-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QTMcJBUT63N0nr0ij3Ovp2uPI7ZvlOxXve1HWeymRoJ09NdckVFxVt2GScy538Wn CgxVEq9usqjCLqHRMPk1JQ== 0000950152-98-006379.txt : 19980806 0000950152-98-006379.hdr.sgml : 19980806 ACCESSION NUMBER: 0000950152-98-006379 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980704 FILED AS OF DATE: 19980805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIY HOME WAREHOUSE INC CENTRAL INDEX KEY: 0000899595 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] IRS NUMBER: 382560752 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21768 FILM NUMBER: 98677673 BUSINESS ADDRESS: STREET 1: 5811 CANAL RD STE 180 CITY: VALLEY VIEW STATE: OH ZIP: 44125 BUSINESS PHONE: 2163285100 MAIL ADDRESS: STREET 1: 5811 CANAL ROAD STREET 2: SUITE 180 CITY: VALLEY VIEW STATE: OH ZIP: 44125 10-Q 1 D.I.Y. HOME WAREHOUSE, INC. 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 4, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 0-21768 D.I.Y. Home Warehouse, Inc. --------------------------- (Exact name of registrant as specified in its charter) State of Ohio 38-2560752 (State of Incorporation) (I.R.S. Employer I.D. No.) 5811 Canal Road Valley View, Ohio 44125 (216) 328-5100 (Address of principal executive offices and telephone number) 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 4, 1998 - -------------------------- --------------------------- Common Stock, no par value 7,633,859 2 DIY HOME WAREHOUSE, INC.
INDEX PAGE NO. ----- -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Balance Sheet - July 4, 1998 and January 3, 1998......................................................................... 3 Condensed Statement of Income - Three and Six Months Ended July 4, 1998 and June 28, 1997....................................................................... 4 Condensed Statement of Shareholders' Equity - Six Months Ended July 4, 1998............................................................................ 5 Condensed Statement of Cash Flows - Six Months Ended July 4, 1998 and June 28, 1997....................................................................... 6 Notes to Condensed Financial Statements................................................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................................. 8 - 11 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K........................................................ 12 - 13
2 3 PART I - FINANCIAL INFORMATION DIY HOME WAREHOUSE, INC. CONDENSED BALANCE SHEET
July 4, 1998 January 3, 1998 ------------ --------------- Assets (Unaudited) Current assets: Cash and cash equivalents $ 480,777 $ 141,401 Accounts receivable, trade 116,811 100,389 Refundable federal income taxes -- 365,963 Merchandise inventories 39,543,213 40,156,756 Deferred income taxes 278,565 278,565 Prepaid expenses and other assets 605,625 745,961 ------------ ----------- Total current assets 41,024,991 41,789,035 ------------ ----------- Property and equipment, at cost 53,620,967 52,326,680 ------------ ----------- Less accumulated depreciation and amortization 15,328,509 13,381,396 Property and equipment, net 38,292,458 38,945,284 Other assets 421,627 474,888 ------------ ----------- Total assets $ 79,739,076 $81,209,207 ============ =========== Liabilities and Shareholders' Equity Current liabilities: Note payable, affiliate $ 300,000 $ 600,000 Current maturities of long-term debt 989,321 946,183 Accounts payable 14,677,287 10,615,039 Accrued expenses and other 5,672,229 5,776,915 Total current liabilities 21,638,837 17,938,137 Revolving credit 1,775,000 6,375,000 Long-term debt 13,635,333 14,208,586 Deferred income taxes 2,462,002 2,547,927 Shareholders' equity: Preferred stock, authorized 1,000,000 shares, none issued -- -- Common stock, no par value, authorized 10,000,000 shares, 7,633,859 shares outstanding as of July 4, 1998 and January 3, 1998 22,955,462 22,955,462 Retained earnings 17,272,442 17,184,095 ------------ ----------- Total shareholders' equity 40,227,904 40,139,557 ------------ ----------- Total liabilities and shareholders' equity $ 79,739,076 $81,209,207 ============ ===========
See accompanying notes to condensed financial statements. 3 4 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF INCOME (Unaudited)
For the three months ended For the six months ended July 4, June 28, July 4, June 28, 1998 1997 1998 1997 ------------ ------------ -------------- ------------ Net sales $ 56,334,029 $ 66,857,265 $ 93,746,202 $106,509,276 Cost of sales 41,875,355 49,473,971 68,603,276 77,464,552 ------------ ------------ -------------- ------------ Gross profit 14,458,674 17,383,294 25,142,926 29,044,724 Store operating, general and administrative expenses 12,418,294 13,425,796 23,689,726 24,911,579 Store development costs 99,747 137,225 305,517 137,225 ------------ ------------ -------------- ------------ Operating income 1,940,633 3,820,273 1,147,683 3,995,920 Other expense, net 439,964 498,699 997,943 826,298 ------------ ------------ -------------- ------------ Income before income taxes 1,500,669 3,321,574 149,740 3,169,622 Income taxes 615,275 1,352,270 61,393 1,289,986 ------------ ------------ -------------- ------------ Net income $ 885,394 $ 1,969,304 $ 88,347 $ 1,879,636 ============== ============= ================= ============= Earnings per common share, basic and diluted $ 0.12 $ 0.26 $ 0.01 $ 0.25 ============== ============= ================= ============= Weighted average common shares outstanding 7,633,859 7,633,859 7,633,859 7,633,859 ============== ============= ================= =============
See accompanying notes to condensed financial statements. 4 5 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JULY 4, 1998 (Unaudited)
Common Stock Total ----------------------------------- Retained Shareholders' Shares Amount Earnings Equity -------------- ------------- -------------- --------------- Balances, January 3, 1998 7,633,859 $22,955,462 $17,184,095 $40,139,557 Net income 88,347 88,347 ------------- ----------- ----------- ----------- Balances, July 4, 1998 7,633,859 $22,955,462 $17,272,442 $40,227,904 ============= =========== =========== ===========
See accompanying notes to condensed financial statements. 5 6 DIY HOME WAREHOUSE, INC. CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
For the six months ended July 4, 1998 June 28, 1997 ------------ ------------- Cash flows from operating activities: Net income $ 88,347 $ 1,879,636 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,955,051 1,664,351 Shares issued under retainer stock plan - 13,457 Loss (gain) on sale of property 2,752 (262,668) Deferred income taxes (85,925) - Changes in operating assets and liabilities: Accounts receivable, trade (16,422) (23,708) Refundable federal income taxes 365,963 248,688 Merchandise inventories 613,543 (8,170,821) Prepaid expenses and other assets 193,597 197,397 Accounts payable 4,062,248 6,035,083 Accrued expenses and other current liabilities (104,686) 1,513,139 Net cash provided by operating activities 7,074,468 3,094,554 Cash flows from investing activities: Acquisition of property and equipment (1,304,977) (760,740) Proceeds from sale of property - 850,911 ---------------- -------------- Net cash (used in) provided by investing activities (1,304,977) 90,171 ---------------- -------------- Cash flows from financing activities: Principal payments under capital lease obligations (83,116) (69,284) Principal payments of note payable, affiliate (300,000) (300,000) Proceeds from revolving credit 3,625,000 6,000,000 Principal payments of revolving credit (8,225,000) (8,500,000) Principal payments of long-term debt (446,999) (323,137) ---------------- -------------- Net cash (used in) financing activities (5,430,115) (3,192,421) ---------------- -------------- Net increase (decrease) in cash and cash equivalents 339,376 (7,696) Cash and cash equivalents, beginning of period 141,401 161,360 ---------------- -------------- Cash and cash equivalents, end of period $ 480,777 $ 153,664 =============== ===============
See accompanying notes to condensed financial statements. 6 7 D.I.Y. HOME WAREHOUSE, INC. Notes to Condensed Financial Statements (Unaudited) 1. Basis of Presentation: In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of July 4, 1998 and the results of operations for the three and six months ended July 4, 1998 and June 28, 1997 and cash flows for the six months ended July 4, 1998. The condensed financial statements should be read in conjunction with the financial statements and notes contained in the Company's Annual Report filed on Form 10-K. The results of operations for any interim period should not necessarily be considered indicative of the results of operations for the full year. 2. Earnings Per Share: Earnings per share are computed using the weighted average number of shares of common stock outstanding for the periods. Basic and fully diluted earnings per common share are identical. COMPUTATION OF EARNINGS PER COMMON SHARE (BASIC AND DILUTED) (Unaudited)
Three Months Ended Six Months Ended July 4, 1998 June 28, 1997 July 4, 1998 June 28, 1997 ------------ ------------- ------------ ------------- (Unaudited) (Unaudited) Net income applicable to common $ 885,394 $1,969,304 $ 88,347 $1,879,636 shares ================ ================= ================= ================= Weighted average common shares outstanding for the period 7,633,859 7,633,859 7,633,859 7,633,789 Dilutive effect of exercise of stock options - - - - ---------------- ----------------- ----------------- ---------------- Weighted average common shares, assuming issuance of the above securities 7,633,859 7,633,859 7,633,859 7,633,789 ================ ================= ================= ================= Earnings per common share: Basic $0.12 $0.26 $0.01 $0.25 Diluted $0.12 $0.26 $0.01 $0.25
