<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
------------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________
Commission file number....................... 0-15227
THE DWYER GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 73-0941783
- -------- ----------
(State of other jurisdicition of (I.R.S.Employer Identification No.)
incorporation of organization)
1010 N. University Parks Dr., Waco, TX 76707
---------------------------------------------
(Address and zip code of principal executive offices)
(817) 745-2400
---------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1995
- ------------------------------ -------------------------------
<S> <C>
Common stock, $.10 par value 7,113,127
</TABLE>
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
<PAGE>
THE DWYER GROUP, INC.
Index
<TABLE>
<CAPTION>
Part I - Financial Information Page No.
<S> <C>
Item 1. Financial Statements
------
Consolidated Balance Sheets as of September 30, 1995 (unaudited)
and December 31, 1994............................................... 3 - 4
Consolidated Statements of Income for the Three Months and
Nine Months Ended September 30, 1995 and 1994 (unaudited)........... 5
Consolidated Statements of Cash Flows Nine Months for the
Ended September 30, 1995 (unaudited) and September 30,
1994 (unaudited).................................................... 6 - 7
Notes to Consolidated Financial Statements.......................... 8 - 12
Item 2. Management's Discussion and Analysis of Financial
------ Condition and Results of Operations................................. 13 - 16
<CAPTION>
Part II - Other Information
<S> <C>
Item 1. Legal Proceedings................................................... 17
------
Item 2. Changes in Securities............................................... 17
------
Item 3. Defaults Upon Senior Securities..................................... 17
------
Item 4. Submission of Matters to a Vote of Security Holders................. 17 - 18
------
Item 5. Other Information................................................... 18
------
Item 6. Exhibits and Reports on Form 8-K................................... 18 - 19
------
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
The Dwyer Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
---- ----
ASSETS
CURRENT
<S> <C> <C>
Cash and cash equivalents $ 3,412,783 $ 4,819,795
Trade accounts receivable, net of
allowance for doubtful accounts of
$243,776 and $364,839, respectively 796,703 781,201
Accounts receivable from related parties 744,716 340,903
Note receivable from related party 865,156 -
Accrued interest receivable 38,500 38,500
Trade notes receivable, current portion 1,066,284 1,059,069
Note receivable - other, current portion 7,611 10,150
Inventories 169,909 159,838
Prepaid expenses and other 235,142 107,254
----------- -----------
TOTAL CURRENT ASSETS 7,336,804 7,316,710
ACCOUNTS RECEIVABLE FROM
RELATED PARTIES, long-term portion 102,916 130,916
PROPERTY AND EQUIPMENT, at
cost less accumulated depreciation 1,200,498 1,034,846
FRANCHISES HELD FOR RESALE 716,399 25,815
TRADE NOTES RECEIVABLE, long-term
portion, net of allowance for doubtful notes
of $412,437 and $421,797, respectively 6,715,844 5,969,771
PURCHASED FRANCHISE RIGHTS, at cost
less accumulated amortization of $286,878
and $180,540, respectively 1,310,175 1,436,164
PATENTS AND TRADEMARKS, at cost less
accumulated amortization of $37,550 and
$16,303, respectively 95,208 92,294
NOTES RECEIVABLE FROM
RELATED PARTIES 1,610,196 1,525,597
NOTES RECEIVABLE - OTHER 14,916 19,672
INVESTMENTS, equity method 419,910 492,300
OTHER ASSETS 194,303 93,454
----------- -----------
$19,717,169 $18,137,539
=========== ===========
</TABLE>
3
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Balance Sheets (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable 688,429 747,567
Accrued liabilities 675,328 673,468
Income tax payable - 370,271
Other payables 174,732 179,634
Current maturities of long-term debt 155,232 157,555
Franchise resale liability 246,333 -
----------- -----------
TOTAL CURRENT LIABILITIES 1,940,054 2,128,495
LONG-TERM DEBT, less current
maturities 264,231 355,546
DEFERRED FRANCHISE SALES
REVENUE 3,523,921 3,496,382
FRANCHISEE FUNDS HELD FOR
ADVERTISING 284,302 292,995
DEFERRED TAX LIABILITY 84,320 22,702
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - shares
authorized, 500,000; outstanding, none - -
Common stock, authorized 15,000,000
and 15,000,000 shares of $.10 par value;
issued 7,235,552 and 7,234,552 shares
at September 30, 1995 and December 31,
1994, respectively 723,556 723,456
Additional paid-in capital 8,941,030 7,989,489
Retained earnings 4,037,293 3,266,463
Treasury stock, at cost (122,425 and
137,425 shares at September 30,1995
and December 31, 1994, respectively) (81,538) (137,989)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 13,620,341 11,841,419
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $19,717,169 $18,137,539
=========== ===========
</TABLE>
See accompanying notes to consolidated Financial Statements.
4
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated Statements of Income (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Royalty income $ 4,831,476 $4,061,926 $1,725,462 $1,576,855
Franchise sales 3,838,783 4,033,044 1,343,419 1,694,678
Product sales 515,733 362,255 174,926 195,098
Tax and other services 607,462 624,622 105,232 121,679
Interest and other revenues 839,187 705,519 210,347 225,870
----------- ---------- ---------- ----------
10,632,641 9,787,366 3,559,386 3,814,180
COSTS AND EXPENSES:
Cost of product sales 178,578 144,951 49,675 71,910
Cost of tax services 987,872 741,650 274,223 178,575
General and administrative 8,073,991 5,868,152 2,957,817 2,381,376
Depreciation and amortization 283,529 188,424 93,405 71,919
Interest 38,706 114,414 10,790 53,518
----------- ---------- ---------- ----------
9,562,046 7,057,591 3,385,910 2,757,298
Earnings before income taxes 1,070,595 2,729,775 173,476 1,056,882
Provision for income taxes 299,765 932,453 30,629 372,266
----------- ---------- ---------- ----------
Net earnings $ 770,830 $1,797,322 $ 142,847 $ 684,616
=========== ========== ========== ==========
Earnings per common share:
Primary and Fully Dilutive:
Earnings before income taxes $.14 $.43 $.02 $.15
Provision for income taxes (.04) (.15) ( - ) (.05)
---- ---- ---- ----
Net earnings per share $.10 $.28 $.02 $.10
==== ==== ==== ====
Weighted average shares outstanding:
Primary 7,487,643 6,324,482 7,485,390 6,987,486
=========== ========== ========== ==========
Fully Dilutive 7,492,960 6,332,383 7,485,390 6,995,387
=========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated Financial Statements.
5
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings 770,830 1,797,322
Adjustments to reconcile net earnings
to net earnings provided by operating
activities:
Depreciation and amortization 283,529 188,424
Provision for doubtful accounts and
notes receivable (130,423) 29,848
Notes receivable written off 367,488 -
Income recognized from sales previously
deferred - (65,000)
Sales of franchises for installment
notes receivable (2,078,723) (2,689,936)
Payments received on notes receivable 873,152 640,652
Sale of notes receivable 134,376 -
Cash received on deferred sales 27,539 66,300
Equity in earnings of investment 48,137 -
Deferred Taxes 61,618 5,331
Changes in assets and liabilities:
Accounts receivable 105,561 (191,824)
Accounts receivable from related parties (375,813) -
Inventories (10,071) (15,921)
Prepaid expenses and other assets (127,888) (178,565)
Notes receivable from related parties (949,755) -
Notes receivable other 7,295 -
Other assets (100,849) 24,302
Accounts payable and accrued
liabilities (57,278) 252,211
Income tax payable (370,271) 401,534
Other payables (4,902) -
Franchise fees held for advertising (8,693) -
---------- ----------
Net cash (used in) provided by operating
activities (1,535,141) 264,678
---------- ----------
Cash Flows From Investing Activities:
Payments for patents & trademarks (24,161) -
Purchases of property and equipment (341,353) (345,959)
Proceeds from sales of property and equipment 3,790 97,803
(Acquisition) sale of assets held for resale (444,251) 217,500
Purchased franchise rights 19,651 -
Acquisition of equity investment - (500,000)
Purchase of Ekwill Acquisition
Corporation Assets - (1,035,000)
---------- ----------
Net cash used in investing activities (786,324) (1,565,656)
---------- ----------
</TABLE>
6
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Financing Activities:
Principal payments of debt (93,638) (2,333,594)
Additional paid in capital 950,000 -
Proceeds from debt issued - 1,885,000
Proceeds from redemption of stock options 1,640 -
Proceeds from sale of stock - 5,047,481
Purchase of treasury stock (189,410) -
Proceeds from sale of treasury stock 245,861 -
----------- -----------
Net cash provided by financing
activities 914,453 4,598,887
----------- -----------
Net (Decrease) Increase In Cash and
Cash Equivalents (1,407,012) 3,297,909
Cash and Cash Equivalents, at January 1 4,819,795 1,213,123
----------- -----------
Cash and Cash Equivalents, at September 30 $ 3,412,783 $ 4,511,032
=========== ===========
</TABLE>
January 1, 1994 adjusted for cash and cash equivalents acquired ($43,043)
in conjunction with the May 1994 acquisition of Ekwill Acquisition
Corporation.
This portion intentionally left blank.
See accompanying notes to consolidated Financial Statements.
7
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-------------------------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies
-------------------------------------------------------------------------
A. Organization
------------
The Dwyer Group, Inc. (the "Parent") is a holding company for service-
based businesses providing specialty services internationally through
franchising. The consolidated financial statements include the accounts
of The Dwyer Group, Inc. and its wholly-owned Subsidiaries (the
"Company"). All material intercompany accounts and transactions have
been eliminated in consolidation.
The Company was incorporated in 1970 in the State of Oklahoma under the
name Mr. Rooter Corporation of America, Inc. The Company's name was
changed to Mr. Rooter Corporation in 1972, and in 1986 it was
reincorporated as a Delaware corporation. Until May 1, 1993, the Company
operated in two segments: franchising plumbing repair and sewer and drain
cleaning services as well as manufacturing and selling sewer and drain
cleaning equipment and supplies. On May 1, 1993, substantially all of
the assets of the manufacturing operations were sold.
On March 1, 1993, the Company, through the Company's wholly-owned
subsidiary Aire Serv Heating and Air Conditioning, Inc. ("Aire Serv"),
began to grant licenses to operate air conditioning and heating repair
services under the trade name Aire Serv.
On June 1, 1993, the Company acquired all of the shares of common stock
of Rainbow International Carpet Dyeing & Cleaning Co. ("Rainbow"), and
General Business Services, Inc. ("GBS") from its majority stockholder for
8,070,000 shares (4,035,000 shares after reverse split) of common stock.
With the acquisition of GBS, the Company began operating in another
segment, tax services, through GBS's wholly-owned subsidiary, General Tax
Services, Inc. ("GTS"). These acquisitions have been accounted for
similar to a pooling of interests because all companies were under common
control.
Following the acquisition of Rainbow and GBS, the Board of Directors
approved a plan to convert the Company into a holding company and to form
a new subsidiary to operate the Mr. Rooter business. On July 30, 1993,
this new subsidiary was incorporated in Texas under the name Mr. Rooter
Corporation ("Rooter") and the Company was renamed The Dwyer Group, Inc.
Effective May 1, 1994, the Company acquired Ekwill Acquisition
Corporation ("Ekwill") including Edwin K. Williams & Co. ("EKW"), a
wholly-owned subsidiary of Ekwill, for approximately $1,150,000 cash by
purchasing all of the outstanding capital stock of Ekwill from Ekwill's
two shareholders. The acquisition of Ekwill has been accounted for using
the purchase method of accounting; accordingly, assets acquired and
liabilities assumed were recorded at their estimated fair values.
8
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-------------------------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies (continued)
-------------------------------------------------------------------------
Effective September 1, 1994, EKW purchased 33 1/3% of the capital stock
of Service Station Computer Systems, Inc. ("SSCS") for $500,000 cash.
The investment in SSCS has been accounted for under the equity method.
On September 6, 1994, the Company formed a new wholly-owned subsidiary.
Mr. Electric Corporation, ("Electric"), which is a Texas corporation
engaged in franchising electrical contracting service businesses.
B. Inventories
-----------
Inventories are stated at the lower of cost or market and consist of
finished goods available for sale. Cost is determined using the average
cost and first-in, first-out ("FIFO") methods.
C. Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is recorded using the straight-line method over the
estimated useful lives of the respective assets, ranging from three to
forty years.
D. Earnings Per Common Share
-------------------------
Earnings per share of common stock is computed based on the weighted
average number of shares and common equivalent shares outstanding during
each of the periods. Earnings per share include the dilutive effect of
unexercised stock options and warrants.
E. Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less and money market funds to be cash
equivalents. The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts and believes it is not
exposed to any significant credit risks on cash and cash equivalents.
F. Franchise Operations
--------------------
Revenues from the sale of regional franchise agreements and individual
franchises in the United States and master license agreements in foreign
countries are generally recognized, net of an allowance for uncollectible
amounts, when substantially all significant services to be provided by
the Company have been performed. Regional franchise agreements grant the
regional franchisee the right to sell individual franchises for the
Company in the regional franchisee's territory. The regional franchisee
generally receives a commission on individual franchises sold as well as
a share of future royalties received by the Company from franchisees
in the regional
9
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-----------------------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
-----------------------------------------------------------------------
F. Franchise Operations (continued)
--------------------------------
franchisee's territory. Interest on trade notes receivable is accrued
and recorded as income, net of an allowance for uncollectible amounts,
when due. In situations, however, where revenue from such sales is
collectible over an extended period of time, down payments are not
sufficient and/or collectibility is not reasonably certain, revenue is
recognized on the installment method as amounts are collected.
Revenue from franchise royalties is generally recognized, net of an
allowance for uncollectible amounts, when due from the franchisees. The
Company collects and holds in escrow 2% of Rooter and Aire Serv
franchisee's sales to be used for an advertising campaign. The current
portion of these funds, ($150,000 at September 30, 1995 and December
31,1994), is included in other payables.
Revenue from product sales is recognized when orders are shipped.
Revenue from tax services is recognized upon the completion of the tax
service. For master license agreements, revenues are recognized upon
completion of all significant initial services provided to the master
licensee and upon satisfaction of all material conditions of the master
license.
G. Franchises Held For Resale
--------------------------
On occasion, the Company purchases operating franchise territories from
existing franchisees, which it markets to new franchisees. The
acquisition is recorded as an asset held for resale at the lower of cost
or fair market value. Any gain or loss realized when the territory is
sold is included in revenue from franchise sales.
H. Income Taxes
------------
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 required a change from the deferred method to the liability
method for accounting for income taxes. Under the liability method,
deferred taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.
The Company files a consolidated tax return on behalf of itself and its
Subsidiaries. Income tax expense is allocated to the Parent and the
Subsidiaries as if they filed separate tax returns.
I. Intangible Assets
-----------------
The costs of intangible assets are amortized using the straight-line
method over their estimated lives of seven to fifteen years.
10
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-------------------------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 2. Reorganization and Acquisition of Affiliates
-------------------------------------------------------------------------
In June, 1993, the Company acquired two corporations, Rainbow and GBS,
controlled by its majority stockholder and Chairman for approximately
8,070,000 shares (4,035,000 shares after reverse split) of common stock.
GBS was purchased by the stockholder on January 11, 1993. Prior to the
acquisition, both companies were "S" corporations with income taxable to
the stockholder not to the corporation. The acquisitions have been
accounted for in a manner similar to pooling of interests.
On May 14, 1994 (effective May 1, 1994) the Company acquired EKW, a
Colorado corporation and wholly-owned subsidiary of Ekwill, a California
corporation, for approximately $1,150,000 by purchasing all of the
outstanding capital stock of Ekwill from Ekwill's two shareholders CO
Data AG, a Swiss company and Central Data BV, a Dutch company, neither of
which is affiliated with the Company. The acquisition was financed by a
short-term loan from an unaffiliated entity at an annual interest rate of
12%, and was repaid in August 1994. EKW grants licenses for the
operation of business consulting services (counseling in finance,
accounting, bookkeeping, tax matters and profit development) to small
businesses. The acquisitions of EKW and Ekwill have been accounted for
as a purchase and their results of operations have been included in the
consolidated financial statements from the effective date of acquisition,
May 1, 1994. The cost of the acquisition was allocated on the basis of
the estimated fair value of the assets acquired and liabilities assumed.
This allocation resulted in allocation to purchased franchise rights of
approximately $681,000. The purchased franchise rights are being
amortized over 10 years on a straight-line basis.
On September 14, 1994, EKW acquired 33 1/3% of the outstanding Capital
Stock of SSCS for $500,000 cash. SSCS is a private concern headquartered
in Salinas, California who develops and provides computerized bookkeeping
products to conventional service stations, self-serve stations and
convenience store operations. The investment in SSCS has been accounted
for using the equity method of accounting. The cost of SSCS in excess of
amounts attributable to tangible assets at September 1, 1994 (acquisition
date) was approximately $257,000 and is being amortized to operations
over an 8 year period using the straight-line method.
-------------------------------------------------------------------------
Note 3: Statements of Cash Flows
-------------------------------------------------------------------------
Cash payments for interest for the nine months ended September 30, 1995
and 1994 amount to $35,000 and $31,000 respectively. For the same
periods, cash payments for income taxes were $642,000 and $401,000
respectively.
11
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-------------------------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Note 4. Trade Note Receivable - Franchise Fees and Deferred Franchise
Sales Revenue
-------------------------------------------------------------------------
The Company receives various notes from the sale of new franchises.
These installment notes receivable are generally collateralized by the
rights to the related franchise territory sold, and bear interest at
approximately market rates prevailing at the dates of the transactions.
A summary of such notes receivable as of September 30, 1995 and December
31, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Amounts due within one year $1,066,284 $1,059,069
Amounts due after one year, net of
allowance for uncollectible amounts
of $412,437 and $421,797,
respectively 6,715,844 5,969,771
---------- ----------
Total notes receivable $7,782,128 $7,028,840
========== ==========
</TABLE>
At September 30, 1995 and December 31, 1994, the amounts of deferred
revenue from franchise sales were $3,523,921 and $3,496,382,
respectively. Fees from franchise sales accounted for by the installment
method are collectible in the years 1994 through 2004.
-------------------------------------------------------------------------
Note 5. Property and Equipment
-------------------------------------------------------------------------
A summary of property and equipment as of September 30, 1995 and December
31, 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land $ 97,159 $ 97,159
Building and Improvements 450,859 405,543
Machinery and Equipment 432,508 103,930
Furniture and Fixtures 791,795 868,343
Vehicles 8,300 12,286
---------- ----------
1,780,621 1,487,261
Less accumulated depreciation 580,123 452,415
---------- ----------
$1,200,498 $1,034,846
========== ==========
</TABLE>
12
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
-------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results
of Operations
-------------------------------------------------------------------------
Liquidity and Capital Resources
-------------------------------
At September 30, 1995, the Company's working capital ratio was
approximately 4.5 to 1 compared to approximately 3.4 to 1 at December 31,
1994. In addition, the Company had working capital of approximately
$5,397,000 at September 30, 1995 as compared to approximately $5,188,000
at December 31, 1994. For the remainder of fiscal 1995 management
expects to fund working capital requirements primarily through operating
cash flow. At September 30, 1995 and December 31, 1994, the Company had
cash and cash equivalents of $3,413,000 and $4,820,000, respectively.
The decrease in cash and cash equivalents since December 31, 1994 is
primarily attributable to payments of approximately: $642,000 to the
Internal Revenue Service for the Company's 1994 and 1995 federal income
tax liabilities; $341,000 for additions to fixed assets; and $445,000 to
purchase operating franchise territories from existing franchisees which
are currently held for resale.
Prepaid expenses increased approximately $128,000 due to prepayments for
general liability and umbrella insurance coverages, franchise taxes, and
Rainbow franchisee rebates.
Trade notes receivable increased approximately $753,000 (10.7%). The
Company will finance a portion of franchise sales if the buyer is
qualified.
The $94,000 decrease in notes payable and long-term debts as well as the
$59,000 decrease in accounts payable are direct results of the Company's
continuing efforts to decrease debt and vendor payables.
Notes receivable from related parties (current and long-term) increased
approximately $950,000 due to the resolution with the estate of the late
Donald J. Dwyer of the discrepancy between the reported amount of life
insurance on Mr. Dwyer's life and that which was actually in force. The
face amount of life insurance on Mr. Dwyer's life in force at the time of
his death was less than the $2,000,000 of life insurance in force as
stated at the time of the July 19, 1994 offering of Common Stock. The
actual life insurance in force at the time of Mr. Dwyer's death was
$1,050,000, a portion of which had been borrowed against for the benefit
of a wholly-owned subsidiary of the Company, which owned the policies.
On February 10, 1995 the estate executed a promissory note in the amount
of $950,000 bearing interest of 9% per annum payable February 9, 1997
resolving the discrepancy of life insurance in force and life insurance
previously reported to be in force on Mr. Dwyer's life.
Franchises held for resale increased approximately $691,000 and franchise
resale liability increased approximately $246,000. These increases
primarily relate to the repurchase from existing franchisees and
subsequent operation
13
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
Liquidity and Capital Resources - (continued)
---------------------------------------------
of two Mr. Rooter and six Aire Serv franchise territories located in the
Pacific Northwest and purchased from existing franchisees.
On June 9, 1995 the Company sold 70,000 shares of treasury stock, at
$3.50 per share, to Renaissance Capital Growth & Income Fund III, Inc.
Results of Operations
---------------------
For the nine months ended September 30, 1995 compared to the nine months
------------------------------------------------------------------------
ended September 30, 1994.
-------------------------
Revenues increased approximately $845,000 (8.6%) for the nine months
ended September 30, 1995 when compared to the nine months ended September
30, 1994. The increase in revenues is mainly attributable to increases
in royalty income of $770,000 (18.9%), product sales of $153,000 (42.4%)
and interest and other revenues of $134,000 (18.9%).
The $770,000 increase in royalty income for the nine months ended
September 30, 1995 as compared to the first nine months of 1994 is mainly
due to the continued growth of Rooter and Aire Serv which contributed
approximately $413,000 (39% increase) and $121,000 (358.9% increase),
respectively, in increased royalty income when compared to 1994.
For the nine months ended September 30, 1995, GBS produced increased
franchise sales of $245,000 (15.2%) when compared to the same period in
1994. In addition, Mr. Electric, which was organized in September 1994
and therefore had no franchise sales during the first nine months of
1994, produced $530,000 in franchise sales for the nine months ended
September 30, 1995. These franchise sales increases were partially
offset by franchise sales decreases in Rooter and Aire Serv of
approximately $718,000 (53.6%) and $269,000 (34.7%), respectively. These
decreases are primarily attributable to the reorganization and
restructure of the respective franchise sales departments necessitated by
the promotion of Robert Tunmire, to the position of President and CEO of
the Company due to the unexpected death of Donald J. Dwyer in December
1994. Prior to Mr. Tunmire's promotion to President of the Company, he
was President of Mr. Rooter and Aire Serv, and was actively involved in
the daily management and closing of franchise sales.
EKW also added approximately $516,000 in product sales for the nine
months ended September 30, 1995 when compared to $362,000 in product
sales for period of May through September 1994, which was subsequent to
the acquisition of EKW on May 1, 1994. EKW sells products such as manual
record keeping systems and forms to its franchisees and outside
customers.
Interest and other revenues increased approximately $134,000 primarily
due to increased interest income of approximately $188,000 from invested
cash balances and interest recognized from notes receivable - related
parties.
14
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
Results of Operations - (continued)
-----------------------------------
Costs and expenses increased $2,504,000 (35.5%) for the nine months ended
September 30,1995 compared to the first nine months of 1994. The major
contributors to these increased expenses are: $300,000 regarding the
estimated loss in the repurchase of and subsequent operation of two
Rooter and six Aire Serv franchise territories; $356,000 of additional
Mr. Electric expenses, which was organized in September 1994 and began
franchising in December 1994; $289,000 of additional E.K. Williams
expenses which was acquired in May 1994 therefore having only five months
of expenses in the first nine months of 1994 compared to nine months of
expenses for the period ended September 30, 1995; and costs associated
with the reengineering of the administrative, franchise sales and
franchise management departments of the operating subsidiaries, as well
as the creation of several new corporate departments (telecommunications,
office services, international marketing and MIS) in 1995.
Earnings from operations before income taxes decreased approximately
$1,659,180(60.8%) for the nine months ending September 30, 1995 as
compared to the same period in 1994. Net earnings decreased
approximately $1,026,000 (57.1%) or $.18 per share for the nine months
ending September 30, 1995 as compared to the same period in 1994. The
Company's effective tax rate decreased to 28% in 1995 compared to 34% in
1994.
For the three months ended September 30, 1995, compared to the three
--------------------------------------------------------------------
months ended September 30, 1994.
--------------------------------
Revenues decreased approximately $255,000 (6.6%) for the three months
ended September 30, 1995 when compared to 1994. The decrease in revenues
is mainly attributable to decreases in franchise sales of $351,000
(20.7%) which were partially offset by increases in royalty income of
$149,000 (9.4%).
