Lease Agreement Between RML Construction, LLP And Dominion Homes, Inc.

EXHIBIT 10.7


LEASE


RML CONSTRUCTION, LLP


"LANDLORD"


AND


DOMINION HOMES OF KENTUCKY, LTD


"TENANT"


DATE: SEPTEMBER 26, 2003


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BRIGHTON PLACE SHOPPES
LEASE AGREEMENT - -------------------------------------------------------------------------------- LESSEE:
TABLE OF CONTENTS


SECTION PAGE - -------------------------------------------------------------------------------- 1.1 Description 4 1.2 Exception and Reservation 4 1.3 Definitions 4 2.1 Base Term 5 2.2 Option Term 5 2.3 Prior Installation 5 3.1 Minimum Rent 5 3.2 Lease Year 5 3.3 Gross Receipts 6 3.4 Security Deposit 6 3.5 Right to Audit 6 3.6 Taxes 6 3.7 Insurance 6 3.8 Operating Expense 7 4.1 Tenant's Use; Exclusive Use 10 4.2 Utilities 10 4.3 Signs 10 4.4 Continuous Occupancy 10 5.1 Initial Construction 11 5.2 Tenant's Duty to Repair 11 5.3 Surrender of Premises 11 5.4 Tenant's Alterations 11 5.5 Mechanic's Liens 12 6.1 Liability of Tenant 12 6.2 Notice of Claim or Suit 12 6.3 Liability Insurance 12 6.4 Failure to Procure Insurance 12 6.5 Increase in Fire Insurance Premium 13 6.6 Waiver of Subrogation 13 7.1 Partial Destruction 13 7.2 Substantial Destruction 13 7.3 Rights of Landlord's Lender 13 7.4 Right of Termination 13 7.5 Tenant Trade Fixtures 14 8.1 Tenant Assignment 14 8.2 Bankruptcy, Etc. 14 9.1 Events of Default 14 9.2 Remedies 15 9.3 No Remedy Exclusive 15 9.4 Attorneys Fees and Expenses 16


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10.1 Control of Common Areas 16 11.1 Partial Taking 16 11.2 Substantial Taking 17 11.3 Award 17 12.1 Landlord's Right of Entry 17 12.2 Quiet Enjoyment 17 12.3 Waiver 18 12.4 Trade Fixtures 18 12.5 Subordination 18 12.6 Notices 18 12.7 Recording 19 12.8 Amendment 19 12.9 Documentation; Right to Cure 19 12.10 Holding Over 19 12.11 No Partnership 19 12.12 Partial Invalidity 19 12.13 Successors 20 12.14 Governing Law 20 12.15 Accord and Satisfaction 20 12.16 Landlord's Exculpatory Clause 20 12.17 Joint and Several Liability 20 12.18 Substitution of Premises 21 12.19 Special Stipulations 21 12.20 Hazardous Waste 21 12.21 Real Estate Commission 21 12.22 Effective Only Upon Execution 21


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BRIGHTON PLACE SHOPPES
LEASE AGREEMENT
LOCATION:
3090 Helmsdale Place, Building A, Units 5 & 6,
Lexington, Kentucky


THIS LEASE AGREEMENT made and entered into as of the 26th day of September 2003, by and between RML CONSTRUCTION, LLP, a Kentucky limited liability partnership, having its principal office at 3399 Tates Creek Road, Lexington, Kentucky 40502 or assigns (referred to as "Landlord"), and DOMINION HOMES OF KENTUCKY, LTD, having an address of 10035 Forest Green Boulevard, Louisville, KY 40223 (referred to as "Tenant):


WITNESSETH:


ARTICLE I: PREMISES 1.1 Description:


Landlord hereby leases to Tenant, and Tenant leases and accepts, subject to the terms and conditions of this Lease, the premises outlined in red on the attached site plan, incorporated herein and marked Exhibit A, at a site near the corner of Man O' War Blvd. and Todds Road, Lexington, Kentucky and upon which site the Landlord has constructed a Center, as defined hereafter in paragraph 1.3, substantially in accordance with the site plan, the demised premises (referred to as "Demised Premises" or "Premises" herein) identified as Suite 240 & 260, being, approximately 4,836 square feet, as allocated by Landlord.