7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS - Three Months Ended July 4, 1998 Compared to Three Months Ended June 28, 1997 Net sales for the quarter ended July 4, 1998 decreased by $10,523,000, or 15.7%, to $56,334,000 for the quarter ended July 4, 1998 from $66,857,000 for the comparable quarter in fiscal 1997. Comparable store sales were impacted by additional national warehouse competition in a majority of the Company's markets. Gross profit decreased by $2,924,000, or 16.8%, from $17,383,000 in the second quarter of fiscal 1997 to $14,459,000 in the second quarter of fiscal 1998. Gross profit, as a percentage of net sales, was 25.7% in the second quarter of fiscal 1998 compared to 26.0% in the second quarter of fiscal 1997. This decrease in gross profit percentage is due to a decrease in vendor rebates and discounts resulting from decreased inventory purchases in the second quarter of fiscal 1998 compared to the comparable quarter of fiscal 1997. During the second quarter of fiscal 1998, the Company continued to focused on enhancing the balance sheet by reducing inventory levels. As a result, inventory purchases in the second quarter of fiscal 1998 were approximately $8,500,000 lower than purchases during the second quarter fiscal of 1997. Store operating, general and administrative expenses decreased $1,008,000, or 7.5%, to $12,418,000 in the quarter ended July 4, 1998 from $13,426,000 in the quarter ended June 28, 1997. This decrease is due to the Company's ongoing efforts to reduce operating costs. As a percentage of net sales, store operating, general and administrative expenses increased to 22.0% in the second quarter of fiscal 1998 compared to 20.0% in the comparable quarter of fiscal 1998 due to lower sales on which to leverage these expenses. Other expense, net, was $440,000 for the quarter ended July 4, 1998 compared to $499,000 for the quarter ended June 28,1997. The net decrease of $59,000 is due to a decrease in interest expense of $108,000 primarily associated with the benefits of reduced debt level as average amounts outstanding under the revolving credit facility were approximately $5,095,000 and $8,941,000 in the second quarter of 1998 and 1997, respectively. The interest expense decrease of $108,000 was offset by the gain of $45,000 on sale of property in the second quarter of fiscal 1997. 8 9 OPERATIONS - Six Months Ended July 4, 1998 Compared to Six Months Ended June 28, 1997 Net sales decreased $12,763,000, or 12.0% from $106,509,000 for the six month ended June 28, 1997 to $93,746,000 for the six months ended July 4, 1998 due to additional national warehouse competition in a majority of the Company's markets. Gross profit decreased by $3,902,000, or 13.4%, to $25,143,000 for the six months ended July 4, 1997 from $29,045,000 for the six months ended June 28, 1997. As a percentage of net sales, gross profit decreased to 26.8% in the first half of fiscal 1998 compared to 27.3% in the first half of fiscal 1997. The Company focused on enhancing the balance sheet by reducing inventory levels This decrease in gross profit percentage is due to a decrease in vendor rebates and discounts resulting from decreased inventory purchases of approximately $18,500,000 in the first half of 1998 compared to the comparable quarter of fiscal 1997. Store operating, general and administrative expenses decreased $1,222,000, or 4.9% to $23,690,000 in the first half of fiscal 1998 from $24,912,000 for the first half of fiscal 1997. The decrease is due to the Company's on-going effort to reduce operating expenses. As a percentage of sales, operating expenses were 25.3% for the first half of 1998 compared to 23.4% for the first half of 1997 due to lower sales on which to leverage expenses. The Company incurred $306,000 related to store development costs for the six months ended July 4, 1998 compared to $137,000 for the same period of fiscal 1997. During the first half of fiscal 1997, management assessed the business strategies and opportunities of the Company to differentiate itself in the warehouse-format home improvement retail market. This process resulted in development of new merchandising, marketing and other strategic initiatives to strengthen the Company's market position. Other expense, net, increased by $172,000, to $998,000 for the six months ended July 4, 1998 from $826,000 for the comparable period of fiscal 1997. This increase is primarily due to a $263,000 gain on sale of parcels of property in the first half of fiscal 1997 and a decrease in interest expense from the Mortgage Loans and Revolving Credit Agreement of $58,000 and $50,000, respectively in the first half of fiscal 1998. Mortgage interest expense decreased primarily due to the principal reduction on the variable mortgage loan in the third quarter of 1997 from the proceeds on the sale of property. The Revolving Credit Agreement interest expense decreased due to the benefits of reduced debt levels as average amounts outstanding were approximately $7,495,000 and $9,206,000 in the first half of fiscal 1998 and 1997, respectively. 9 10 LIQUIDITY AND CAPITAL RESOURCES During the six months ended July 4, 1998 and June 28, 1997, operating activities provided net cash of approximately $7,074,000 and $3,095,000, respectively. The primary source of cash from operating activities for the six months ended July 4, 1998 was $1,955,000 from deprecation and amortization and $614,000 from reducing inventories, combined with an increase of $4,062,000 in accounts payable. The primary source of cash from operating activities for the six months ended June 28, 1997 was $3,544,000 from net income plus depreciation and amortization and an increase of $6,035,000 in accounts payable. The primary use of cash for same period in 1997 included $8,171,000 to fund seasonal increases in inventories. The Company continued to focus on enhancing its balance sheet during fiscal 1998 which included inventory reductions of approximately $7,205,000 compared to the same period of fiscal 1997. Net cash used in investing activities was $1,305,000 for the six months ended July 4, 1998 due to store development capital expenditures associated with the comprehensive renovation of certain store locations. Net cash provided by investing activities was $90,000 for the six months ended June 28, 1997, due primarily to the proceeds of $851,000 from the sales of several parcels of property offset by cash used of $761,000 for the acquisition of property and equipment. Net cash used in financing activities increased by $2,238,000 to $5,430,000 for the six months ended July 4, 1998 from $3,192,000 for the comparable period in fiscal 1997. The increase is due to a reduction in the net borrowings under the revolving credit facility as a result of lower inventory purchases. Management believes cash on hand, cash from operations and cash available through the Company's financing agreements will be sufficient to meet short-term and long-term working capital requirements. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors. Accordingly, actual results may differ materially from those expressed in the forward-looking statements and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. Important risk factors include, but are not limited to, the following: general economic conditions; consumer spending and debt levels; housing turnover; weather; impact on sales and margins from both existing and new competition; changes in operating expenses; changes in product mix; interest rates; changes in and the application of accounting policies and practices; adverse results in significant litigation matters; adverse state and federal regulations and legislation; the occurrence of extraordinary 10 11 events including events and acts of nature or accidents; and the risks described from time to time in the Company's Securities and Exchange Commission filings. Competition The home improvement, hardware and garden businesses are all highly competitive. The Company competes against traditional hardware, plumbing, electrical and home supply retailers, as well as warehouse-format and discount retail stores and many of the Company's competitors have substantially greater resources than the Company. Builders Square and Lowe's Company have had stores in the Company's markets since 1985 and 1994, respectively. Lowe's continued to expand with additional locations in 1996 and 1997. In the fourth quarter of 1997, Home Depot began operations in several of the Company's markets. Home Depot continued to expand in the first half of 1998 and has announced further expansion plans in the second half 1998 and first quarter of 1999. Lowe's has announced further expansion plans in 1998. In addition, there has been increasing consolidation within the home improvement industry, which may provide certain entities increased competitive advantages. Specifically, increased competition including, but not limited to, additional competitors' store locations, price reductions, and advertising and marketing campaigns could have a material adverse effect on the Company's business, recoverability of asset values, financial condition and operating results. Year 2000 Issue The Year 2000 Issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. The Company has assessed the Year 2000 Issue with regard to its internal financial and operational systems as well as its external financial vendors and determined that the costs to complete the related compliance will not materially affect future financial results. The Company anticipates its Year 2000 Issues to be completed and tested by the end of fiscal year 1998. 