Rooter and Aire Serv contributed royalty income growth of $142,000
(35.8%), and $61,000 (387.3%), respectively for the three months ended
September 30, 1995 when compared to 1994. This growth was somewhat
offset by a $54,000 (11%) decrease in GBS and EKW royalty income for the
three months ended September 30, 1995 when compared to 1994.
For the quarter ended September 30, 1995 when compared to 1994, Rooter,
GBS and Aire Serv reported franchise sales decreases of $306,000 (53.9%),
$266,000 (33.1%), and $116,000 (54.2%), respectively. These franchise
sales decreases were partially offset by franchise sales from Mr.
Electric, which began operations in September 1994, of approximately
$324,000 and increased franchise sales of Rainbow of $32,000 (34.7%).
Costs and expenses increased $629,000 (22.8%) in the third quarter of
1995 compared to the third quarter of 1994. The major contributors to
these increased expenses are: $113,000 in losses regarding the temporary
operation of two Rooter and six Aire Serv franchise territories
repurchased from franchisees; $155,000 of Mr. Electric expenses, which
began franchising in the fourth quarter of 1994, and compensation costs
associated with the reengineering of the administrative, franchise sales
and franchise management departments of the operating
15
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
Results of Operations - (continued)
-----------------------------------
subsidiaries, as well as the creation of several new corporate
departments (telecommunications, office services, international
marketing, and MIS) in 1995.
Earnings from operations before income taxes decreased approximately
$883,000 (83.6%) for the quarter ending September 30, 1995 as compared to
the same period in 1994. Net earnings decreased approximately $542,000
(79.1%) or $.08 per share for the quarter ending September 30, 1995 as
compared to the same period in 1994. The Company's effective tax rate
decreased to 17% in 1995 from 34% in 1994. The 1995 effective tax rate
reflects a third quarter adjustment to maintain a 28% effective tax rate
for the nine months ended September 30, 1995.
Impact of Inflation
-------------------
Inflation has not had a material impact on the operations of the Company.
Foreign Operations
------------------
The Company and its subsidiaries operate in fourteen (14) countries.
With the exception of Canada, income from master licenses is recorded as
received due to the difficulty sometimes experienced in foreign countries
when attempting to remove income generated from royalties. The Company
does not depend on foreign operations to have a significant impact on its
cash flow. Typically, foreign franchises are sold and managed by a
master licensee in that country. During the remainder of 1995, the
Company may make additional master license sales which could result in
each case to a one time, lump sum payment from the master licensee to the
Company.
Other Disclosures
-----------------
Weighted average common and dilutive common equivalent shares outstanding
have continued to increase as outstanding stock options held by
management and employees are exercised or become dilutive.
Franchises held for resale at September 30, 1995 include funds expended
and liabilities assumed associated with the buy-back of certain operating
franchise territories from existing franchisees. Such franchise
territories are being marketed to potential new franchisees.
16
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
(a) NONE
(b) Not applicable.
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a vote of Security Holders
The 1994 annual meeting of the stockholders of the Company was held
on July 31, 1995. The following directors were elected at the
meeting: Theresa Dwyer, Donald J. Dwyer, Jr., Dina Dwyer-Owens,
John P. Hayes, Donald E. Latin, James L. Sirbasku, and Robert
Tunmire.
The following matters were voted upon at the meeting:
1. Election of Directors by stockholders for a term of one year,
or until the next annual meeting of the stockholders. Of the
6,184,150 shares present at the meeting, or through proxy, the
following table summarizes the results of the voting:
<TABLE>
<CAPTION>
Director Name Votes For Against Abstentions Broker Non Votes
------------- --------- ------- ----------- ----------------
<S> <C> <C> <C> <C>
Theresa Dwyer 6,132,125 200 22,820 29,005
Donald J. Dwyer, Jr. 6,132,125 200 22,820 29,005
John P. Hayes 6,132,125 200 22,820 29,005
James Sirbasku 6,132,125 200 22,820 29,005
Dina Dwyer-Owens 6,131,125 1,200 22,820 29,005
Robert Tunmire 6,132,125 200 22,820 29,005
Donald E. Latin 6,131,125 1,200 22,820 29,005
</TABLE>
17
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders (continued)
2. Proposal to amend the Company's 1986 Stock Option Plan
increasing the number of shares issuable under the Plan from
100,000 shares to 500,000 shares. Of the 6,184,150 shares
present at the meeting, or through proxy, the following table
summarizes the results of the voting:
Votes For: 5,130,679
Votes Against: 39,570
Abstentions: 16,150
Broker Non Votes: 997,751
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of, or incorporated
by reference into, this report:
No. Exhibit
--- -------
10.1 Employment Agreement by and between Paul Woody and
the Company, dated June 1, 1995.
10.2 Stock purchase agreement dated June 9, 1995 between
the Company and Renaissance Capital Growth & Income
Fund III, Inc.
10.3 Registration Rights Agreement, dated June 9, 1995
by and among the Company and Renaissance Capital
Growth & Income Fund III, Inc.
10.4 Employment Agreement by and between Michael Bidwell
and the Company, dated July 28, 1995.
10.5 Consulting and services agreement dated August 1,
1995, between the Company and John P. Hayes.
10.6 Termination Agreement by and between Douglas
Holsted and the Company dated March 21, 1995.
18
<PAGE>
The Dwyer Group, Inc. and Subsidiaries
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K
1. Current report on Form 8-K dated July 31, 1995, as filed with
the SEC on August 7, 1995, reporting a change in independent
accountants.
2. Form 8-K/A (Amendment No. 1) filed with the SEC on August 11,
1995, filing as an exhibit a letter from former independent
accountants indicating agreement with the Registrant's
disclosures.
3. Current report on Form 8-K/A (Amendment No. 2) filed with the
SEC on August 28, 1995 clarifying disclosure in Form 8-K dated
July 31, 1995.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
The Dwyer Group, Inc.
By:\s\Robert Tunmire
-----------------
Robert Tunmire
Date: October 31, 1995 \s\ Robert Tunmire
--------------------- -------------------------------
Robert Tunmire, President
and Chief Executive Officer
Date: October 31, 1995 \s\ Stephen E. Beatty
--------------------- --------------------------------
Stephen E. Beatty, Treasurer
and Chief Financial Officer
20
<PAGE>
Exhibit 10.1
Employment Agreement by and between Paul Woody
and the Company dated June 1, 1995.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT is by and between GENERAL BUSINESS SERVICES, INC.,
a Texas corporation with its principal place of business located at 1010-1020
North University Parks Drive, Waco, Texas 76707 ("EMPLOYER") and PAUL WOODY,
individually, having a residence address of 3205 N.W. 63rd Street, Oklahoma
City, Oklahoma 73116 ("EMPLOYEE"). EMPLOYER and EMPLOYEE hereby agree as
follows:
DUTIES AND CONDITIONS
EMPLOYEE is hereby employed as President beginning June 1, 1995. EMPLOYEE
shall report directly to Robert E. Tunmire, President and Chief Executive
Officer of the Dwyer Group, Inc., EMPLOYER's parent. EMPLOYEE agrees to devote
such time, knowledge skill and attention necessary to adequately perform in
the position of President and protect the business interests of EMPLOYER.
EMPLOYER specifically acknowledges that EMPLOYEE will be spending time in
winding-up his involvement with his GBS franchise business practice in Oklahoma
City, Oklahoma and EMPLOYEE is currently a 1/3 owner in a business venture known
as Infinity Sportswear, Inc., which will require time and attention from
EMPLOYEE. EMPLOYEE'S principal duties shall be as directed by Mr. Tunmire.
EMPLOYEE agrees to perform such other additional duties as may be reasonably
assigned to EMPLOYEE. It is understood that EMPLOYEE shall work only in those
areas assigned during such periods of time as designated by EMPLOYER.
COMPENSATION
EMPLOYER shall pay EMPLOYEE a salary of $200,000.00 per year for the
services contemplated hereunder, payable in accordance with the EMPLOYER's usual
payroll period.
EMPLOYER further agrees EMPLOYEE shall receive an annual bonus, payable at
the rate of $4,166.67 per month, with quarterly adjustments. The annual bonus
shall be equal to the greater of $50,000 or five percent (5%) of EMPLOYER's
annual net income. If the quarterly net income figures indicate that EMPLOYEE is
entitled to a bonus exceeding the amount already paid, EMPLOYEE shall receive
payment for the quarterly adjusted amount in the next monthly payment. If the
quarterly net income figures indicate that EMPLOYEE has received more than 5% of
EMPLOYER's net income, EMPLOYEE shall not be expected to return any portion of
the monthly payments, it being the intent of EMPLOYER and EMPLOYEE to guarantee
EMPLOYEE a bonus of $50,000 per year but not to limit the bonus to $50,000 per
year. EMPLOYER's net income will be determined from the internal financial
statement of EMPLOYER as regularly kept, adjusted by excluding any extraordinary
items. In the event of a dispute as to adjustments, the decision of EMPLOYER's
Chief Financial Officer shall be final.
EMPLOYMENT AGREEMENT -- PAGE 1
- --------------------
<PAGE>
EMPLOYER further agrees to reimburse EMPLOYEE for actual moving expenses, to
be paid on July 1, 1995 provided EMPLOYEE has provided with any documentation
required by the Chief Financial Officer to support such payment.
BENEFITS
EMPLOYEE shall be provided with employee benefits and programs to the same
extent and in the same manner as those benefits and programs are available to
the other executive employees of EMPLOYER's parent. In addition, beginning July
1, 1995, EMPLOYER agrees to pay the full monthly premium for EMPLOYEE's choice
of health insurance coverage for EMPLOYEE's family, and EMPLOYER agrees to being
paying the premiums for disability insurance and life insurance coverage which
EMPLOYEE already has in place, as shown on the attached Exhibit 1. EMPLOYEE is
entitled to four (4) weeks paid vacation per year, which EMPLOYEE may use for
personal business. EMPLOYEE agrees to schedule vacation at a time which is
mutually convenient for EMPLOYER and EMPLOYEE to the extent possible.
TERM
The term of this Agreement shall be sixty (60) months beginning with the
effective date of this Agreement stated above, being July 1, 1995. If, after
the initial term of the Agreement has expired, the parties continue to do
business together as if this Agreement were still in effect, the practice
constitute a renewal of the Agreement until one of the parties notifies the
other, in writing, of its wish to terminate this Agreement.
TERMINATION
In the event of a material adverse breach or neglect of duties by EMPLOYEE,
EMPLOYER may, at EMPLOYER'S option, terminate this Agreement by giving immediate
notice in writing without prejudice to any other remedy to which EMPLOYER may be
entitled at law, in equity, or under the terms of this Agreement. A material
adverse breach of this Agreement includes but is not limited to: (1) EMPLOYEE's
material violation of the policies and rules of EMPLOYER; (2) an act of fraud
committed by EMPLOYEE; (3) nonperformance of EMPLOYEE's duties; or (4) the
occurrence of a material conflict of interest between EMPLOYEE and EMPLOYER.
Notwithstanding the foregoing, EMPLOYER agrees to give EMPLOYEE notice of such
breach and a reasonable period of time in which to cure such breach if the
breach is capable of cure.
STOCK OPTIONS
EMPLOYEE is entitled to stock options in accordance with a separate Stock
Option Incentive Agreement to be entered contemporaneously herewith.
EMPLOYMENT AGREEMENT -- PAGE 2
- --------------------
<PAGE>
INTELLECTUAL PROPERTY,
TRADE SECRETS AND CONFIDENTIAL INFORMATION
EMPLOYEE acknowledges the proprietary right of EMPLOYER in the service
marks, trademarks and trade names owned by EMPLOYER (either registered or
applied for) and the service marks heretofore used by EMPLOYER to identify its
services. During the term of employment with EMPLOYER, EMPLOYEE will or may have
access to and become familiar with trade secrets of EMPLOYER and trade secrets
licensed to EMPLOYER including, but not limited to, patents, formulas,
procedures, processes, patterns, contracts, methods, secret inventions,
presentations, scripts and policies, and EMPLOYEE shall not disclose, or cause
to be disclosed, the aforementioned trade secrets to any third party, nor shall
EMPLOYEE use any such trade secrets for EMPLOYEE'S own benefit or for the
benefit of any third party either related or unrelated, during the term of this
Agreement or any time after termination of this Agreement. EMPLOYEE further
agrees that EMPLOYEE will not use for EMPLOYEE's own benefit or disclose to any
person confidential information of EMPLOYER of any kind or character learned
while acting as EMPLOYEE for EMPLOYER, without the prior written consent of
EMPLOYER.