1.2 Exception and Reservation: N/A


1.3 Definitions:


(a) The term "Center" herein shall be deemed to mean the first or ground floor of Building A and Building B, adjacent parking area, and including any and all proposed structures, (whether reflected in Exhibit A or hereafter incorporated in the Center during the lease term or any extension thereof).


(b) The term "Common Areas" herein shall include entrances and exits, service road, loading facilities, sidewalks, ramps, landscaped areas, parking area, roof, and exterior faces of exterior walls, and all other areas constructed or to be constructed for use in common by the Tenant and all other tenants in the Center and their agents, employees and business invitees, subject, however, to the terms of this agreement and reasonable rules and regulations prescribed from time to time by the Landlord.


(c) The term "Landlord's lender" or "lender" shall mean the holder of the first mortgage against the property described in Exhibit A.


ARTICLE II: TERM


2.1 Base Term:


The original term of this Lease shall be for a period of thirty-six (36) months plus part of a month, if any, (the "Base Term") from the Commencement Date of the Lease Term to the first day of the


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first full calendar month in the Lease Term, commencing on October 1, 2003 hereafter referred to as the "Commencement Date".


2.2 Option Term:


The Landlord agrees that if the Tenant shall not be in default in performing any of its obligations under this Lease, Tenant shall have and is hereby granted one (1) option period to extend the Lease Term for an additional period of two (2) years. Such extended term shall begin upon the expiration of the original term or the current option term, as applicable, and all of the terms, covenants, and provisions of this Lease shall apply to such extended term, except the Minimum Guaranteed Rental shall be at the annual rate of $19.75 per square foot.


Tenant shall notify Landlord, in writing, not less than six (6) months prior to expiration of original term of Tenant's intent to exercise the option to renew.


2.3 Prior Installation:


Tenant, upon commencement of the term, shall with prior consent of Landlord which shall not be delayed or unreasonably withheld and in accordance with the provisions of Section 5.5 herein, be permitted to install fixtures and equipment. Any work done by the Tenant shall be in a manner as will not interfere with the progress of the work by Landlord in completing construction and Landlord shall have no liability or responsibility or responsibility for loss of, or any damage to fixtures, equipment or other property of Tenant so installed or placed in Premises.


ARTICLE III: RENT AND OTHER TENANT CONTRIBUTIONS


3.1 Minimum Rent:


Tenant shall pay to the Landlord as minimum rent (the "Minimum Rent") for the Demised Premises Seven Thousand Four Hundred Fifty-Five Dollars and Fifty Cents ($7,455.50) per month, representing $18.50 per square foot, beginning the earlier of (i) November 1, 2003, or (ii) the date upon which Tenant opens for business, continuing until October 31, 2006 in advance, on the first day of each month at the address for Landlord as hereafter given in paragraph 12.6, or at such other place as Landlord may designate from time to time, such rent to be paid without demand, set-off or deduction.


In the event of the failure of the Tenant to pay any Minimum Rent due hereunder within ten (10) days of the date such rent is due, the Tenant shall be liable to the Landlord for a late charge equal to five percent (5%) of the rental payment due and unpaid in order to reimburse Landlord for its additional administrative costs as a result of such breach. In the event the Minimum Rent due hereunder or any other amount due under this Lease is not paid within fifteen (15) days of the due date, interest will, subsequent to the expiration of said fifteen (15) day period, accrue on the amount of the unpaid rental or other payment at the maximum rate permitted by applicable law, or eighteen percent (18%) per annum, whichever is less. Imposition of such late charge or interest expense shall not abrogate or limit any rights or remedies which the Landlord may otherwise have hereunder.


3.2 Lease Year:
The term "Lease Year" shall mean the twelve (12) month period beginning on the Commencement Date referred to in Article II above and terminating on the same day of the succeeding year, and on the same day of each year thereafter during the lease term.


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3.3 Gross Receipts: N/A


3.4 Security Deposit:


Concurrently with its execution of this Lease, Tenant shall deposit with Landlord a security deposit in the amount of $8,507.33 (the "Security Deposit") which will be held by Landlord to guarantee the faithful, timely and full performance by Tenant of all of its obligations under this Lease. Any interest earned thereon shall be the property of Landlord. If Tenant defaults with respect to any provision of this Lease, Landlord may expend the whole or any part of the Security Deposit for the payment of any amount, which Landlord may expend by reason of such default. Otherwise, such Security Deposit shall be applied to Minimum Rent and all other payments due from Tenant to Landlord hereunder when and as such payments become due until such Security Deposit is extinguished.