11 12 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: A list of the exhibits required by Item 601 of Regulation S-K to be filed as a part of this Form 10-Q is shown on the "Exhibit Index" filed herewith. (b) Reports on Form 8-K: None Signature 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. D.I.Y. HOME WAREHOUSE, INC. (Registrant) DATED: August 3, 1998 -------------- By: Eric I. Glassman ---------------------------------- Vice President and Chief Financial Officer 13 13 EXHIBIT INDEX Exhibit Number Description of Exhibit - ------ ---------------------- 10 Material Contracts ------------------ 10.1 Fourth Amendment to Revolving Credit Agreement dated April 4, 1998 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 10.2 Fourth Amendment to Loan and Co-Lender Agreement dated April 4, 1998 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 10.3 Fifth Amendment to Line of Credit Agreement dated April 4, 1998 between D.I.Y. Home Warehouse, Inc., National City Bank of Columbus and Old Kent Bank 10.4 Amended and Restated Employment Agreement between Clifford L. Reynolds and D.I.Y. Home Warehouse, Inc. 10.5 Amended and Restated Employment Agreement between R. Scott Eynon and D.I.Y. Home Warehouse, Inc. 10.6 Amended and Restated Employment Agreement between Dennis C. Hoff and D.I.Y. Home Warehouse, Inc. 10.7 Employment Agreement between Eric I. Glassman and D.I.Y. Home Warehouse, Inc. 10.8 Transaction Bonus Agreement between Clifford L. Reynolds and D.I.Y. Home Warehouse, Inc. 10.9 Transaction Bonus Agreement between R. Scott Eynon and D.I.Y. Home Warehouse, Inc. 10.10 Transaction Bonus Agreement between Dennis C. Hoff and D.I.Y. Home Warehouse, Inc. 10.11 Transaction Bonus Agreement between Eric I. Glassman and D.I.Y. Home Warehouse, Inc. 27 Financial Data Schedule: ------------------------ 27.1 Financial Data Schedule for the quarter ended July 4, 1998 13 EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT ("Amendment") is made as of the 4th day of April, 1998, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK, formerly known as National City Bank of Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCB"), and OLD KENT BANK, formerly known as Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders (NCB and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCB, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Revolving Credit Agreement dated December 7, 1994, as amended by the First Amendment to Revolving Credit Agreement dated as of December 22, 1995, as further amended by the Second Amendment to Revolving Credit Agreement dated as of December 23, 1996 and as further amended by the Third Amendment to Revolving Credit Agreement dated as of October 24, 1997 (collectively, the "Loan Agreement"), pursuant to which the Banks have agreed to loan to the Borrower on a revolving credit basis (the "Loan") an aggregate amount not to exceed Twenty-Three Million Dollars ($23,000,000.00). B. The Loan is evidenced by two (2) Amended and Restated Revolving Notes dated December 22, 1995, by the Borrower to each of NCB and Old Kent, each in the principal amount of Ten Million Dollars ($10,000,000.00) and two (2) Amended and Restated Revolving Notes dated December 22, 1995, by the Borrower to each of NCB and Old Kent, each in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) (collectively, the "Revolving Credit Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. ACKNOWLEDGMENT OF EXTENSION OF MATURITY. The Borrower and the Banks hereby acknowledge that, pursuant to the terms of the Loan Agreement, the Original Commitment Maturity Date is extended to January 1, 2002, and the Supplemental Commitment Maturity Date is extended to December 1, 1999. The Original Commitment Maturity Date and the Supplemental Commitment Maturity Date may be further extended pursuant to the terms of the Loan Agreement as provided for therein. 2 2. CERTAIN DEFINITIONS. Effective as of the date of this Amendment, the original term "Domestic Loans" is deleted in its entirety and the following terms are added to the defined terms contained in Section 1.1 of the Loan Agreement: "Domestic Loans" means Prime Loans, CD Loans or Standby Letter of Credit Loans whether issued and outstanding individually or collectively. "Standby Letter of Credit Loan" means a Loan to be made as a Standby Letter of Credit pursuant to the applicable Letter of Credit Notice. 3. INTEREST RATES. Effective as of the date of this Amendment, Section 2.13(c) of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: (c) The Borrower shall pay to the Agent (i) fees ("Documentary Letters of Credit Fees") with respect to Documentary Letters of Credit in amount of 0.25% per annum times the average daily Documentary Letter of Credit Outstandings and (ii) fees ("Standby Letters of Credit Fees") with respect to Standby Letters of Credit, in the applicable amount per annum set forth in the pricing schedule in Section 2.4(e) of this Agreement times the average daily Standby Letter of Credit Outstandings. The Agent shall pay to NCB one hundred percent (100%) of the Documentary Letters of Credit Fees and fifty percent (50%) of the Standby Letters of Credit Fees and shall pay Old Kent fifty percent (50%) of the Standby Letters of Credit Fees. All Documentary Letters of Credit Fees and Standby Letters of Credit Fees (collectively, "Letters of Credit Fees") shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed and shall be payable quarterly in arrears commencing with the first (1st) Domestic Business Day after the end of each fiscal quarter following issuance of each Letter of Credit and on the earlier of the Original Commitment Maturity Date or the acceleration of the Revolving Credit Notes. 4. PRICING OPTIONS. Effective as of the date of this Amendment, paragraph 3(d) in the Second Amendment to Revolving Credit Agreement is deleted in its entirety and the following Section 2.4(e) is inserted into the Loan Agreement: (e) For the purposes of determining the pricing of any Prime Loan, Euro-Dollar Loan, CD Loan and/or Standby Letter of Credit Loan, the Fixed Charge Coverage Ratio of the Borrower at the date such Loan is made shall be deemed to be the fixed charge coverage ratio as shown on the compliance certificate last delivered to the Banks. Any change in the Fixed Charge Coverage Ratio shall be effective sixty (60) days after the end of the fiscal quarter during which such change occurs; provided, however, that if the compliance certificate evidencing the computation of the Fixed 2 3 Charge Coverage Ratio is not delivered on a date that is on or before sixty (60) days after the end of a fiscal quarter, the interest rate on any Loan made between, and the interest rate on any Prime Loan, Euro-Dollar Loan, CD Loan or Standby Letter of Credit Loan the Interest Period for which commences between, the date that is sixty (60) days after the end of such fiscal quarter and the date on which such compliance certificate is delivered to the Banks shall be determined as if the Fixed Charge Coverage Ratio during such period were 1.25x [EQUALS TO OR GREATER THAN] 1.29x; provided, further, that any change in the Fixed Charge Coverage Ratio shall affect only (i) Loans made subsequent to such date and (ii) the interest rate on any Prime Loan, Euro-Dollar Loan, CD Loan or Standby Letter of Credit Loan the Interest Period for which commences subsequent to such date. The pricing schedule is as follows:
Pricing Options Fixed Charge Ratio Prime LIBOR CD Rate Standby L/C's [EQUALS TO OR GREATER THAN] 1.95x +0 bp +125 bp +137.5 bp +100 bp 1.75x [EQUALS TO OR GREATER THAN] 1.94x +0 bp +145 bp +157.5 bp +120 bp 1.50x [EQUALS TO OR GREATER THAN] 1.74x +35 bp +160 bp +172.5 bp +135 bp 1.40x [EQUALS TO OR GREATER THAN] 1.49x +45 bp +170 bp +182.5 bp +145 bp 1.30x [EQUALS TO OR GREATER THAN] 1.39x +55 bp +180 bp +192.5 bp +155 bp 1.25x [EQUALS TO OR GREATER THAN] 1.29x +75 bp +200 bp +212.5 bp +175 bp
bp = basis points 5. CASH FLOW. Section 7.1 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.1 CASH FLOW. Permit the ratio of (a) the sum of its net income for the preceding twelve (12) month period plus its depreciation expense and amortization expense for the same period to (b) the sum of scheduled principal payments of Indebtedness for the same period plus one hundred percent (100%) of its total capital expenditures for the same period to be less than 1.0 to 1.0 as measured at the end of the fiscal quarter ending April 4, 1998 through the last fiscal quarter of 1998. For each fiscal quarter thereafter, such ratio shall not be less than 2.0 to 1.0. 6. FIXED CHARGE COVERAGE. Section 7.2 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.2 FIXED CHARGE COVERAGE. Permit the ratio of (a) the sum of its net income before taxes for the preceding twelve (12) month period plus its interest, rent and lease expense for the same period to (b) the sum of its interest, rent and lease expense for the same period to be less than 1.25 to 1.0 effective at the end of the fiscal quarter ending April 4, 1998 and at the end of each fiscal quarter of the Borrower thereafter. 3 4 7. MINIMUM TANGIBLE NET WORTH. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $37,000,000.00 PLUS the sum of all Net Income Adjustments as calculated quarterly commencing with the fiscal quarter ending April 4, 1998. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the Borrower's net income as measured at the end of each fiscal quarter commencing with the fiscal quarter ending April 4, 1998. For purposes of this Agreement, losses shall be considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 8. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Five Million Dollars ($5,000,000.00) during any one (1) fiscal year commencing with fiscal year 1998. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 9. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Revolving Credit Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 10. REFERENCES TO CREDIT AGREEMENT. All references in each of the Revolving Credit Notes to the Credit Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 11. COUNTERPARTS. This Amendment may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together constitute one and the same instrument. 