COVENANTS
The covenants on the part of EMPLOYEE shall be construed as an agreement
independent of any other provision of this Agreement; and the existence of any
claim or cause of action of EMPLOYEE against EMPLOYER, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by EMPLOYER of the covenants contained herein. EMPLOYEE agrees that all
covenants made by EMPLOYEE to EMPLOYER herein shall survive the termination of
EMPLOYEE'S agreement and be enforceable against EMPLOYEE by specific
performance, restraining orders or injunctions.
PREVIOUS AGREEMENTS
This Agreement supersedes all prior such agreements and represents the
entire agreement by and between EMPLOYER and EMPLOYEE except as otherwise
provided in this Agreement. No other agreement either written or oral with
respect to the employment of EMPLOYEE by EMPLOYER is binding upon the parties
hereto. This Agreement may not be changed except by written amendment duly
executed by both parties.
GOVERNING LAW
This Agreement shall be subject to and governed by the laws of the State of
Texas. Any and all obligations or payments are due and payable in Waco, McLennan
County, Texas.
EMPLOYMENT AGREEMENT -- PAGE 3
- --------------------
<PAGE>
PERSONAL SERVICES CONTRACT
This is a personal services contract and EMPLOYEE shall have no right to
transfer or assign EMPLOYEE's interest in this Agreement without the prior
written consent of EMPLOYER. This contract shall terminate automatically upon
the death of EMPLOYEE.
WAIVER AND DELAY
The failure or delay in the enforcement of the rights detailed in this
Agreement by EMPLOYER shall not constitute a waiver of those rights or be
considered as a basis for estoppel. EMPLOYER may exercise its rights under this
Agreement despite the delay or failure to enforce the rights.
GENERAL AND ADMINISTRATIVE PROVISIONS
In the unlikely event that a dispute occurs or an action in law or equity
arises out of the operation, construction or interpretation of this Agreement,
the prevailing party shall bear the expense of attorney's fees and costs
incurred by the other party in the action.
If any provision of this Agreement shall, for any reason, be held violative
of any applicable law, and so much of the Agreement is held to be unenforceable,
then the invalidity of such a specific provision in this Agreement shall not be
held to invalidate any other provisions in this Agreement, which other
provisions shall remain in full force and effect unless removal of the invalid
provisions destroys the legitimate purposes of this Agreement, in which event
this Agreement shall be cancelled.
SIGNED May 26, 1995 but EFFECTIVE June 1, 1995.
EMPLOYER:
GENERAL BUSINESS SERVICES, INC.
BY: /s/ Robert E. Tunmire
---------------------------
Robert E. Tunmire, CEO
EMPLOYEE:
/s/ Paul Woody
-------------------------------
Paul Woody
EMPLOYMENT AGREEMENT -- PAGE 4
- --------------------
<PAGE>
Exhibit 10.2
Stock purchase agreement dated June 9, 1995 between the
Company and Renaissance Capital Growth & Income Fund III, Inc.
<PAGE>
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of June 9, 1995, is
entered into by and between The Dwyer Group, Inc. (the "Company") and
Renaissance Capital Growth & Income Fund III, Inc., a Texas corporation
(together with any assignees or successors in interest, individually or
collectively as the context may appear, referred to as the "Investor").
NOW THEREFORE, in consideration of the mutual promises herein contained and for
other valuable consideration, receipt and sufficiency of which is
acknowledged, the parties hereto agree as follows:
1. Sale and Purchase of Common Stock.
- -------------------------------------
Upon the terms and subject to the conditions herein contained, in
reliance on the representations and warranties of the Company contained herein,
the Investor agrees to purchase from the Company, and in reliance on the
representations and warranties of the Investor contained herein, the Company
agrees to sell to the Investor at the Closing (as hereinafter defined) on the
Closing Date (as hereinafter defined), 70,000 shares ("Shares") of common stock
$0.10 par value of the Company at $3.50 per share for an aggregate consideration
of $245,000 ("Purchase Price").
2. General Provisions.
- ----------------------
2.01 Closing
The closing of the sale to and purchase by the Investor of the Common
Stock (the "Closing") shall occur at the offices of Renaissance Capital Group,
Inc., 8080 North Central Expressway, Suite 210, Dallas, Texas, at the hour of
eleven o'clock A.M., on June 9, 1995 or at such different time or day or at
such other place as the Investor and the Company shall agree (the "Closing
Date"). At the Closing, the Company shall deliver to Renaissance a certificate
or certificates evidencing the Shares which shall be registered and styled River
Oaks Trust Company, FBO Renaissance Capital Growth & Income Fund III, Inc.,
against delivery to the Company of payment by check from the River Oaks Trust
Company.
2.02 Placement Fee
The Company shall be responsible for payment of any placement fees and
commissions, brokerage fees or finders fees in connection with the sale. The
Company and the Investor each represent and acknowledge, to the best of their
respective knowledge, that no placement fees or commissions brokerage fees or
finder fees are due or payable with respect to the sale of the Shares by the
Company or the purchase of the Shares by the Investor.
3. Representations and Warranties by the Company
- -------------------------------------------------
In order to induce the Investor to enter into this Agreement and to
purchase the Shares, the Company hereby covenants with, and represents and
warrants to the Investor as follows:
<PAGE>
3.01 Ownership of Securities.
The Company is currently holds 192,425 shares of Common Stock as
treasury stock representing 2.7% of the Company's outstanding Common Stock. The
Shares are free from all encumbrances and liens and are not subject to any
restrictions other than under federal or state securities laws (except as
disclosed below) and the Shares are not subject to any voting restrictions or
trusts.
3.02 Organization and Qualification.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to carry on its business as presently
conducted and as contemplated to be conducted, to own, hold and operate its
properties and assets as now owned, held and operated by it, to enter into this
Agreement, to sell the Shares to the investor and to carry out the provisions
hereof.
3.03 Authorization.
The execution, delivery and performance by the Company of this
Agreement and all related documents, and the offer, sale, issuance and delivery
of the Shares pursuant hereto, are within the Company's legal authority, require
no authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality of government, except for post-sale filings
with the SEC and the appropriate state securities regulatory agency.
3.04 Binding Obligations.
This Agreement and the related documents constitute the legal, valid and
binding obligations of the Company and are enforceable against the Company in
accordance with their respective terms.
3.05 Securities Laws.
The offer, issuance and sale of the Shares are and will be (i) exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933 (the "Securities Act"), (ii) have been registered or qualified (or are
exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws and (iii)
accomplished in conformity with all other federal and applicable state
securities laws, rules and regulations.
3.06 Litigation.
Except as may be disclosed on Schedule 3.06 attached hereto, there is no
legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding (whether federal, state, local
or foreign) pending or threatened against or affecting the Company. The
<PAGE>
Company is not subject to any order, writ, judgment, injunction, decree,
determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign).
3.07 Disclosure
No representation or warranty contained in this Agreement or information
appearing in any writing furnished by the Company to the Investor or their
representatives pursuant hereto or in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading. The Company is not in
possession of any material, nonpublic information regarding the Company which
has not been disclosed to the Investor.
3.08 Survival of Representations and Warranties.
All representations and warranties by the Company herein shall survive
the Closing and any investigation at any time made by or on behalf of Investor
shall not diminish Investor's right to rely on the Company's representations and
warranties as herein set forth.
4. Representations and Warranties of Investor.
----------------------------------------------
In order to induce the Company to enter into this Agreement and to sell
the Shares, the Investor hereby covenants with the Company, and represents and
warrants to the Company as follows:
4.01 Restrictions on Transfer
The Investor understands and agrees that the Shares have not been
registered under the Securities Act and that accordingly they will not be fully
transferable except as permitted under various exemptions contained in the
Securities Act, or upon satisfaction of the registration and prospectus delivery
requirements of the Securities Act, and in compliance with applicable state
securities laws. The Investor acknowledges that it must bear the economic risk
of its investment in the Shares for an indefinite period of time since they have
not been registered under the Securities Act and therefore cannot be sold unless
they are subsequently registered or an exemption from registration is available.
4.01A Investment Representations
(a) The Investor hereby represents and warrants to the Company
that it is acquiring the Shares for investment purposes only, for its own
account, and not as nominee or agent for any other Person, and not with a view
to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act. The Investor represents and warrants that it has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its investment.
(b) The Investor has performed such due diligence regarding the
Company and the Shares as to enable it to make an informed investment decision
with respect to the Shares.
3
<PAGE>
(c) The Investor has carefully reviewed and understands the risks of,
and other consideration relating to, a purchase of the Shares. The Investor has
determined that the purchase of the Shares is consistent with the Investor's
investment objective.
4.02 Legend
The Investor understands and agrees that each certificate issued in this
transaction will bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT OR LAWS COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY (WHICH MAY BE COUNSEL FOR THE COMPANY) STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS."
4.03 Accredited Investor.
The Investor is an "Accredited Investor" within the meaning of Rule 501 of
the Securities Act.
4.04 Authorization; Binding Obligations
The execution, delivery and performance of this Agreement and all other
related documents to which the Investor is party have been duly authorized by
the Investor and this Agreement and the related documents constitute legal,
valid binding obligations of the Investor enforceable against the Investor in
accordance with their respective terms.
4.05 Survival of Representations and Warranties.
All representations and warranties by the Investor herein shall survive the
Closing and any investigation at any time made by or on behalf of Company shall
not diminish the Company's right to rely on the Investor's representations and
warranties as herein set forth.
5. Affirmative Covenants.
- -------------------------
The Company agrees that so long as the Investor is the holder of Shares or
shares purchased pursuant to the Stock Purchase Agreement by the between the
Estate of Donald J. Dwyer and Renaissance Capital Growth & Income Fund III, Inc.
dated June 9, 1995, the Company will do the following:
4
<PAGE>
5.01 Registration of Securities.
Register shares of restricted Common Stock held by the Investor pursuant to
the Registration Rights Agreement by and between the Company and the Investor
dated June 9, 1995.
5.02 Removal of Transfer Restrictions.
Any legend endorsed on the shares and the stop transfer instructions and
record notations with respect thereto shall be removed and the Company shall
issue a certificate without such legend to the holder thereof at such time as
the securities evidenced thereby cease to be restricted from transfer in
accordance with the provisions of the Securities Act.
6. Enforcement.
- ---------------
6.01 Remedies at Law or in Equity.
If any default shall occur or if any representation or warranty made by the
Company or the Investor (in either case the defaulting party) in this Agreement
or other document delivered under or pursuant to any term hereof shall be untrue
or misleading in any material respect as of the date of this Agreement or as of
the Closing Date or as of the date it was made, furnished or delivered, the
non-defaulting party may proceed to protect and enforce its rights by suit in
equity or action at law.
In the event the non-defaulting party brings such an action against the
defaulting party, the prevailing party in such dispute shall be entitled to
recover from the losing party all fees, costs and expenses of enforcing any
right of such prevailing party under or with respect to this Agreement,
including without limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
6.02 Cumulative Remedies.
None of the rights, powers or remedies conferred upon any party to this
Agreement shall be mutually exclusive, and each such right, power or remedy
shall be cumulative and in addition to every other rights, power or remedy,
whether conferred hereby or hereafter available at law, in equity, by statute or
otherwise.
7. Miscellaneous.
- -----------------
7.01 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally, mailed by
certified mail (return receipt requested) or sent by overnight delivery service,
cable, telegram, facsimile transmission or telex to the parties at the following
addresses or as such other addresses as shall be specified by the parties by
like notice:
(a) if to the Company:
The Dwyer Group, Inc.
Attn: President
1010 N. University Parks Dr.
5
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P.O. Box 3146
Waco, Texas 76707
Phone: (817) 756-2122
Fax: (817) 745-2487
with a copy to:
John T. Kipp, Esq.
Gardere & Wynne, L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Phone: (214) 999-3000
Fax: (214) 999-4667
(b) if to the Investor:
Renaissance Capital Growth & Income Fund III, Inc.
c/o Renaissance Capital Group, Inc.
Attn.: Russell Cleveland, President
8080 North Central Expressway, Suite 210
Dallas, TX 75206
Phone: (214) 891-8294
Fax: (214) 891-8291
Notice so given shall, in the case of notice so given by mail, be deemed to
be given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
7.02 Severability.
If any provision of this Agreement shall be held to be illegal, invalid or
unenforceable under any applicable law, then such illegality, invalidity or
unenforceability shall not invalidate the entire Agreement. Such provision shall
be deemed to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification shall render it legal, valid and
enforceable, then this Agreement shall be construed as if not containing the
provision held to be invalid, and the rights and obligations of the parties
shall be construed and enforced accordingly.
