent shall be governed by and construed and enforced in
accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the Company, the Lenders set forth below,
and the Administrative Agent have hereunto set their hands as of the date first
set forth above.
THE COMPANY:
DOMINION HOMES, INC.
By: /s/ Terry E. George
-----------------------------------------------
Its: Senior Vice President and Treasurer
----------------------------------------------
THE BANKS:
THE HUNTINGTON NATIONAL BANK
By: /s/ William R. Remias
-----------------------------------------------
Its: Vice President
----------------------------------------------
NBD BANK
By: /s/ Steven Mahr
-----------------------------------------------
Its: First Vice President
----------------------------------------------
KEYBANK NATIONAL ASSOCIATION
By: /s/ Robert Zelina
-----------------------------------------------
Its: Vice President
----------------------------------------------
-3-
<PAGE> 4
NATIONAL CITY BANK
By: /s/ Steven A. Smith
-----------------------------------------------
Its: Vice President
----------------------------------------------
FIRSTAR BANK, N.A. F/K/A STAR BANK, N.A.
By: /s/ Marilyn K. Miller
-----------------------------------------------
Its: Vice President
----------------------------------------------
COMERICA BANK
By: /s/ Charles Weddell
-----------------------------------------------
Its: Vice President
----------------------------------------------
ADMINISTRATIVE AGENT:
THE HUNTINGTON NATIONAL BANK
By: /s/ William R. Remias
-----------------------------------------------
Its: Vice President
----------------------------------------------
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1999 AND STATEMENTS OF INCOME FOR THE SIX MONTHS ENDING
JUNE 30, 1999, OF DOMINION HOMES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 410
<SECURITIES> 0
<RECEIVABLES> 1,644
<ALLOWANCES> (17)
<INVENTORY> 148,211
<CURRENT-ASSETS> 0
<PP&E> 8,224
<DEPRECIATION> (3,477)
<TOTAL-ASSETS> 160,641
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 31,119
<OTHER-SE> 21,967
<TOTAL-LIABILITY-AND-EQUITY> 160,641
<SALES> 125,569
<TOTAL-REVENUES> 125,569
<CGS> 102,118
<TOTAL-COSTS> 118,350
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,752
<INCOME-PRETAX> 4,467
<INCOME-TAX> 1,876
<INCOME-CONTINUING> 2,591
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,591
<EPS-BASIC> .41
<EPS-DILUTED> .40
</TABLE>