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK, formerly known D.I.Y. HOME WAREHOUSE, INC. as National City Bank of Columbus By: /s/ Joseph L. Kwasny By: /s/ Clifford L. Reynolds ----------------------------- --------------------------------- Name: Joseph L. Kwasny Name: Clifford L. Reynolds --------------------------- ------------------------------- Its: Vice President Its: President ---------------------------- -------------------------------- OLD KENT BANK, formerly known as NATIONAL CITY BANK, formerly known Old Kent Bank and Trust Company as National City Bank of Columbus, as Agent By: /s/ Timothy O'Rourke By: /s/ Joseph L. Kwasny ----------------------------- --------------------------------- Name: Timothy O'Rourke Name: Joseph L. Kwasny --------------------------- ------------------------------- Its: Vice President Its: Vice President ---------------------------- -------------------------------- 5 EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 FOURTH AMENDMENT TO LOAN AND CO-LENDER CREDIT AGREEMENT THIS FOURTH AMENDMENT TO LOAN AND CO-LENDER CREDIT AGREEMENT ("Amendment") is made as of the 4th day of April, 1998, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK, formerly known as National City Bank of Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCB"), and OLD KENT BANK, formerly known as Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders (NCB and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCB, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Loan and Co-Lender Credit Agreement dated as of December 23, 1994, as amended by the First Amendment to Loan and Co-Lender Credit Agreement dated as of December 22, 1995, as further amended by the Second Amendment to Loan and Co-Lender Credit Agreement dated as of December 23, 1996, and as further amended by the Third Amendment to Loan and Co-Lender Credit Agreement dated as of October 24, 1997 (collectively, the "Loan Agreement"), pursuant to which the Banks have loaned to the Borrower an aggregate amount not to exceed Nine Million Dollars ($9,000,000.00) (the "Loan"). B. The Loan is evidenced by two (2) Mortgage Notes dated December 23, 1994, by the Borrower to each of NCB and Old Kent, each in the original principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000.00) (collectively, the "Mortgage Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. CASH FLOW. Section 7.1 of the Loan Agreement is hereby deleted in its entirety and the following inserted in lieu thereof: 7.1 CASH FLOW. Permit the ratio of (a) the sum of its net income for the preceding twelve (12) month period plus its depreciation expense and amortization expense for the same period to (b) the sum of scheduled principal payments of Indebtedness for the same period plus one hundred percent (100%) of its total capital expenditures for the same period to be less than 1.0 to 1.0 as measured at the end of the fiscal quarter ending April 4, 1998 through the last fiscal quarter of 1998. For each fiscal quarter thereafter, such ratio shall not be less than 2.0 to 1.0. 2. FIXED CHARGE COVERAGE. Section 7.2 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.2 FIXED CHARGE COVERAGE. Permit the ratio of (a) the sum of its net income before taxes for the preceding twelve (12) month period plus its interest, rent and lease 2 expense for the same period to (b) the sum of its interest, rent and lease expense for the same period to be less than 1.25 to 1.0 effective at the end of the fiscal quarter ending April 4, 1998 and at the end of each fiscal quarter of the Borrower thereafter. 3. MINIMUM TANGIBLE NET WORTH. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $37,000,000.00 PLUS the sum of all Net Income Adjustments as calculated quarterly commencing with the fiscal quarter ending April 4, 1998. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the Borrower's net income as measured at the end of each fiscal quarter commencing with the fiscal quarter ending April 4, 1998. For purposes of this Agreement, losses shall be considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 4. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Five Million Dollars ($5,000,000.00) during any one (1) fiscal year commencing with fiscal year 1998. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 5. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Mortgage Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 6. REFERENCES TO LOAN AGREEMENT. All references in each of the Mortgage Notes to the Loan Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 7. COUNTERPARTS. This Amendment may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by 2 3 each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK, formerly known D.I.Y. HOME WAREHOUSE, INC. as National City Bank of Columbus By: /s/ Joseph L. Kwasny By: /s/ Clifford L. Reynolds ----------------------------- --------------------------------- Name: Joseph L. Kwasny Name: Clifford L. Reynolds --------------------------- ------------------------------- Its: Vice President Its: President ---------------------------- -------------------------------- OLD KENT BANK, formerly known as NATIONAL CITY BANK, formerly known as Old Kent Bank and Trust Company National City Bank of Columbus, as Agent By: /s/ Timothy O'Rourke By: /s/ Joseph L. Kwasny ----------------------------- --------------------------------- Name: Timothy O'Rourke Name: Joseph L. Kwasny --------------------------- ------------------------------- Its: Vice President Its: Vice President ---------------------------- -------------------------------- 3 EX-10.3 4 EXHIBIT 10.3 1 Exhibit 10.3 FIFTH AMENDMENT TO LINE OF CREDIT AGREEMENT THIS FIFTH AMENDMENT TO LINE OF CREDIT AGREEMENT ("Amendment") is made as of the 4th day of April, 1998, among D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation, with its principal place of business located at 5811 Canal Road, Suite 180, Valley View, Ohio 44125 (the "Borrower"), as borrower, NATIONAL CITY BANK, formerly known as National City Bank of Columbus, a national banking association, with its principal office located at 155 East Broad Street, Columbus, Ohio 43251 ("NCB"), and OLD KENT BANK, formerly known as Old Kent Bank and Trust Company, a Michigan banking corporation, with its principal office located at One Vandenberg Center, Grand Rapids, Michigan 49503 ("Old Kent"), as lenders (NCB and Old Kent each herein, separately, called a "Bank" and, collectively, called the "Banks"), and NCB, as agent for itself and Old Kent (the "Agent"). RECITALS A. The Banks and the Borrower have entered into a certain Line of Credit Agreement for Real Estate Loans dated as of April 28, 1995, as amended by the First Amendment to Line of Credit Agreement dated as of September 15, 1995, as further amended by the Second Amendment to Line of Credit Agreement dated as of December 22, 1995, as further amended by the Third Amendment to Line of Credit Agreement dated as of December 23, 1996 and as further amended by the Fourth Amendment to Line of Credit Agreement dated as of October 24, 1997 (collectively, the "Loan Agreement"), pursuant to which the Banks have loaned to the Borrower an aggregate principal amount of Seven Million Nine Hundred Seventy-Five Thousand Dollars ($7,975,000.00) (the "Loan"). B. The Loan is evidenced by two (2) Mortgage Notes dated April 28, 1995, by the Borrower to each of NCB and Old Kent, each in the original principal amount of One Million Six Hundred Eighty-Seven Thousand Five Hundred Dollars ($1,687,500.00) and two (2) Mortgages Notes dated September 15, 1995, by the Borrower to each of NCB and Old Kent, each in the original principal amount of Two Million Three Hundred Thousand Dollars ($2,300,000.00) (collectively, the "Notes"). C. The Banks and the Borrower have agreed to certain amendments with respect to the Loan. NOW, THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Banks agree as follows: 1. CASH FLOW. Section 7.1 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 2 2 7.1 CASH FLOW. Permit the ratio of (a) the sum of its net income for the preceding twelve (12) month period plus its depreciation expense and amortization expense for the same period to (b) the sum of scheduled principal payments of Indebtedness for the same period plus one hundred percent (100%) of its total capital expenditures for the same period to be less than 1.0 to 1.0 as measured at the end of the fiscal quarter ending April 4, 1998 through the last fiscal quarter of 1998. For each fiscal quarter thereafter, such ratio shall not be less than 2.0 to 1.0. 2. Fixed Charge Coverage. Section 7.2 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.2 FIXED CHARGE COVERAGE. Permit the ratio of (a) the sum of its net income before taxes for the preceding twelve (12) month period plus its interest, rent and lease expense for the same period to (b) the sum of its interest, rent and lease expense for the same period to be less than 1.25 to 1.0 effective at the end of the fiscal quarter ending April 4, 1998 and at the end of each fiscal quarter of the Borrower thereafter. 3. Minimum Tangible Net Worth. Section 7.3 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.3 MINIMUM TANGIBLE NET WORTH. Permit its tangible net worth to be less than $37,000,000.00 PLUS the sum of all Net Income Adjustments as calculated quarterly commencing with the fiscal quarter ending April 4, 1998. As used herein, "Net Income Adjustment" shall mean an amount equal to fifty percent (50%) of the Borrower's net income as measured at the end of each fiscal quarter commencing with the fiscal quarter ending April 4, 1998. For purposes of this Agreement, losses shall be considered zero (0) net income for the determination of a change in the required minimum tangible net worth and tangible net worth shall be defined as shareholders' equity minus intangible assets such as goodwill, Restricted Investments, capitalized loan fees, underwriters' discounts, non-compete agreements and deferred costs. 4. CAPITAL EXPENDITURES. Section 7.4 of the Loan Agreement is deleted in its entirety and the following inserted in lieu thereof: 7.4 CAPITAL EXPENDITURES. Make capital expenditures for real estate, machinery, equipment, vehicles, furniture, fixtures, leasehold improvements or any other fixed assets in an aggregate amount greater than Five Million Dollars ($5,000,000.00) during any one (1) fiscal year commencing with fiscal year 1998. No unused portion of any capital expenditure allowance provided for in this Section 7.4 for any fiscal year shall be available to the Borrower for use in any subsequent fiscal year. 2 3 5. RATIFICATION AND CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The Loan Agreement is in all respects ratified and confirmed by the parties hereto, and the Loan Agreement and this Amendment shall be read, taken and construed as one and the same instrument. Except as modified herein, the Loan Agreement remains unchanged and in full force and effect. Except as otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Loan Agreement. The Borrower hereby acknowledges and certifies that all other representations and warranties made in the Loan Agreement continue to be true and correct as of the date hereof and that there are no defaults existing under the covenants or other terms of the Loan Agreement. The Borrower hereby ratifies and confirms the Borrower's obligations and all liability to the Banks under the terms and conditions of the Loan Agreement and the Notes, and acknowledges that the Borrower has no defenses to or rights of setoff against the Borrower's obligations and all liability to the Banks thereunder. The Borrower hereby further acknowledges that the Banks have performed all of the Banks' obligations to date under the Loan Agreement. 