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7.03 Parties in Interest.
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not. This Agreement shall
not run to the benefit of or be enforceable by any Person other than a party to
this Agreement and its successors and assigns.
7.04 CHOICE OF LAW; VENUE
THIS AGREEMENT WILL BE GOVERNED BY THE LAW OF TEXAS. THE PARTIES
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS
OF THE PARTIES HEREUNDER WILL BE PERFORMABLE IN DALLAS, TEXAS. IF ANY ACTION IS
BROUGHT TO ENFORCE OR INTERPRET THIS AGREEMENT, VENUE FOR SUCH ACTION SHALL BE
IN DALLAS, TEXAS.
7.05 Complete Agreement.
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
IN WITNESS WHEREOF, the Company and the Investor have caused this Agreement
to be executed as of the date first written above.
THE DWYER GROUP, INC.
By: (Signature Appears Here)
------------------------------------
Its
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
By: /s/ Russell Cleveland
------------------------------------
Russell Cleveland
President
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Exhibit 10.3
Registration Rights Agreement, dated June 9, 1995 by and among the
Company and Renaissance Capital Growth & Income Fund III, Inc.
<PAGE>
The Dwyer Group, Inc.
---------------------
Registration Rights Agreement
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into on and effective as of June 9, 1995, by and among THE DWYER GROUP, INC., a
Delaware corporation (herein called the "Company") and Renaissance Capital
Growth & Income Fund III, Inc. (the "Fund").
W I T N E S S E T H:
--------------------
WHEREAS, the parties hereto have entered into a Stock Purchase Agreement of
even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company has agreed to provide to the Fund certain registration
rights set forth herein to induce the parties hereto to enter into the Purchase
Agreement and to purchase 300,000 shares of restricted Common Stock from the
Estate of Donald J. Dwyer, Deceased.
ACCORDINGLY, for and in consideration of the mutual promises, covenants,
representations and warranties contained herein and on the terms and conditions
set forth herein, the parties hereto do hereby agree as follows:
1. DEFINITIONS.
---------------
1.1 Definitions.
- -----------------
For purposes of this Agreement:
a. The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of the effectiveness of such
registration statement or document;
b. The term "Registrable Securities" means (i) the Common Stock purchased
by the Fund pursuant to the Purchase Agreement and Common Stock purchased by the
Fund pursuant to the purchase agreement by and between the Fund and the Estate
of Donald J. Dwyer, Deceased dated June 9, 1995, (ii) any Common Stock of the
Company issued or issuable with respect to the Common Stock referred to in
clause (i) above (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued or issuable with respect to the Common
Stock referred to in clause (i) above) by way of stock dividend; any other
distribution with respect to or in exchange for, or in replacement of Common
Stock; stock split; or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; excluding in
all cases, however, any Registrable Securities sold or transferred by a person
in a transaction in which his rights under this Agreement are not assigned;
c. The number of shares of "Registrable Securities then outstanding" shall
be an amount equal to the number of shares of Common Stock outstanding which
have been received by the Fund from the Estate of Donald J. Dwyer, Deceased and
the Company;
d. The term "Holder" means the Fund and any assignee thereof and any person
owning or having the right to acquire Registrable Securities in accordance with
the provisions hereof; and
e. The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the
Securities and Exchange Commission ("SEC") which similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
f. The term "Common Stock" shall mean the common stock of The Dwyer Group,
Inc. par value $.10.
2. SECURITIES SUBJECT TO THIS AGREEMENT
---------------------------------------
2.1 Securities
- ---------------
The securities entitled to the benefits of this Agreement are the
Registrable Securities but, with respect to any particular Registrable Security,
only if and so long as such a security continues to be a "Restricted Security."
A Registrable Security ceases to be a "Restricted Security" when (i) it has been
effectively registered under the Act and disposed of in accordance with the
registration statement covering it, (ii) it is distributed to the public
pursuant to Rule 144 (or any similar provisions that are enforced) under the
Act, or (iii) it has otherwise been transferred and a new certificate or other
evidence
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of ownership for it not bearing a restrictive legend and not subject to any stop
transfer order lawfully has been delivered by or on behalf of the Company to the
Holder along with an opinion of counsel to the Company reasonably satisfactory
to the Holder to the effect that no other restriction on transfer exists.
3. REGISTRATION RIGHTS.
-----------------------
3.1 Demand for Registration.
- ----------------------------
a. The Company hereby agrees to register, subject to the terms and
conditions set forth herein, all or any portion of the Registrable Securities if
at any time it shall receive a written request from the Holders of at least
fifty percent (50%) in the aggregate of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of at least a majority of the Registrable Securities
then outstanding (or a lesser percent if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $500,000).
The Company shall, within twenty (20) days of its receipt thereof, give written
notice of such request to all Holders of record of Registrable Securities at the
last known address of each such Holder maintained by the Company or the
Company's transfer agent. The Holders of said Registrable Securities shall have
fifteen (15) days from the receipt of such notice by the Company to request that
all or a portion of their respective Registrable Securities be included in said
registration. The Company hereby agrees, subject to the limitations hereof, to
use its best lawful efforts to effect as soon as reasonably possible, and in any
event (if legally possible, and as allowed by the SEC, and if no factor outside
the Company's reasonable control prevents it) within 150 days of the receipt of
the initial written registration request, to effect the registration under the
Act of all Registrable Securities which the Holders thereof have requested.
b. If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Agreement, and the Company
shall include such information in the written notice to the other Holders of
Registrable Securities referred to in Section 3.1(a). In such event, the right
of any Holder to include his/her Registrable Securities in such registration
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by the Company, the underwriter, a majority in
interest of the Initiating Holders and such Holder) is limited to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
3.3(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by mutual agreement
of the Company and a majority in interest of the Initiating Holders, which
agreement shall not be unreasonably withheld.
c. Notwithstanding any provision to the contrary set forth herein, the
parties hereto hereby acknowledge and agree that the Company is obligated to
effect only two (2) such registrations pursuant to this Section 3.1.
d. Notwithstanding the foregoing, if the Company shall furnish to the
Initiating Holders a certificate signed by the President of the Company stating
that the good faith judgment of the Board of Directors of the Company, it would
be materially detrimental to the Company and its shareholders for such
registration statement to be filed at that time, and it is therefore essential
to defer the filing of such registration statement, the Company shall have the
right to defer the commencement of such a filing for a period of not more than
180 days after receipt of the request of the Initiating Holders; provided,
however, that at least twelve (12) months must elapse between any two such
deferrals under this Section 3.1(d).
3.2 "Piggy-Back" Registration.
- ------------------------------
If, but without any obligation to do so, the Company from time to time
proposes to register any of its capital stock or other securities under the Act
in connection with the public offering of such securities for its own account or
for the account of its security holders, other than Holders of Registrable
Securities pursuant to Section 3.1 (a "Piggy-Back Registration Statement"),
primarily for cash (other than (i) a registration relating solely to the sale of
securities to participants in a Company stock plan or employee benefit plan,
(ii) a registration relating solely to an SEC Rule 145 transaction or any rule
adopted by the SEC in substitution thereof or in amendment thereto, or (iii) a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, the Holders of Registrable
Securities shall be entitled to include all or any portion of their Registrable
Securities in such registration (and related underwritten offering, if any) on
the following terms and conditions:
a. The Company shall give written notice of such determination to each
Holder of Registrable Securities, and each such Holder shall have the right to
request, by written notice given to the Company within fifteen (15) days of the
date that such written notice was given by the Company to such Holder, that a
specific number of Registrable Securities held by such Holder will be included
in the Piggy-Back Registration Statement (and related underwritten offering, if
any);
b. If the Piggy-Back Registration Statement relates to an underwritten
offering, the notice given to each Holder shall specify the name or names of the
managing underwriter or underwriters for such offering. In addition such notice
shall also specify the number of securities to be registered for the account of
the Company and for the account of its shareholders
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(other than the Holders of Registrable Securities), if any;
c. If the Piggy-Back Registration Statement relates to an underwritten
offering, each Holder of Registrable Securities to be included therein must
agree (x) to sell such Holder's Registrable Securities on the same basis as
provided in the underwriting arrangement approved by the Company, and (y) to
timely complete and execute all questionnaires, powers of attorney, indemnities,
hold-back agreements, underwriting agreements and other documents required under
the terms of such underwriting arrangements or by the SEC or by any state
securities regulatory body;
d. If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that inclusion
of all or any portion of the Registrable Securities in such offering would
adversely affect the ability of the underwriters for such offering to sell all
of the securities requested to be included for sale in such offering at the best
price obtainable therefor, the aggregate number of Registrable Securities that
may be sold by the Holders shall be limited to such number of Registrable
Securities, if any, that the managing underwriter or underwriters determine may
be included therein without such adverse effect as provided below. If the number
of securities proposed to be sold in such underwritten offering exceeds the
number of securities that may be sold in such offering, there shall be included
in the offering, first, up to the maximum number of securities to be sold by
the Company for its own account and second, as to the balance, if any,
securities to be sold for the account of the Company's stockholders (both the
Holders of Registrable Securities requested and such other stockholders of the
Company requested to be included therein) on a pro rata basis;
e. Holders of Registrable Securities shall have the right to withdraw their
Registrable Securities from the Piggy-Back Registration Statement, but if the
same relates to an underwritten offer, they may only do so during the time
period and on the terms agreed upon among the underwriters for such underwritten
offering and the Holders of Registrable Securities.
3.3 Obligations of the Company.
- -------------------------------
Whenever required under this Section 3 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:
a. Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best lawful efforts to cause such
registration statement to become effective, and keep such registration statement
effective until all such Registrable Securities have been distributed, and or
until one hundred twenty (120) days have elapsed since such registration
statement became effective (subject to extension of this period as provided
below);
b. Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement, or until one hundred twenty (120) days have elapsed
since such registration statement became effective (subject to the extension of
this period as provided below);
c. Furnish to the Holders such numbers of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the Act, and
such other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them;
d. Use its best lawful efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify as a broker-dealer in any states or jurisdictions
or to do business or to file a general consent to service of process in any such
states or jurisdictions;
e. In the event of any underwritten public offering, enter into and perform
its obligations under an underwriting agreement with the managing underwriter of
such offering, in usual and customary form reasonably satisfactory to the
Company and the Holders of a majority of the Registrable Securities to be
included in such offering. Each Holder participating in such underwriting shall
also enter into and perform its obligations under such an agreement;
f. Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing; and
g. In the event of the notification provided for in Section 3.3(f) above,
the Company shall use its best efforts to prepare and file with the SEC (and to
provide copies thereof to the Holders) as soon as reasonably possible an amended
prospectus complying with the Act, and the period during which the prospectus
referred to in the notice provided for in Section 3.3(f) above cannot be used
and the time period prior to the use of the amended prospectus referred to in
this Section 3.3(g), shall not be counted in the 120 day period of this Section
3.3.
3.4 Furnish Information.
- ------------------------
a. It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 3 that the selling Holders shall
furnish to the Company any and all information reasonably requested by the
Company, its
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officers, directors, employees, agents or representatives, the underwriter or
underwriters, if any, and the SEC or any other governmental regulatory agency,
including but not limited to (i) such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities, as shall be required to effect the registration of their
Registrable Securities, and (ii) the identity of and compensation to be paid to
any proposed underwriter to be employed in connection therewith.
b. In connection with the preparation of filing of each registration
statement registering Registrable Securities under the Act, the Company shall
give the Holders of Registrable Securities on whose behalf such Registrable
Securities are to be registered and their underwriters, if any, and their
respective counsel and accountants, at such Holder's sole cost and expense
(except as otherwise set forth herein), such access to copies of the Company's
records and documents and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be reasonably necessary in the
opinion of such Holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the Act.
3.5 Expenses of Demand Registration.
- ------------------------------------
Expenses incurred in connection with any registration or qualification of any
shares including all registration, filing and qualification fees, printing
expenses, legal expenses and expenses of any special audits incidental to or
required by such registration, shall be borne by the Fund.
3.6 Expenses of Piggy-Back Registration.
- ----------------------------------------
Each Holder shall bear and pay all those incremental expenses attributable
to the inclusion of such Holder's Registrable Securities in any registration,
filing or qualification of Registrable Securities pursuant to Section 3.2
including, without limitation, such Holder's incremental portion of all
reasonable registration, filing, and qualification fees, printers' and
accounting fees, fees and disbursements of counsel of the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders, but
excluding the Company's overhead expenses and expenses related to the use of
time by the Company's officers, directors and employees in effecting such
registrations. In addition, the selling Holders shall bear the expenses of any
underwriting discounts and commissions, if any, attributable to the sale of
their shares of Common Stock in connection with such Piggy-Back Registrations.