3.5 Right to Audit: N/A


3.6 Taxes:


Tenant shall pay at least ten (10) days before delinquency all taxes, charges or other governmental impositions assessed against or levied upon any of Tenant's personal property and/or trade fixtures located in or about the Demised Premises and any of Tenant's improvements or alterations made to the Demised Premises.


3.7 Insurance:


(a) Landlord shall procure fire and extended casualty insurance for the Center (excluding Tenant's goods, furniture, trade fixtures and all other personal property located in or about the Demised Premises) and shall maintain liability and other insurance on the Common Areas in such amounts as Landlord, in its reasonable judgement , may deem appropriate. Provided, however, that Landlord's coverage shall fulfill the requirements of Section 3.8 (b)(i), (ii) and (iii) herein. Landlord shall have the right, at its option, to self-insure.


(b) Tenant shall, at its sole expense, obtain and maintain in full force and effect during the Term of this Lease (i) all insurance coverage necessary or desirable for the full protection against loss or damage from fire or other casualty for all of Tenant's movable equipment, furniture, goods, supplies and all other personal property and trade fixtures located in or about the Demised Premises, (ii) workers compensation insurance in such amounts which are necessary and desirable (in no event shall such amounts be less than any minimum amount prescribed or required by law), and (iii) general liability insurance for bodily injury and property damage with a limit of liability of not less than $1,000,000 for bodily injury and $500,000 for property damage. Tenant shall cause Landlord, RML Construction, LLP, Isaac Commercial Properties, Inc., its Managing Agent, and their respective employees and assigns to be named as an additional insured under the liability policies and shall furnish Landlord with the policies or duly executed certificates (an ACORD 27) of all required insurance, together with satisfactory evidence of the payment of the premiums therefor, on the date Tenant first occupies the Demised Premises and, upon renewals of such policies, not less than fifteen (15) days prior to the expiration of the term of such coverage. All policies obtained pursuant hereto shall be in form and content and written by insurers reasonably acceptable to Landlord and endorsed to expressly waive the underwriters' and insurance carriers' rights of subrogation against Landlord and/or its insurance carriers.


(c) Tenant shall not do or permit to be done any act or thing which increases the rate of insurance for all or any part of the Center or any property or equipment located therein or thereon. An addition to


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Landlord's other rights and remedies, in the event of a breach by Tenant under this section, Tenant shall reimburse Landlord upon demand for any increased premiums where increase is based on Tenant's breach.


(d) Anything in this Lease to the contrary notwithstanding, each party hereto hereby releases and waives all claims, liabilities, rights of recovery and causes of action that either such party or any party claiming by, through or under such party by subrogation or otherwise may now or hereafter have against the other party or any of the other party's partners, venturers, directors, officers, employees or agents for any loss or damage that may occur to persons, the Center, the Demised Premises, any of Tenant's fixtures, improvements or personal property or any of the contents of the foregoing by reason of fire, act of God, the elements or any other cause that could have been insured against in the Commonwealth of Kentucky under the terms of policies of fire and casualty insurance, general liability insurance or workers compensation insurance, regardless of cause or origin including, without limitation, negligence of the parties hereto or their partners, venturers, directors, officers, employees or agents.


(e) Except for the claims, rights of recovery and causes of action that Landlord has released and waived pursuant to Section 3.7 (d) hereof, Tenant shall be liable to Landlord its agents, servants, directors, officers and employees from and against, any and all liabilities, claims, costs (including court costs, attorneys' fees and costs of investigation), and actions of any kind resulting or arising or alleged to result or arise from any injuries to or death of any person or damage to or loss of any property occasioned or alleged to be occasioned, in whole or in part, by any act, omission or neglect of Tenant or Tenant's partners, venturers, directors, officers, employees, agents, invitees, assignees, subtenants, servants or guests or any parties contracting with Tenant relating to the Demised Premises or by any breach, violation or non-performance of any covenant of Tenant under this Lease. If any action or proceeding shall be brought by or against Landlord in connection with any such liability or claim, Tenant, on notice from Landlord shall defend such action or proceeding at Tenant's expense, by or through attorneys reasonably satisfactory to Landlord. The provisions of this section shall apply to all activities of Tenant, Tenant's partners, venturers, directors, officers, employees, agents , invitees, assignees, subtenants, servants or guests or any parties contracting with Tenant with respect to the Demised Premises or the Center, whether occurring before or after the Commencement Date or before or after the expiration or termination of this Lease.