6. REFERENCES TO LOAN AGREEMENT. All references in each of the Notes to the Loan Agreement shall mean and refer to the Loan Agreement, as amended by this Amendment. 7. COUNTERPARTS. This Amendment may be executed in one or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by each in manner and form sufficient to bind them and duly authorized in the premises as of the day and year first above written. NATIONAL CITY BANK, formerly known D.I.Y. HOME WAREHOUSE, INC. as National City Bank of Columbus By: /s/ Joseph L. Kwasny By: /s/ Clifford L. Reynolds ----------------------------- --------------------------------- Name: Joseph L. Kwasny Name: Clifford L. Reynolds --------------------------- ------------------------------- Its: Vice President Its: President ---------------------------- -------------------------------- OLD KENT BANK, formerly known as NATIONAL CITY BANK, formerly known Old Kent Bank and Trust Company as National City Bank of Columbus, as Agent By: /s/ Timothy O'Rourke By: /s/ Joseph L. Kwasny ----------------------------- --------------------------------- Name: Timothy O'Rourke Name: Joseph L. Kwasny --------------------------- ------------------------------- Its: Vice President Its: Vice President ---------------------------- -------------------------------- 3 EX-10.4 5 EXHIBIT 10.4 1 Exhibit 10.4 AMENDMENT NO.2 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT --------------------------------- This Amendment No. 2 to Amended and Restated Employment Agreement is executed as of May 28, 1998 by CLIFFORD L. REYNOLDS (the "Executive") and D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation (the "Company"). RECITALS: --------- A. Executive and the Company are parties to a certain Amended and Restated Employment Agreement dated as of January 1, 1995 (the "Agreement"). B. The parties desire to amend the Agreement as set forth below. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. Section 6(d) of the Agreement is hereby amended to read, in its entirety, as follows: (d) If Executive's employment is terminated pursuant to the provisions of subsection 5(a)(vi) above, and Executive was not offered employment after the change of control of the Company at substantially the same compensation and contract terms for the performance of substantially the same responsibilities as is set forth in this Agreement (other than corporate title), in addition to paying Executive his Earned Compensation, the Company shall pay the Executive an additional amount per month, as severance pay, equal to one-twelfth (1/12th) of the Executive's current base salary for each month during the Severance Period. In addition, during the Severance Period, the Company shall provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive immediately prior to the actual termination date of this Agreement. The foregoing notwithstanding, the Executive shall use his good faith efforts to obtain reasonable replacement employment from and after such termination and any compensation and medical and insurance benefits received by the Executive from such replacement employing during the Severance Period shall reduce the amount of severance pay and medical and insurance benefits due to Executive from the Company hereunder. 2 2. As modified above, the Agreement shall continue in full force and effect and is hereby ratified and confirmed. This Amendment No. 2 may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one in the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2 as of the date set forth above. /s/ Clifford L. Reynolds ---------------------------------------- Cliff L. Reynolds D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation By: /s/ Fred A. Erb ------------------------------------ Fred A. Erb Its: Chairman 2 EX-10.5 6 EXHIBIT 10.5 1 Exhibit 10.5 AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT --------------------------------- This Amendment No. 1 to Amended and Restated Employment Agreement is executed as of May 28, 1998 by R. SCOTT EYNON (the "Executive") and D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation (the "Company"). RECITALS: --------- A. Executive and the Company are parties to a certain Amended and Restated Employment Agreement dated as of January 1, 1995 (the "Agreement"). B. The parties desire to amend the Agreement as set forth below. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. Section 6(d) of the Agreement is hereby amended to read, in its entirety, as follows: (d) If Executive's employment is terminated pursuant to the provisions of subsection 5(a)(vi) above, and Executive was not offered employment after the change of control of the Company at substantially the same compensation and contract terms for the performance of substantially the same responsibilities as is set forth in this Agreement (other than corporate title), in addition to paying Executive his Earned Compensation, the Company shall pay the Executive an additional amount per month, as severance pay, equal to one-twelfth (1/12th) of the Executive's current base salary for each month during the Severance Period. In addition, during the Severance Period, the Company shall provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive immediately prior to the actual termination date of this Agreement. The foregoing notwithstanding, the Executive shall use his good faith efforts to obtain reasonable replacement employment from and after such termination and any compensation and medical and insurance benefits received by the Executive from such replacement employing during the Severance Period shall reduce the amount of severance pay and medical and insurance benefits due to Executive from the Company hereunder. 2 2. As modified above, the Agreement shall continue in full force and effect and is hereby ratified and confirmed. This Amendment No. 1 may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one in the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the date set forth above. /s/ R. Scott Eynon --------------------------------------- R. Scott Eynon D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation By: /s/ Fred a. Erb ------------------------------------ Fred A. Erb Its: Chairman 2 EX-10.6 7 EXHIBIT 10.6 1 Exhibit 10.6 AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT --------------------------------- This Amendment No. 1 to Amended and Restated Employment Agreement is executed as of May 28, 1998 by DENNIS C. HOFF (the "Executive") and D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation (the "Company"). RECITALS: --------- A. Executive and the Company are parties to a certain Amended and Restated Employment Agreement dated as of January 1, 1995 (the "Agreement"). B. The parties desire to amend the Agreement as set forth below. NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. Section 6(c) of the Agreement is hereby amended to read, in its entirety, as follows: (c) If Executive's employment is terminated pursuant to the provisions of subsection 5(a)(vi) above, and Executive was not offered employment after the change of control of the Company at substantially the same compensation and contract terms for the performance of substantially the same responsibilities as is set forth in this Agreement (other than corporate title), in addition to paying Executive his Earned Compensation, the Company shall pay the Executive an additional amount per month, as severance pay, equal to one-twelfth (1/12th) of the Executive's current base salary for each month during the Severance Period. In addition, during the Severance Period, the Company shall provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive immediately prior to the actual termination date of this Agreement. The foregoing notwithstanding, the Executive shall use his good faith efforts to obtain reasonable replacement employment from and after such termination and any compensation and medical and insurance benefits received by the Executive from such replacement employing during the Severance Period shall reduce the amount of severance pay and medical and insurance benefits due to Executive from the Company hereunder. 2 2. As modified above, the Agreement shall continue in full force and effect and is hereby ratified and confirmed. This Amendment No. 1 may be executed in two or more counterparts, each of which shall be deemed an original. but all of which together shall constitute one in the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the date set forth above. /s/ Dennis C. Hoff ---------------------------------------- Dennis C. Hoff D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation By: /s/ Fred a. Erb ------------------------------------ Fred A. Erb Its: Chairman 2 EX-10.7 8 EXHIBIT 10.7 1 Exhibit 10.7 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made as of July 1, 1998, by and between ERIC I. GLASSMAN ("Executive") and D.I.Y. HOME WAREHOUSE, INC., an Ohio corporation (the "Company"). RECITALS: A. The Company operates warehouse-format home improvement centers that sell products primarily to do-it-yourself home repair and remodeling customers. B. Executive is presently employed by the Company as its Vice President and Chief Financial Officer. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows: 1. EMPLOYMENT. From the date of this Agreement (the "Effective Date") until December 31, 1999, unless sooner terminated as provided below or extended upon mutual agreement of the parties, the Company will employ Executive as Vice President and Chief Financial Officer of the Company, to perform such services for and on behalf of the Company as the Company's Board of Directors may from time to time direct consistent with Executive's title and position, and Executive hereby accepts such employment, upon the terms and conditions set forth in this Agreement. Executive's principal place of business will be located within a fifty (50) mile radius of downtown Cleveland, Ohio. 2. COMPENSATION. As full compensation and consideration for the services to be rendered by him under this Agreement, the Company shall compensate Executive as follows: (a) The Company shall pay Executive a base salary at the annual rate of One Hundred Thousand and 00/100 Dollars ($100,000.00), payable in installments not less often than bi-monthly. The foregoing notwithstanding, the Company's Board of Directors, or its Compensation Committee, shall review the performance of Executive annually and may, in its sole discretion, increase Executive's base salary for any period during the term of this Agreement. (b) The Company's Board of Directors or its Compensation Committee may, in its sole discretion, award Executive a bonus in an amount to be determined by the Board of Directors or such Compensation Committee for each fiscal year throughout the term of this Agreement; provided that Executive must be employed by the Company on the last day of its fiscal year to be entitled to any such bonus. -1- 2 (c) The Company shall provide Executive with such other benefits as it now provides him and as it may from time to time provide other employees of Executive's rank. Executive acknowledges and agrees that the Company, in its sole and absolute discretion and without any liability whatsoever to Executive, may change, modify or delete any benefits it provides employees of Executive's rank, including Executive, so long as such changes, modifications or deletions are uniform in respect of all, or substantially all, employees of such rank. 3. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Executive for all necessary and reasonable business expenses incurred by him in the performance of his duties under this Agreement in accordance with practices established from time to time by the Company, upon presentation by Executive of vouchers, receipts or other evidence of such expenditures, satisfactory to the Company. 4. SERVICES. (a) Executive shall perform his duties under this Agreement faithfully, diligently and to the best of his ability. He shall serve subject to the policies and instruction of the Company 5 Board of Directors, and shall devote his full business time, attention, energies and loyalty to the Company. (b) During the term of this Agreement, Executive will not engage in any activities in conflict with the best interests of the Company or of any Affiliate. As used in this Agreement, the term "Affiliate" shall mean at any time (a) each corporation or other business entity directly or indirectly controlling, controlled by, or under common control with the Company, including all corporations and other business entities now or hereafter owned or acquired by the controlling shareholders of the Company, and (b) each corporation or other business entity in which at least fifty percent (50%) of the voting or non-voting stock or other interest therein is owned beneficially and/or of record directly or indirectly by the Company or its controlling shareholders. 5. TERMINATION. (a) Executive's employment under this Agreement may be terminated: (i) by Executive at any time for any reason or for no reason whatsoever, upon not less than thirty (30) days written notice; (ii) by the Company at any time "for cause" (as defined below), without prior notice; (iii) by the Company at any time for any reason or for no reason whatsoever, without prior notice; (iv) by the Company if Executive is unable to perform his duties under this Agreement by reason of illness or physical or mental incapacity for an aggregate period of sixty (60) days within any period of 365 consecutive days, upon thirty (30) days prior written notice; -2- 3 (v) upon Executive's death; or (vi) by the Company or the Executive at any time upon a "change of control" (as defined below) of the Company. (b) As used in this Agreement, the term "for cause" shall mean any of the following: (i) any action of Executive (or any failure to act by Executive), which, in the reasonable determination of the Company's Board of Directors, involves malfeasance, fraud, embezzlement, dishonesty or moral turpitude, or which, if generally known, would or might have a material adverse effect on the Company and/or its reputation; or (ii) the impairment of Executive's ability, in the reasonable belief of the Company, to carry out the duties and responsibilities set forth in this Agreement by reason of his use of alcohol and/or legal or illegal drugs or substances. (c) As used in this Agreement, the term "change of control" shall mean either of the following: (i) an event or series of events by which any person or other entity or group (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended the "Securities Exchange Act") of persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall, as a result of a tender or exchange offer or offers, an open market purchase or purchases, a privately negotiated purchase or purchases or otherwise, become the beneficial owner (within the meaning of Rule 1 3d-3 under the Securities Exchange Act), directly or indirectly, of 50% or more of the then outstanding voting stock of the Company; or (ii) the Company consolidates with, or merges with or into, another person or entity or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person or entity, or any person or entity consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which 50% or more of the outstanding voting stock of the Company is converted into or exchanged for cash, securities or other property. 6. COMPENSATION PAYABLE UPON TERMINATION. (a) If Executive's employment is terminated pursuant to the provisions of subsections 5(a)(i), (ii), (iv) or (v) above, the Company shall pay Executive all sums due Executive hereunder through the date of such termination ("Earned Compensation"). -3- 4 (b) If the Company terminates Executive's employment pursuant to the provisions of subsection 5(a)(iii) above, then, in addition to paying Executive his month, as severance pay, equal to one-twelfth (1/12th) of the Executive's current base salary for each month of the next succeeding six (6) months following termination (the "Severance Period"). In addition, during the Severance Period, the Company shall provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive under this Agreement immediately prior to the actual termination date. The foregoing notwithstanding, Executive shall use his good faith efforts to obtain reasonable replacement employment from and after such termination and any compensation and medical and insurance benefits received by Executive from any such replacement employment during the Severance Period shall reduce the amount of severance pay and medical and insurance benefits due to Executive from the Company hereunder. (c) If Executive's employment is terminated pursuant to the provisions of subsection 5(a)(vi) above, and Executive was not offered employment after the change of control of the Company at substantially the same compensation and contract terms for the performance of substantially the same responsibilities as is set forth in this Agreement (other than corporate title), in addition to paying Executive his Earned Compensation, the Company shall pay the Executive an additional amount per month, as severance pay, equal to one-twelfth (1/12th) of the Executive's current base salary per month for each month of the next succeeding twelve (12) months following termination (the "Termination Severance Period"). In addition, during the Termination Severance Period, the Company shall provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive immediately prior to the actual termination date of this Agreement. The foregoing notwithstanding, Executive shall use his good faith efforts to obtain reasonable replacement employment from and after such termination and any compensation and medical and insurance benefits received by the Executive from such replacement employment during the Termination Severance Period shall reduce the amount of severance pay and medical and insurance benefits due to Executive from the Company hereunder. 7. RESTRICTIVE COVENANTS. (a) Executive acknowledges that the services to be performed by him are unique, and, by reason of such employment, Executive will acquire confidential information and trade secrets concerning the operations of the Company and of one or more Affiliates concerning their respective methods of doing business and future plans. Accordingly, Executive agrees that: (i) During the Restricted Period (as defined in subsection 7(b) below), Executive will not, directly or indirectly, engage in, or have an interest in or be associated with (whether as an officer, director, stockholder, partner, associate, employee, consultant, owner or otherwise) any corporation, firm or enterprise which is engaged in any business which is competitive with the business conducted or, to the knowledge of Executive, planned to be conducted at any time during the term of this Agreement or the Restricted Period by the Company, anywhere in the -4- 5 continental United States; except that Executive may invest in any publicly held corporation engaged in such business, if such investment does not exceed I % in value of the issued and outstanding capital stock of such corporation; (ii) For so long as any Confidential Information (as defined below) shall remain confidential or otherwise remain wholly or partially protectable, either during the course of the Executive's employment or thereafter, Executive will not use or disclose, directly or indirectly, to any person outside of the Company any Confidential Information; (iii) Promptly upon the termination of Executive's employment for any reason, Executive (or if Executive has died, his personal representative) shall return to the Company any and all copies (whether prepared or copied by, or at the direction of, the Company or Executive) of all records, drawings, materials, memoranda and other data constituting or pertaining to Confidential Information; (iv) During the Restricted Period, Executive shall not directly or indirectly divert, or by aid to others do anything