3.7 Indemnification.
- --------------------
In the event that any Registrable Securities are included in a registration
statement under this Section 3:
a. To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any underwriter
(as defined in the Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, liabilities (joint or several) or any legal or other costs and expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage or liability, or action to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, costs, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact with respect to the Company or
its securities contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements therein, (ii) the omission or alleged omission to state therein a
material fact with respect to the Company or its securities required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any federal or state securities law or any rule or regulation promulgated
under the Act, the 1934 Act or any state securities law. Notwithstanding the
foregoing, the indemnity agreement contained in this Section 3.7(a) shall not
apply and the Company shall not be liable (i) in any such case for any such
loss, claim, damage, costs, expenses, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person, or
(ii) for amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld.
b. To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless the Company, each of its directors and officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, each of the Company's employees, agents
and representatives, any underwriter and any other Holder selling securities in
such registration statement or any of its directors or officers, or any person
who controls such Holder, against any losses, claims, damages, costs, expenses,
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, employee, agent, representative, or underwriter, or
controlling person or other such Holder or director or officer thereof or of
said controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, only insofar as such losses,
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claims, damages, costs, expenses or liabilities or actions in respect thereto
arise out of or are based upon any Violation, in each case to the extent and
only to the extent that such violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, employee, representative, controlling person, underwriter or
controlling person, other Holder, officer or director thereof or of any
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 3.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, costs, expenses, liability or action
if such settlement is effected without the prior written consent of the Holder,
which consent shall not be unreasonably withheld.
c. Promptly after receipt by an indemnified party under this Section 3.7 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 3.7, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the indemnifying
party, if representations of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve the indemnifying party of its obligations
under this Section 3.7, except to the extent that the failure results in a
failure of actual notice to the indemnifying party and such indemnifying party
is materially prejudiced in its ability to defend such action solely as a result
of the failure to give such notice.
d. If the indemnification provided for in this Section 3.7 is unavailable
to an indemnified party under this Section in respect of any losses, claims,
damages, costs, expenses, liabilities or actions referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, costs, expenses, liabilities or actions in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and of the Holder on the other in connection with the Violation that
resulted in such losses, claims, damages, costs, expenses, liabilities or
actions. The relative fault of the Company on the one hand and of the Holder on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of the material fact or the omission to state
a material fact relates to information supplied by the Company, or material fact
relates to information supplied by the Company, or by the Holder, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company on the one hand and the Holders on the other hand agree that it
would not be just and equitable if contribution pursuant to this Section 3.7
were determined by a pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of losses, claims, damages, costs, expenses, liabilities and
actions referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any reasonable legal or
other expenses incurred by such indemnified party in connection with defending
any such action or claim. Notwithstanding the provisions of this Section 3.7,
neither the Company nor the Holders shall be required to contribute any amount
in excess of the amount by which the total price in which the securities were
offered to the public exceeds the amount of any damages which the Company or
each such Holder as otherwise been required to pay by reason of such Violation.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
3.8 Reports Under Securities Exchange Act of 1934.
- --------------------------------------------------
With a view to making available to the Holders the benefits of Rule 144
promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3, if applicable,
the Company agrees to use its best lawful efforts to:
a. Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
b. Take such action, including the voluntary registration of its Common
Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to
trade their Registrable Securities on a public market;
c. When and if applicable, file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act;
d. Use its best efforts to list all Common Stock covered by such
registration statement on such securities exchange on which any of the Common
Stock is then listed, or, if the Company's Common Stock is not then quoted on
NASDAQ or
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listed on any national securities exchange, use its best efforts to have such
Common Stock covered by such registration statement quoted on NASDAQ or, at the
option of the Company, listed on a national securities exchange; and
e. Furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of SEC Rule 144, the
Act and the 1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other SEC
reports and documents so filed by the Company, and (iii) such other information
(but not any opinion of counsel) as may be reasonably requested by any Holder
seeking to avail himself of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
3.9 Assignment of Registration Rights.
- --------------------------------------
Subject to the terms and conditions of the Purchase Agreement and the
Common Stock the right to cause the Company to register Registrable Securities
pursuant to this Section 3 may be assigned by the Fund to any transferee or
assignee of such securities; provided that said transferee or assignee is a
transferee or assignee of at least ten percent (10%) of the Registrable
Securities, and provided that the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act; it being the intention that so long as the Fund holds
any Registrable Securities hereunder, either the Fund or its transferee or
assignee may exercise the demand rights to registration and piggy-back
registration rights hereunder. Other than as set forth above, the parties hereto
hereby agree that the registration rights hereunder shall not be transferable or
assigned and any contemplated transfer or assignment in contravention of this
Agreement shall be deemed null and void and of no effect whatsoever.
3.10 Other Matters.
- -------------------
a. Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, with respect to each offering of the
Registrable Securities, whether each Holder is offering such Registrable
Securities in an underwritten or non-underwritten offering, such Holder will
comply with Rules 10b-2, 10b-6 and 10b-7 of the 1934 Act and such other or
additional anti-manipulation rules then in effect until such offering has been
completed, and in respect of any non-underwritten offering, in writing will
inform the Company, any other holders who are selling shareholders, and any
national securities exchange upon which the securities of the Company are
listed, that the Registrable Securities have been sold and will, upon the
Company's request, furnish the distribution list of the Registrable Securities.
In addition, upon the request of the Company, each Holder will supply the
Company with such documents and information as the Company may reasonably
request with respect to the subject matter set forth and described in this
Section 3.10.
b. Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
the registration statement, the prospectus or any document incorporated therein
by reference, in order to make the statements therein not misleading in any
material respect, such Holder will forthwith discontinue disposition of
Registrable Securities under the prospectus related to the applicable
registration statement until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus.
c. The Company hereby agrees not to effect any public sale or other
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such equity securities, during the period
commencing on the seventh day prior to, and ending on the one hundred twentieth
day (subject to extension as provided in Section 3.3 hereof) following the
effective date of any underwritten demand registration or piggy-back
registration (except in connection with any piggy-back registration).
3.11 Termination of Rights.
- ---------------------------
a The rights to request a demand registration or repurchase of Registrable
Securities, as granted to Holders under this Section 3, shall terminate on June
1, 2004, or after the Fund has exercised two demand registration rights at its
own expense as provided in this Section 3, whichever is first to occur.
b The rights to participate in a piggy-back registration, as granted to
Holders under this Section 3, shall be exercisable by the Fund until June 1,
2004.
Page 6
<PAGE>
4. Miscellaneous
----------------
4.1 Successors and Assigns.
- ---------------------------
Subject to the terms and conditions of this Agreement, the rights and
obligations set forth herein shall inure to the benefit of and be binding upon
the respective successor and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by this Agreement. The rights and powers of
the Fund are granted to such the Fund as an owner of the Registrable Securities.
Consequently, and subject to Section 3.9, the parties agree that such rights
and powers exist separately and distinctly with respect to each share of the
Registrable Securities and as to each such share, unless otherwise specified in
this Agreement, shall pass with it so that any owner of any of the Registrable
Securities, whether becoming such by transfer, assignment, operation of law or
otherwise, shall have all of the rights and powers of the Fund hereunder, and
shall be entitled to exercise them in full, with or without the agreement or
consent of other such owners, and no transfer or assignment shall divest the
Fund or any subsequent owner of such rights and powers unless all shares of
Registrable Securities owned by such the Fund are transferred or assigned.
4.2 Notices.
- ------------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effective upon personal
delivery to the party to be notified, telefax or telecopy communication when
confirmed in writing on the same day, or three (3) days after deposit with the
United States mail, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by advance written notice to the other parties.
4.3 Amendments and Waivers.
- ---------------------------
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of a majority of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities at the time outstanding, each
future holder of all such securities, and the Company.
4.4 Enforcement.
- ----------------
In the event of a material breach by the Company or by the Fund hereunder,
each right, power or remedy of the Holder and the Company hereof as provided for
in this Agreement, the Debenture, or the Purchase Agreement, or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy and the exercise
or beginning of the exercise by the Holder or transferee hereof of any one or
more of such rights, powers or remedies shall not preclude the simultaneous or
later exercise by the Holder of any or all such other rights, powers or
remedies. The Holders will be entitled to enforce their rights under this
Agreement specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all of their rights existing in their favor. The parties hereto hereby
agree and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement by the Company, and that Holder may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement. In
addition, upon the occurrence of a material breach by the Company or by the
Holder, the breaching party agrees to pay and shall pay all costs and expenses
(including prevailing party's attorneys' fees and expenses) reasonably incurred
in connection with the preservation and enforcement of such party's rights
hereunder.
4.5 Titles, Subtitles and Table of Contents.
- --------------------------------------------
The titles, subtitles and table of contents used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
4.6 Severability.
- -----------------
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
4.7 Entire Agreement.
- ---------------------
Except as otherwise expressly set forth herein, this Agreement embodies the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and thereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
Page 7
<PAGE>
4.8 Counterparts.
- -----------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall continue one and
the same instrument.
4.9 GOVERNING LAW.
- ------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF TEXAS EXCEPT INSOFAR AS AND TO THE EXTENT THAT THE LAWS OF THE UNITED
STATES OF AMERICA SHALL HAVE APPLICATION.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Company
-------
The Dwyer Group, Inc.
By: _____________________________________
Its:
The Fund
--------
Renaissance Capital Growth & Income Fund III, Inc.
By: _____________________________________
Russell Cleveland
President
Page 8
<PAGE>
Exhibit 10.4
Employment Agreement by and between
Michael Bidwell and the Company dated July 28, 1995.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT is by and between RAINBOW INTERNATIONAL CARPET
DYEING & CLEANING COMPANY, a Texas corporation with its principal place of
business located at 1010-1020 North University Parks Drive, Waco, Texas 76707
("EMPLOYER") and MICHAEL BIDWELL, individually, having a residence address of
_______________________________________________________________ ("EMPLOYEE").
("EMPLOYER and EMPLOYEE hereby agree as follows:
DUTIES AND CONDITIONS
EMPLOYEE is hereby employed as President of EMPLOYER beginning July 24,
1995. EMPLOYEE shall report directly to Robert E. Tunmire, President and Chief
Executive Officer of The Dwyer Group, Inc., EMPLOYER's parent holding company.
EMPLOYEE agrees to devote his time, knowledge, skill and attention solely and
exclusively to the business interests of EMPLOYER. EMPLOYEE's principal duties
shall be as directed by Mr. Tunmire. EMPLOYEE agrees to perform such other
additional duties as may be reasonably assigned to EMPLOYEE. It is understood
that EMPLOYEE shall work only in those areas assigned during such periods of
time as designated by EMPLOYER. EMPLOYEE agrees to live up to EMPLOYER's Code of
Values.
COMPENSATION
EMPLOYER shall pay EMPLOYEE a salary of $120,000.00 per year for the
services contemplated hereunder, payable in accordance with the EMPLOYER's usual
payroll period.
EMPLOYER further agrees to provide EMPLOYEE a bonus, payable quarterly, in
an amount equal to five percent (5%) of the net income of EMPLOYER for the
applicable quarter. The payment shall be made as soon as net income for the
quarter has been determined. Net income will be determined from the internal
financial statement of EMPLOYER as regularly kept, adjusted by excluding any
extraordinary items. In the event of a dispute as to adjustments, the decision
of EMPLOYER's Chief Financial Officer shall be final.
EMPLOYER further agrees to reimburse EMPLOYEE for actual moving expenses,
to be paid on or before August 1, 1995 provided EMPLOYEE has provided any
documentation required by EMPLOYER's Chief Financial Officer to support such
payment.
EMPLOYER further agrees that if EMPLOYEE's present home, located in Tucson,
Arizona, has not been sold by July 24, 1995, EMPLOYER shall pay EMPLOYEE the
equivalent of EMPLOYEE's mortgage payment each month, beginning with the payment
due in August, 1995 until the earlier of (1) the date the house sells or (2) for
a period of six (6) months. To the extent this relocation allowance is not
utilized by EMPLOYEE, EMPLOYER agrees to reimburse EMPLOYEE
EMPLOYMENT AGREEMENT -- PAGE 1
- --------------------
<PAGE>
for real estate fees paid by EMPLOYEE for the sale of his home in Tucson,
Arizona. In any event, the maximum combined reimbursable expense covered by this
paragraph shall be $10,000.