3.8 Operating Expense:


(a) In addition to all Minimum Rent and any other payments required herein, Tenant agrees to pay to Landlord its pro-rata share of all "Operating Expenses", as such are defined below. Tenant shall pay to the Landlord a monthly operating expense payment of $1,051.83 on each day that a Minimum Rent payment is due. After the end of each calendar year during the term hereof, Landlord shall supply Tenant with a statement covering all costs and expenditures as enumerated herein with respect to Operating Expenses and a determination of Tenant's pro-rata share of such Operating Expenses ("Tenant's Pro-Rata Share"). In the event that the amount paid by Tenant shall be less than Tenant's Pro-Rata Share, such deficiency shall be paid to Landlord within thirty (30) days after notice of such determination, or in the alternative, any payment made by the Tenant in excess of Tenant's Pro-Rata Share, shall be credited to the next sums due to Landlord from Tenant for Operating Expenses. Said statement shall also include a determination by Landlord of the monthly sum to be paid by Tenant during the calendar year succeeding the calendar year for which said statement was prepared and such determination shall be based in part on the statement of expenses for the prior year modified by any known and/or anticipated increases in Operating Expenses. Unless within thirty (30) days after delivery of such statement, Tenant (i) asserts specific error(s) in writing, or (ii) requests, in writing, an audit in


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accordance with paragraph (b) below, the statement shall be deemed to be correct. If Tenant asserts error, Tenant shall nevertheless pay the disputed amount to Landlord pending the resolution thereof.


(b) Tenant shall have the right, at Tenant's sole cost and expense, to audit Landlord's records of Operating Expenses provided that all of the following criteria has been met:


(1) No audit shall be conducted during the months of January, February or March of any calendar year. Tenant's auditor shall make an appointment with the Landlord or any agent appointed by Landlord. Landlord and Tenant shall reasonably cooperate to arrange a mutually acceptable time within sixty (60) days of Tenant's request. Notwithstanding the foregoing, Landlord shall not be required to accommodate Tenant's auditors if other tenants have scheduled audits prior to Tenant's request on the date proposed by Tenant;


(2) Before conducting any audit, Tenant must pay the full amount of Operating Expenses billed and must not be in default of any other provision of this Lease;


(3) Tenant may review only those records of Landlord that are specifically related to Operating Expenses. Without limiting the generality of the foregoing, Tenant may not review any other leases, and/or tenant agreements, cross easement agreements or Landlord's tax returns or financial statements;


(4) In conducting an audit, Tenant must utilize an independent certified public accountant experienced in auditing shopping center records, subject to Landlord's reasonable prior approval;


(5) The audit shall be conducted at a suitable business environment location determined solely by Landlord in Fayette County, Kentucky;


(6) Upon receipt thereof, Tenant shall deliver to Landlord a copy of the audit report and all accompanying data;


(7) Tenant shall keep confidential all agreements involving the rights provided in this section and the results of any audits conducted hereunder. Notwithstanding the foregoing, Tenant shall be permitted to furnish the foregoing information to its auditors to the extent that this information is required to perform their audit services for Tenant;


(8) The audit shall be conducted in accordance with generally accepted rules of auditing practices;


(9) Tenant may not conduct an audit more than once each calendar year. Tenant may audit records with respect to each Lease year only once. No audit shall cover a period in time in excess of two (2) calendar years immediately preceding the audit; and


(10) In the event that Tenant's audit reveals an overpayment by Tenant of five percent (5%) or more, Landlord will reimburse Tenant for the cost of such audit not to exceed $500. In any event, Landlord shall credit Tenant's account for the full amount(s) of any overpayments by Tenant.


(c) The term "Operating Expenses" means and includes all amounts, expenses and costs of whatsoever nature incurred because of or in connection with the ownership, management, operation, repair or maintenance of the Center, any portion thereof and/or all additional facilities which may be added to the Center and Landlord's personal property used in connection therewith, excepting only replacement of capital investment items and specif ...