which would tend to divert, from the Company any trade or business with any customer with whom Executive had any contact or association during the term of Executive's employment with the Company or with any party whose identity or potential - as a customer was confidential or learned by Executive during his employment by the Company; and (v) During the course of Executive's employment hereunder or at any time thereafter, Executive shall not, either directly or indirectly, induce or attempt to induce any person to leave the employment of the Company or any Affiliate. (b) As used in this Agreement, the term "Confidential Information" shall mean all business information of any nature and in any form which at the time or times concerned is not generally known to those persons engaged in business similar to that conducted or contemplated by the Company (other than by the act or acts of an employee not authorized by the Company to disclose such information) and which relates to any one or more of the aspects of the present or past business of the Company or any Affiliate or any of their respective predecessors, including, without limitation, patents and patent applications, inventions and improvements (whether or not patentable), development projects, policies, processes, formulas, techniques, know-how, and other facts relating to sales, advertising, promotions, financial matters, customers, customer lists, customer purchases or requirements, and other trade secrets. As used in this Agreement, the term "Restricted Period" shall mean: (i) if Executive's employment is terminated pursuant to the provisions of subsection 5(a)(i) or subsection 5(a)(ii), the period commencing on the Effective Date and ending upon the expiration of three (3) years from the date of such termination; -5- 6 (ii) if Executive's employment is terminated pursuant to the provisions of subsection 5(a)(iii) or subsection 5(a)(iv), and the Company, in its sole and absolute discretion, continues to pay Executive his base salary in the amount and manner set forth in subsection 2(a) above and provide Executive with the same medical and insurance benefits, but no other fringe benefits, which it provided to Executive under this Agreement immediately prior to the actual termination date, the period commencing on the Effective Date and ending on the first to occur of (1) the date the Company ceases to pay Executive such base salary or provide Executive such medical and insurance benefits, or (2) December 31, 1999; (iii) if Executive's employment is terminated pursuant to the provisions of subsection 5(a)(vi), the period commencing on the Effective Date and ending upon the expiration of twelve (12) months from the date of such termination. (c) Executive understands that the Company would not have an adequate remedy at law for the breach or threatened breach by Executive of any one or more of the covenants set forth above, and agrees that if there is any such breach or threatened breach the Company may, in addItion to the other legal or equitable remedies which may be available to it, obtain an injunction or restraining order to enjoin or restrain Executive from the breach or threatened breach of such covenants. (d) Executive acknowledges and agrees that the covenants set forth above are reasonable and valid in geographical and temporal scope and in all other respects. If any court determines that any of the covenants, or any part of any covenant, is invalid or unenforceable, the remainder of the covenants shall not be affected and shall be given full effect, without regard to the invalid portion. If any court determines that any of the covenants, or any part of any covenant, is unenforceable because of its duration or geographic scope, such court shall have the power to reduce the duration or scope, as the case may be, and, enforce such provision in such reduced form. Executive and the Company intend to and hereby confer jurisdiction to enforce the covenants upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts of any one or more of such jurisdictions hold the covenants, or any part of the covenants, unenforceable by reason of the breadth of such scope or otherwise, it is the intention of Executive and the Company that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants as to breaches of such covenants in. such other respective jurisdictions. For this purpose, such covenants as they relate to each jurisdiction shall be severable into diverse and independent covenants. 8. NOTICES. Any notice, demand or request which is permitted, required or desired to be given in connection with this Agreement or Executive's employment by the Company shall be deemed given if personally delivered, or delivered by telegram or facsimile, or mailed, by first class mail, postage prepaid, certified, return receipt -6- 7 requested, to the parties at the following addresses, or at such other address as they may hereafter indicate by written notice given as herein provided: If to Executive: ---------------- Eric I. Glassman 25276 Cardington Drive Beachwood, Ohio 44122 If to the Company: With a Required Copy to: ------------------ ------------------------ D.I.Y. Home Warehouse, Inc. Jaffe, Raitt, Heuer & Weiss c/o Edgemere Enterprises Professional Corporation P.O. Box 458 One Woodward Ave., Suite 2400 Bloomfield Hills, Michigan 48305 Detroit, Michigan 48226 Attn: Fred A. Erb, Chairman Attn: Ira J. Jaffe, Esq. 9. MISCELLANEOUS. (a) The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, successors and personal representatives. (b) This Agreement shall be governed by, and be construed and enforced in accordance with, the laws of the State of Ohio. (c) This Agreement may not be modified except by written instrument executed by each of the parties. (d) This Agreement sets forth the entire understanding and agreement of the parties with respect to its subject matter and supersede all prior understandings and agreements, whether written or oral, in respect thereof. (e) This Agreement is personal to Executive and may not be assigned by him in any manner whatsoever. (f) The headings and captions used herein are for convenience of reference only and shall not be considered in construing this Agreement. (g) If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, such provision shall be modified so as to be enforceable to the fullest extent permitted by applicable law, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. (h) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -7- 8 (i) The Company and Executive acknowledge and agree that there may be a constitutional right to a jury trial in connection with any claim, dispute or lawsuit arising between them, but that such right may be waived. Accordingly, the parties agree that notwithstanding such constitutional right, in this matter, the parties believe and agree that it shall be in their best interest to waive such right, and accordingly, hereby waive such right to a jury trial, and further agree that the best forum for hearing any claim, dispute or lawsuit, if any, arising in connection with this Agreement or the relationship between Executive and the Company, shall be a court of competent jurisdiction sitting without a jury. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. /s/ Eric I. Glassman ---------------------------------------- ERIC I. GLASSMAN D.I.Y. HOME WAREHOUSE, INC. By: /s/ Fred A. Erb ------------------------------------- Fred A. Erb, Chairman of the Board -8- EX-10.8 9 EXHIBIT 10.8 1 Exhibit 10.8 D.I.Y. HOME WAREHOUSE, INC. 5811 Canal Road Valley View, Ohio 44125 July 1, 1998 Clifford L. Reynolds 5811 Canal Road Valley View, OH 44125 Dear Cliff: This letter will confirm with you the terms and conditions upon which the Compensation Committee (the "Committee") of the Board of Directors of D.I.Y. Home Warehouse, Inc. (the "Company") at its meeting held on February 19, 1998 granted to you the right to receive a bonus under certain circumstances. If you participate in bringing about a transaction resulting in a change of control of the Company (as defined Below) (a "Transaction") and (i) are still employed by the Company immediately prior to the closing of the Transaction, or (ii) your employment has been terminated by the Company without cause (as defined in your current employment agreement), after the execution of the definitive agreement governing the Transaction, you will be entitled to receive a bonus (the "Transaction Bonus") equal to the greater of (i) one (1) year of your base salary, or (ii) 1.11% of the value received by the shareholders of the Company as a result of the Transaction, as determined by an independent evaluation obtained by the Company. The Company confirms that any Transaction Bonus is in addition to any payment which you may be entitled to receive pursuant to the terms of any employment agreement which you may have with the Company as a result of termination of your employment due to a change of control of the Company. As used in this letter, the term "change of control" shall mean either of the following: (i) An event or series of events by which any person or other entity or group (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Securities Exchange Act") of persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall. as a result of a tender or exchange offer or offers, an open market purchase or purchases, a privately negotiated purchase or purchases or otherwise, become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of fifty percent (50%) or more of the then outstanding voting stock of the Company: or 2 D.I.Y. Home Warehouse, Inc. July 1, 1998 Page 2 (ii) The Company consolidates with, or merges with or into, another person or entity or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person or entity, or any person or entity consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which fifty percent (50%) or more of the outstanding voting stock of the Company is converted into or exchanged for cash, securities, or other property. This letter agreement shall only apply to a Transaction which is closed by December 31, 1999. This agreement shall be governed by and be construed and enforced in accordance with the laws of the State of Ohio. This agreement