BENEFITS
EMPLOYEE shall be provided with employee benefits and programs to the same
extent and in the same manner as those benefits and programs are available to
the other executive employees of EMPLOYER's parent.
TERM
The term of this Agreement shall be sixty (60) months beginning with the
effective date of this Agreement stated above, being July 24, 1995. If, after
the initial term of the Agreement has expired, the parties continue to do
business together as if this Agreement were still in effect, the practice
constitute a renewal of the Agreement until one of the parties notifies the
other, in writing, of its wish to terminate this Agreement.
TERMINATION
In the event of a material breach or neglect of duties by EMPLOYEE,
EMPLOYER may, at EMPLOYER'S option, terminate this Agreement by giving immediate
notice in writing without prejudice to any other remedy to which EMPLOYER may be
entitled at law, in equity, or under the terms of this Agreement. A material
breach of this Agreement includes but is not limited to: (1) EMPLOYEE's material
violation of the policies and rules of EMPLOYER; (2) an act of fraud committed
by EMPLOYEE; (3) nonperformance of EMPLOYEE's duties; or (4) the occurrence of a
material conflict of interest between EMPLOYEE and EMPLOYER. Notwithstanding the
foregoing, EMPLOYER agrees to give EMPLOYEE notice of such breach and a
reasonable period of time in which to cure such breach if the breach is capable
of cure.
STOCK OPTIONS
EMPLOYEE is entitled to stock options in accordance with a separate Stock
Option Incentive Agreement to be entered contemporaneously herewith.
INTELLECTUAL PROPERTY,
TRADE SECRETS AND CONFIDENTIAL INFORMATION
EMPLOYEE acknowledges the proprietary right of EMPLOYER in the service
marks, trademarks and trade names owned by EMPLOYER (either registered or
applied for) and the service marks heretofore used by EMPLOYER to identify its
services. During the term of employment with EMPLOYER, EMPLOYEE will or may have
access to and become familiar with trade secrets of EMPLOYER and trade secrets
EMPLOYMENT AGREEMENT -- PAGE 2
- --------------------
<PAGE>
licensed to EMPLOYER including, but not limited to, patents, formulas,
procedures, processes, patterns, contracts, methods, secret inventions,
presentations, scripts and policies, and EMPLOYEE shall not disclose, or cause
to be disclosed, the aforementioned trade secrets to any third party, nor shall
EMPLOYEE use any such trade secrets for EMPLOYEE'S own benefit or for the
benefit of any third party either related or unrelated, during the term of this
Agreement or any time after termination of this Agreement. EMPLOYEE further
agrees that EMPLOYEE will not use for EMPLOYEE's own benefit or disclose to any
person confidential information of EMPLOYER of any kind or character learned
while acting as EMPLOYEE for EMPLOYER, without the prior written consent of
EMPLOYER.
COVENANTS
The covenants on the part of EMPLOYEE shall be construed as an agreement
independent of any other provision of this Agreement; and the existence of any
claim or cause of action of EMPLOYEE against EMPLOYER, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by EMPLOYER of the covenants contained herein. EMPLOYEE agrees that all
covenants made by EMPLOYEE to EMPLOYER herein shall survive the termination of
EMPLOYEE'S agreement and be enforceable against EMPLOYEE by specific
performance, restraining orders or injunctions.
PREVIOUS AGREEMENTS
This Agreement supersedes all prior such agreements and represents the
entire agreement by and between EMPLOYER and EMPLOYEE except as otherwise
provided in this Agreement. No other agreement either written or oral with
respect to the employment of EMPLOYEE by EMPLOYER is binding upon the parties
hereto. This Agreement may not be changed except by written amendment duly
executed by both parties.
GOVERNING LAW
This Agreement shall be subject to and governed by the laws of the State of
Texas. Any and all obligations or payments are due and payable in Waco, McLennan
County, Texas.
PERSONAL SERVICES CONTRACT
This is a personal services contract and EMPLOYEE shall have no right to
transfer or assign EMPLOYEE's interest in this Agreement without the prior
written consent of EMPLOYER. This contract shall terminate automatically upon
the death of EMPLOYEE.
EMPLOYMENT AGREEMENT -- PAGE 3
- --------------------
<PAGE>
WAIVER AND DELAY
The failure or delay in the enforcement of the rights detailed in this
Agreement by EMPLOYER shall not constitute a waiver of those rights or be
considered as a basis for estoppel. EMPLOYER may exercise its rights under this
Agreement despite the delay or failure to enforce the rights.
GENERAL AND ADMINISTRATIVE PROVISIONS
In the unlikely event that a dispute occurs or an action in law or equity
arises out of the operation, construction or interpretation of this Agreement,
the prevailing party shall bear the expense of attorney's fees and costs
incurred by the other party in the action.
If any provision of this Agreement shall, for any reason, be held violative
of any applicable law, and so much of the Agreement is held to be unenforceable,
then the invalidity of such a specific provision in this Agreement shall not be
held to invalidate any other provisions in this Agreement, which other
provisions shall remain in full force and effect unless removal of the invalid
provisions destroys the legitimate purposes of this Agreement, in which event
this Agreement shall be cancelled.
SIGNED this 28 day of May, 1995 but EFFECTIVE the 24th day of July, 1995.
EMPLOYER:
RAINBOW INTERNATIONAL CARPET DYEING
& CLEANING COMPANY
BY: /s/ Robert E. Tunmire
-------------------------------
Robert E. Tunmire, CEO
EMPLOYEE:
/s/ Michael Bidwell
-----------------------------------
Michael Bidwell
EMPLOYMENT AGREEMENT -- PAGE 4
- --------------------
<PAGE>
Exhibit 10.5
Consulting and services agreement dated August 1, 1995
between the Company and John P. Hayes.
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made by and between THE DWYER GROUP, INC., a
Delaware corporation having a principal business address of 1010-1020 North
University Parks Drive, Waco, TX 76707 ("Company") and JOHN P. HAYES,
individually, having a residence address of 6612 Dupper Court, Dallas, TX 75252
("Consultant").
WHEREAS, the Company is a holding company for six (6) service concept
franchise companies and affiliated with other franchise companies and certain
other related business interests to whom the Company provides legal, accounting
and other administrative services (the "Business").
WHEREAS, it is the desire of the Company to engage the services of the
Consultant to perform consulting services for the Company regarding public
relations, marketing and special projects assigned by the Chief Executive
Officer of the Company or the operation of the Business, as an independent
contractor and not as an employee.
WHEREAS, it is the desire of the Consultant to consult with the officers,
the Board of Directors and the administrative staff of the Company, and to
undertake, for the Company, consultation as to the direction of certain public
relations and marketing functions in the management of the Business and such
other special projects as may be assigned by the Company's Chief Executive
Officer.
WHEREAS, in consideration of the mutual promises contained in this
Consulting Agreement, the parties agree as follows:
TERM
1.1. The respective duties and obligations of the parties to this
Consulting Agreement shall be for a period of twelve (12) months, commencing on
August 1, 1995.
1.2 This Consulting Agreement may be terminated by either party giving
ninety (90) days' written notice to the other party at the respective party's
address stated above or such other address as the party may designate, in
writing, to the other party.
1.3 If, after the initial term of the Agreement has expired, the parties
continue to do business together as if this Agreement were still in effect, the
parties agree that this practice constitutes a renewal of the Agreement for an
additional term of twelve (12) months until one of the parties notifies the
other party, in writing, of its wish to terminate this Agreement.
CONSULTING AGREEMENT -- PAGE 1
- --------------------
<PAGE>
CONSULTATIONS
2.1 The Consultant shall make himself available to consult with the Board
of Directors, the officers, including the Chief Executive Officer and the
department heads of the administrative staff at reasonable times concerning
matters pertaining to public relations and marketing of the Company and the
Business and to those future matters which Consultant and the Chief Executive
Officer agree, in writing, are responsibilities of the Consultant.
2.2 The Consultant may represent, perform services for and by employed by
such additional clients, persons or companies as the Consultant, in his sole
discretion, sees fit.
COMPENSATION
3.1 For services rendered under this Consulting Agreement, the Consultant
shall receive a base fee of $7,500 per month. If the additional matters increase
the demands on Consultant's time (instead of merely replacing projects which
have been completed), the base fee may be adjusted by the parties, which
adjustment must be agreed to in advance, in writing, by both parties.
3.2 Consultant shall be reimbursed for expenses, other than ordinary
office overhead, incurred and directly attributable to services rendered under
this Consulting Agreement.
3.3 A statement shall be submitted to the Company no later than the tenth
(10th) day of each month, detailing, by company, the services rendered during
the previous month. The Consultant shall be paid on or before the twentieth
(20th) day of the same month for the previous month's services.
3.4 Consultant is hereby granted an option to acquire 10,000 non-qualified
shares of common stock of the Corporation valued as of the close of business on
August 1, 1995 in accordance with the Stock Option Agreement attached hereto as
Exhibit "A". If this Consulting Agreement is renewed, Consultant shall be
granted an additional option upon each annual renewal.
LIMITED LIABILITY
4.1 The Consultant shall not be liable to the Company, or to anyone who
may claim any right due to his relationship with the Company, for any acts or
omissions on the part of the Consultant or the agents or employees of Consultant
in the performance of the Consultant services under this Consulting Agreement,
except when such acts or omissions are due to willful misconduct or culpable
negligence. The Company shall hold the Consultant harmless from any obligations,
costs, claims, judgments, attorney's fees or attachments arising from our
growing out of the services rendered to the Company pursuant to the terms of
this Consulting Agreement
CONSULTING AGREEMENT -- PAGE 2
- --------------------
<PAGE>
or in any way connected with the rendering of such services, except when the
same shall arise due to the willful misconduct or culpable negligence of the
Consultant and the Consultant is adjudged to be guilty of willful misconduct and
culpable negligence by a court of competent jurisdiction.
APPLICABLE LAW
5.1 This Consulting Agreement shall be construed under and in accordance
with the laws of the State of Texas. All obligations of the parties created
under this Consulting Agreement are performable in Waco, McLennan County, Texas.
PARTIES BOUND
6.1 This Consulting Agreement shall be binding on and inure to the benefit
of the parties to it and their respective heirs, executors, administrators,
legal representatives, successors and assigns when permitted by this Consulting
Agreement.
LEGAL CONSTRUCTION
7.1 In the event that any one or more of the provisions contained in this
Consulting Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions and this Consulting Agreement shall be
construed as if such invalid, illegal or unenforceable provision and never been
contained in it.
REMEDIES
8.1 If any action at law or in equity is necessary to enforce or interpret
the terms of this Consulting Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition
to any other relief to which the party may be entitled.
PRIOR AGREEMENTS SUPERSEDED
9.1 This Consulting Agreement constitutes the sole and only agreement of
the parties to it and supersedes any prior understandings or written or oral
agreements between the parties respecting this subject matter.
EFFECTIVE DATE
10.1 This Consulting Agreement is effective as of the 1st day of August,
1995.
CONSULTING AGREEMENT -- PAGE 3
- --------------------
<PAGE>
CONSULTANT:
/s/ John P. Hayes
-----------------------------------
John P. Hayes, individually
COMPANY:
THE DWYER GROUP, INC.
BY: /s/ Robert E. Tunmire
--------------------------------
Robert E. Tunmire, President
ATTEST:
- ---------------------------
Dina Dwyer-Owens, Secretary
CONSULTING AGREEMENT -- PAGE 4
- --------------------
<PAGE>
Exhibit 10.6
Termination Agreement by and between Douglas Holsted
and the Company dated March 21, 1995.
<PAGE>
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE
AND COVENANT NOT TO SUE
--------------------------------------------
This MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE
(the "Agreement") is made and entered into as of the date indicated below by and
between GENERAL BUSINESS SERVICES, INC., a Texas corporation ("GBS"), EDWIN K.
WILLIAMS & CO., a Colorado corporation ("EKW") and THE DWYER GROUP, INC., a
Delaware corporation ("Dwyer") (collectively referred to as "the Companies") and
DOUGLAS C. HOLSTED, individually ("Holsted").