is personal to the addressee and may not be assigned in any manner whatsoever. This Agreement may be executed in two or more counterparts, each of which are to be deemed an original, but all of which together shall constitute one and the same instrument. Very truly yours, D.I.Y. HOME WAREHOUSE, INC. By: /s/ Fred A. Erb, -------------------------------- Fred A. Erb, Chairman of the Board ACKNOWLEDGED AND AGREED TO ON JULY 15, 1998 /s/ Clifford L. Reynolds - ------------------------- Clifford L. Reynolds EX-10.9 10 EXHIBIT 10.9 1 Exhibit 10.9 D.I.Y. HOME WAREHOUSE, INC 5811 Canal Road Valley View, Ohio 44125 July 1, 1998 R. Scott Eynon 5811 Canal Road Valley View, OH 44125 Dear Scott: This letter will confirm with you the terms and conditions upon which the Compensation Committee (the "Committee") of the Board of Directors of D.I.Y. Home Warehouse, Inc. (the "Company") at its meeting held on February 19, 1998 granted to you the right to receive a bonus under certain circumstances. If you participate in bringing about a transaction resulting in a change of control of the Company (as defined below) (a "Transaction") and (i) are still employed by the Company immediately prior to the closing of the Transaction, or (ii) your employment has been terminated by the Company without cause (as defined in your current employment contract) after the execution of the definitive agreement governing the Transaction, you will be entitled to receive a bonus (the "Transaction Bonus") equal to the greater of (i) one (1) year of your base salary, or (ii) 0.64% of the value received by the shareholders of the Company as a result of the Transaction, as determined by an independent evaluation obtained by the Company. The Company confirms that any Transaction Bonus is in addition to any payment which you may be entitled to receive pursuant to the terms of any employment agreement which you may have with the Company as a result of termination of your employment due to a change of control of the Company. As used in this letter, the term "change of control" shall mean either of the following: (i) An event or series of events by which any person or other entity or group (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934. as amended ("Securities Exchange Act") of persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall. as a result of a tender or exchange offer or offers, an open market purchase or purchases. a privately negotiated purchase or purchases or otherwise. become the beneficial owner (within the meaning of Rule 1 3d-3 under the Securities Exchange Act), directly or indirectly, of fifty percent (50%) or more of the then outstanding voting stock of the Company; or 2 D.I.Y. Home Warehouse, Inc. July 1, 1998 Page 2 (ii) The Company consolidates with, or merges with or into, another person or entity or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person or entity, or any person or entity consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which fifty percent (50%) or more of the outstanding voting stock of the Company is converted into or exchanged for cash, securities, or other property. This letter agreement shall only apply to a Transaction which is closed by December 31, 1999. This agreement shall be governed by and be construed and enforced in accordance with the laws of the State of Ohio. This agreement is personal to the addressee and may not be assigned any manner whatsoever. This Agreement may be executed in two or more counterparts, each of which are to be deemed an original, but all of which together shall constitute one and the same instrument. Very truly yours, D.I.Y. HOME WAREHOUSE, INC. By: /s/ Fred A. Erb. -------------------------------- Fred A. Erb, Chairman of the Board ACKNOWLEDGED AND AGREED TO ON JULY 15, 1998 /s/ R. Scott Eynon - ------------------------------------ R. Scott Eynon EX-10.10 11 EXHIBIT 10.10 1 Exhibit 10.10 D.I.Y. HOME WAREHOUSE, INC. 5811 Canal Road Valley View, Ohio 44125 July 1, 1998 Dennis C. Hoff 5811 Canal Road Valley View, OH 44125 Dear Dennis: This letter will confirm with you the terms and conditions upon which the Compensation Committee (the "Committee") of the Board of Directors of D.I.Y. Home Warehouse, Inc. (the "Company") at its meeting held on February 19, 1998 granted to you the right to receive a bonus under certain circumstances. If you participate in bringing about a transaction resulting in a change of control of the Company (as defined below) (a "Transaction") and (i) are still employed by the Company immediately prior to the closing of the Transaction, or (ii) your employment has been terminated by the Company without cause (as defined in your current employment agreement) after the execution of the definitive agreement governing the Transaction, you will be entitled to receive a bonus (the "Transaction Bonus") equal to the greater of (i) one (1) year of your base salary, or (ii) 0.64% of the value received by the shareholders of the Company as a result of the Transaction, as determined by an independent evaluation obtained by the Company. The Company confirms that any Transaction Bonus is in addition to any payment which you may be entitled to receive pursuant to the terms of any employment agreement which you may have with the Company as a result of termination of your employment due to a change of control of the Company. As used in this letter, the term "change of control" shall mean either of the following: (i) An event or series of events by which any person or other entity or group (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Securities Exchange Act") of persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall, as a result of a tender or exchange offer or offers. an open market purchase or purchases. a privately negotiated purchase or purchases or otherwise. become the beneficial owner (within the meaning of Rule 13d-3 under the Securities 2 D.I.Y. Home Warehouse, Inc. July 1, 1998 Page 2 Exchange Act), directly or indirectly, of fifty percent (50%) or more of the then outstanding voting stock of the Company; or (ii) The Company consolidates with, or merges with or into, another person or entity or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person or entity, or any person or entity consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which fifty percent (50%) or more of the outstanding voting stock of the Company is converted into or exchanged for cash, securities, or other property. This letter agreement shall only apply to a Transaction which is closed by December 31 , 1999. This agreement shall be governed by and be construed and enforced in accordance with the laws of the State of Ohio. This agreement is personal to the addressee and may not be assigned in any manner whatsoever. This Agreement may be executed in two or more counterparts, each of which are to be deemed an original. but all of which together shall constitute one and the same instrument. Very truly yours, D.I.Y. HOME WAREHOUSE, INC. By: /s/ Fred A. Erb ------------------------------- Fred A. Erb, Chairman of the Board ACKNOWLEDGED AND AGREED TO ON 7/15, l998 /s/ Dennis C. Hoff - ------------------------------- Dennis C. Hoff EX-10.11 12 EXHIBIT 10.11 1 Exhibit 10.11 D.I.Y. HOME WAREHOUSE, INC. 5811 Canal Road Valley View, Ohio 44125 July 1, 1998 Mr. Eric I. Glassman Vice-President and Chief Financial Officer 5811 Canal Road, Suite 180 Valley View, OH 44125 Dear Mr. Glassman: This letter will confirm with you the terms and conditions upon which the Compensation Committee (the "Committee") of the Board of Directors of D.I.Y. Home Warehouse, Inc., an Ohio corporation (the "Company") in its Action Without Meeting taken as of July 1, 1998, granted to you the right to receive a bonus under certain circumstances. If you participate in bringing about a transaction resulting in a change of control of the Company (as defined below) (a "Transaction") and (i) you are still employed by the Company immediately prior to the closing of the Transaction, or (ii) your employment has been terminated by the Company without cause after the execution of the definitive agreement governing the Transaction, you will be entitled to receive a bonus (the "Transaction Bonus") equal to $50,000. You shall be entitled to received a Transaction Bonus hereunder with respect to a Transaction which is closed by December 31, 1999. The Company confirms that any Transaction Bonus is in addition to any payment which you may be entitled to receive pursuant to the terms of any employment agreement you may have with the Company as a result of termination of your employment due to a change of control of the Company. As used herein, the term "change of control" shall mean any of the following: (i) an event or series of events by which any person or other entity or group (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act") of persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall, as a result of a tender or exchange offer or offers, an open market purchase or purchases, a privately negotiated purchase or purchases or otherwise, become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act), 2 Mr. Eric I. Glassman July 1, 1998 Page 2 directly or indirectly, of 50% or more of the then outstanding voting stock of the Company; or (ii) the Company consolidates with. or merges with or into, another person or entity or sells. assigns. conveys, transfers. leases or otherwise disposes of all or substantially all of its assets to any person or entity, or any person or entity consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which 50% or more of the outstanding voting stock of the Company is converted into or exchanged for cash, securities or other property. Very truly yours, D.I.Y. HOME WAREHOUSE, INC. By: /s/ Fred A. Erb ----------------------------- Fred A. Erb, Chairman of the Board ACKNOWLEDGED AND AGREED TO N JULY 30, 1998 /s/ Eric I. Glassman - ---------------------------------- Eric I. Glassman EX-27.1 13 EXHIBIT 27.1
5 1,000 6-MOS JAN-02-1999 JAN-04-1998 JUL-04-1998 480 0 117 0 39,543 41,025 53,621 15,329 79,739 21,639 16,700 0 0 22,955 17,272 79,739 93,746 93,746 68,603 23,995 (41) 0 1,039 150 62 88 0 0 0 88 0.01 0.01
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