WHEREAS, Holsted was employed by GBS from January 7, 1993 through March 21,
1995, most recently in the position of President;
WHEREAS, Holsted was employed by EKW from May 14, 1994 through March 21,
1995, most recently in the position of President;
WHEREAS, Holsted was employed as Chief Financial Officer by Dwyer and/or a
company owned or affiliated with Dwyer from April 1991 through December 1994;
WHEREAS, Holsted is currently indebted to GBS for the sum indicated on
Exhibit "A" attached hereto;
WHEREAS, prior to the execution of this Agreement, Holsted has voluntarily
resigned his employment with the Companies, effective March 21, 1995;
WHEREAS, prior to the execution of this Agreement, Holsted has fully read
this Agreement, has been given adequate time to consider this Agreement, a
reasonable opportunity to consult with advisors of Holsted's choosing and
understands this Agreement;
WHEREAS, Holsted and the Companies desire to provide for an orderly
termination of the employment relationship and to settle fully and finally, in
the manner set forth herein, all differences between them which have arisen or
which might arise in the future, including but not limited to all claims and
controversies arising out of the employment relationship between Holsted and the
Companies.
NOW, THEREFORE, in consideration of the Recitals and mutual promises,
covenants and agreements set forth in this Agreement, Holsted and the Companies
covenant and agree as follows:
1. Holsted, for himself and on behalf of his heirs, assigns, successors,
executors, administrators and attorneys, IRREVOCABLY AND UNCONDITIONALLY
RELEASES, ACQUITS AND FOREVER DISCHARGES the Companies, any current, past or
future parent, subsidiaries, affiliated and related corporations, firms,
associations, partnerships and entities, and their successors and assigns, and
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 1
- --------------------------------------------------------------------
<PAGE>
the current and former owners, shareholders, directors, officers, employees,
agents, attorneys, representatives and insurers of said corporations, firms,
associations, partnerships and entities, and their guardians, successors,
assigns, heirs, executors and administrators (collectively referred to as
"Releasees"), from any and all claims, complaints, grievances, liabilities,
obligations, promises, agreements, damages, causes of action, and expenses
whatsoever, including attorney's fees and expenses.
2. Holsted, for himself and on behalf of his heirs, assigns, successors,
executors, administrators and attorneys, COVENANTS NOT TO SUE OR OTHERWISE
VOLUNTARILY CONSENT TO PARTICIPATE IN AN ACTION AGAINST any of the Releasees
under municipal, local, state or federal law, common or statutory, for any
actions or omissions whatsoever, whether known or unknown and whether connected
with the employment of Holsted by the Companies or not, except as may be
required in response to lawful judicial process.
3. From and after the effective date of this Agreement, Holsted agrees
that he will keep the terms, amount and fact of this Agreement STRICTLY AND
COMPLETELY CONFIDENTIAL and that he will not communicate or otherwise disclose
the terms, amount or fact of this Agreement to any employee of the Companies
(past, present or future) or to a member of the general public, except as may be
required in response to lawful judicial process.
4. Holsted waives and forever releases any right or rights he might have
to employment, re-employment, reinstatement with the Companies and any of the
Releasees named in this Agreement.
5. Holsted agrees to surrender all keys and tangible personal property
belonging to the Companies and represents that he has returned to and left in
the custody of the Companies all documents and property, including but not
limited to computers, computer netport cards, papers, keys, files, records,
books or other materials belonging to the Companies or any other Releasee,
whether in writing, or recorded by manual or electronic means, whether located
at Holsted's residence or the offices of the Companies.
6. Holsted acknowledges that by virtue of his employment with the
Companies, he acquired knowledge and experience and/or was a participant or
witness to events and circumstances that may be important in pending and future
litigation, arbitration and/or administrative proceedings involving the
Companies. Holsted agrees to cooperate fully with all reasonable requests of the
Companies, at the Companies' expense, in conjunction with any such litigation,
arbitration and/or administrative proceedings involving the Companies which
cover a time period in which Holsted was employed by the Companies. Holsted also
agrees that he will not, without the prior written consent of the Companies,
cooperate with or assist any person or entity which is or which may become an
adverse
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 2
- --------------------------------------------------------------------
<PAGE>
party to the Companies or any of the Releasees in any litigation, arbitration
and/or administrative proceeding, or disclose or make available to such person
or entity any information or documents which may be relevant to such, except as
may be required by law or compulsory process.
7. Holsted acknowledges that during the course of employment, he had
access to and did receive confidential information about the Companies,
including customer lists and other trade secrets; Holsted represents and
covenants that he will in no way divulge, use or in any way employ such
confidential information; provided, however, that this Agreement does not
prohibit Holsted from using the occupational skill of franchising in his future
employment.
8. Holsted acknowledges that he is indebted to the GBS for the sum shown
on Exhibit "A" attached hereto.
9. Holsted and the Companies agree that they shall effect a final
reconciliation of all outstanding business expense advances and/or reports and
the like within 30 days after the effective date hereof.
10. Holsted and the Companies warrant and represent to one another that
they will not undertake any future conduct which is intended to damage any of
the franchise systems affiliated with the Companies or which discredits Holsted
or the Companies in the eyes of franchisees, the franchise community or third
parties.
11. In consideration for this Agreement, the Companies agree to do the
following:
(a) excuse and release Holsted's indebtedness to GBS in the amount
shown on Exhibit "A" attached hereto; a portion of said amount, to be
determined in the final reconciliation of accounts referred to in Section
9 above, shall be added to Holsted's W-2 for calendar year 1995 as income
and Holsted shall be liable for all tax obligations, if any, with respect
to this sum;
(b) pay Holsted the equivalent of his salary as of the effective date
of this Agreement in accordance with the Companies' usual bi-weekly payroll
period for a period commencing on Friday, March 31, 1995 and concluding on
Friday, June 9, 1995. The amounts paid shall be subject to withholding as
required by law;
(c) as to any obligations or liabilities not released in subsection
11(a), the Companies, for themselves and on behalf of any parent,
subsidiaries, affiliated and related corporations, firms, associations,
partnerships and entities, and their successors and
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 3
- --------------------------------------------------------------------
<PAGE>
assigns, and the current and former owners, shareholders, directors,
officers, employees, agents, attorneys, representatives and insurers of
said corporations, firms, associations, partnerships and entities, and
their guardians, successors, assigns, heirs, executors and administrators,
does irrevocably and unconditionally release, acquit and forever discharge
Holsted, his heirs, assigns, successors, executors, administrators and
attorneys, from any and all claims, complaints, grievances, liabilities,
obligations, promises, agreements, damages, causes of action and expenses
(including attorneys' fees and expenses) whatsoever, and covenants not to
sue, or otherwise consent to voluntarily participate in any action against
Holsted, his heirs, assigns, successors, executors, administrators and
attorneys, under municipal, local, state or federal law, common or
statutory, for any actions or omissions whatsoever, whether known or
unknown and whether connected with the employment of Holsted by the
Companies or not, except as may be required by law or compulsory process.
12. Holsted and the Companies recognize that by entering into this
Agreement, the Companies and Holsted do not admit and do specifically deny any
violation of any local, state or federal law, common or statutory. Holsted and
the Companies further recognize that this Agreement has been entered into in
release and compromise of any claims which might be asserted by Holsted or the
Companies in regard to Holsted's employment by the Companies and to avoid the
expense and burden of any litigation related thereto.
13. This Agreement constitutes the entire Agreement of the parties hereto
and supersedes all prior and contemporaneous negotiations and agreements, oral
or written. All rights, duties and remedies provided by this Agreement to the
parties hereto are independent of and not affected by any release or forbearance
which is part of this Agreement. All prior and contemporaneous negotiations and
agreements are deemed incorporated and merged into this Agreement and are deemed
to have been abandoned if not so incorporated. No representations, oral or
written, are being relied upon by either party in executing this Agreement,
other than the express representations of this Agreement. This Agreement cannot
be changed or terminated orally.
14. This Agreement shall be governed by and construed in accordance with
the laws of the state of Texas.
15. SIGNED AND EXECUTED at Waco, Texas this 21st day of March, 1995.
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 4
- --------------------------------------------------------------------
<PAGE>
THE COMPANIES:
THE DWYER GROUP, INC.
BY: /s/ Robert E. Tunmire
-------------------------------------
Robert E. Tunmire, President
GENERAL BUSINESS SERVICES, INC.
BY: /s/ Robert E. Tunmire
-------------------------------------
Robert E. Tunmire, CEO
EDWIN K. WILLIAMS & CO.
BY: /s/ Robert E. Tunmire
-------------------------------------
Robert E. Tunmire, CEO
By my signature below, I represent that I have been given adequate time to
consider this Agreement. I have fully read and understand this Agreement and I
sign it of my own free will.
/s/ Douglas C. Holsted
----------------------------------------
Douglas C. Holsted
THE STATE OF TEXAS (S)
(S)
COUNTY OF McLENNAN (S)
BEFORE ME, the undersigned authority, on this day personally appeared
ROBERT E. TUNMIRE, PRESIDENT of THE DWYER GROUP, INC., and acknowledged that he
executed the same as the act of THE DWYER GROUP, INC. in the capacity stated and
as the act of all other legal persons or entities claiming through or being
released through THE DWYER GROUP, INC. for the purpose and consideration therein
expressed.
Given under my hand and seal of office on this 21st day of March, 1995.
[SEAL OF MICHAELE WEATHERBIE /s/ Michaele Weatherbie
APPEARS HERE] -----------------------------
Notary Public, State of Texas
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 5
- --------------------------------------------------------------------
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF McLENNAN (S)
BEFORE ME, the undersigned authority, on this day personally appeared
ROBERT E. TUNMIRE, CHIEF EXECUTIVE OFFICER of GENERAL BUSINESS SERVICES, INC.,
and acknowledged that he executed the same for the purpose and consideration
therein expressed, and in the capacity therein stated.
Given under my hand and seal of office on this 21st day of March, 1995.
[SEAL OF MICHAELE WEATHERBIE /s/ Michaele Weatherbie
APPEARS HERE] -----------------------------
Notary Public, State of Texas
THE STATE OF TEXAS (S)
(S)
COUNTY OF McLENNAN (S)
BEFORE ME, the undersigned authority, on this day personally appeared
ROBERT E. TUNMIRE, CHIEF EXECUTIVE OFFICER of EDWIN K. WILLIAMS & CO., and
acknowledged that he executed the same for the purpose and consideration therein
expressed, and in the capacity therein stated.
Given under my hand and seal of office on this 21st day of March, 1995.
[SEAL OF MICHAELE WEATHERBIE /s/ Michaele Weatherbie
APPEARS HERE] -----------------------------
Notary Public, State of Texas
THE STATE OF TEXAS (S)
(S)
COUNTY OF McLENNAN (S)
BEFORE ME, the undersigned authority, on this day personally appeared
DOUGLAS C. HOLSTED, and acknowledged that he executed the same for the purpose
and consideration therein expressed.
Given under my hand and seal of office on this 21st day of March, 1995.
[SEAL OF MICHAELE WEATHERBIE /s/ Michaele Weatherbie
APPEARS HERE] -----------------------------
Notary Public, State of Texas
MUTUAL SETTLEMENT AGREEMENT, GENERAL RELEASE AND COVENANT NOT TO SUE -- PAGE 6
- --------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C>
General Business Services, Inc.
Doug Holsted Bonus Activity
12/31/94 (PRELIMINARY)**
HOLSTED
2.5% BONUS
----------
1994 GBS NET INCOME $351,049.05
ADD:
Provision for Federal Income Tax $243,793.29
Bonus Expensed during 1994 $20,227.07
PRE TAX/PRE BONUS INCOME $615,069.41 $15,376.74
LESS PAYMENTS DURING 1994:
ck 101202 Jul-94 ($9,713.41)
ck 101395 Oct-94 ($8,197.00)
ck 302440 Sep-94 ($5,000.00)
-----------
PRELIMINARY TOTAL OVERPAID TO DOUG FOR 1994 BONUS ($7,533.67)
===========
</TABLE>
**THIS SCHEDULE IS SUBJECT TO CHANGE AS A RESULT OF AUDIT ADJUSTMENTS
WHICH MAY BE RECEIVED SUBSEQUENT TO TODAY'S DATE OF MARCH 20, 1995.
Page 1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,412,783
<SECURITIES> 0
<RECEIVABLES> 12,619,055
<ALLOWANCES> 656,213
<INVENTORY> 169,909
<CURRENT-ASSETS> 7,336,804
<PP&E> 1,780,621
<DEPRECIATION> 580,123
<TOTAL-ASSETS> 19,717,169
<CURRENT-LIABILITIES> 1,940,054
<BONDS> 264,231
<COMMON> 723,556
0
0
<OTHER-SE> 12,896,785
<TOTAL-LIABILITY-AND-EQUITY> 19,717,169
<SALES> 4,354,516
<TOTAL-REVENUES> 10,632,641
<CGS> 178,578
<TOTAL-COSTS> 9,562,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 109,887
<INTEREST-EXPENSE> 38,075
<INCOME-PRETAX> 1,070,595
<INCOME-TAX> 299,765
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 770,830
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
