SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended October 31, 1996
---------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934.
For the transition period from to
------------- -------------
Commission File Number 0-14821
---------------
MAIL BOXES ETC.
- -------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0010260
- ------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
6060 Cornerstone Ct. West, San Diego, California 92121
- ------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 455-8800
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, No Par Value 11,212,928
- --------------------------- --------------------------------
(Class) (Outstanding at October 31, 1996)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
MAIL BOXES ETC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<CAPTION>
October 31, April 30,
ASSETS 1996 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $3,382 $1,416
Restricted cash - franchisee deposits 1,993 2,073
Short-term investments 24,665 21,825
Accounts receivable, net 6,503 6,799
Receivable from National Media Fund 0 770
Inventories 769 544
Current portion of notes receivable 7,407 6,756
Current portion of net investment
in sales-type and direct financing
leases 1,792 2,414
Deferred income taxes 1,846 1,846
Re-acquired area and center rights held
for resale 724 638
Other current assets 2,510 1,063
--------- ---------
Total current assets 51,591 46,144
Notes receivable, net 9,954 10,831
Net investment in sales-type and direct
financing leases 7,412 7,518
Property and equipment, net 5,204 5,381
Excess of cost over assets acquired, net 412 441
Re-acquired area rights 5,318 3,240
Deferred income taxes 1,307 1,307
Other assets 892 904
--------- ---------
Total assets $82,090 $75,766
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $2,384 $2,096
Franchisee deposits 2,708 2,619
Royalties, referrals and commissions
payable 2,489 2,515
Accrued employee expenses and related
taxes 1,034 1,963
Other accrued expenses 1,818 2,012
Accrual for litigation settlement 5,000 --
Income taxes payable -- 838
Current maturities of debt and notes
payable 311 958
--------- ---------
Total current liabilities 15,744 13,001
Long-term debt, net of current
maturities 2,923 1,402
Shareholders' equity:
Preferred stock, no par value, 10,000,000
shares authorized, with none issued and
outstanding -- --
Common stock, no par value, 40,000,000
shares authorized, with 11,212,928 and
11,139,698 shares issued outstanding
at October 31, 1996 and April 30, 1996,
respectively 15,404 14,944
Retained earnings 48,019 46,419
--------- ---------
Total shareholders' equity 63,423 61,363
--------- ---------
Total liabilities and shareholders'
equity $82,090 $75,766
========= =========
</TABLE>
See accompanying notes.
<TABLE>
MAIL BOXES ETC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three months ended Six months ended
10/31/96 10/31/95 10/31/96 10/31/95
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Royalty and marketing fees $7,985 $6,838 $15,586 $13,301
Franchise fees 2,736 2,642 4,531 4,422
Sales of supplies and
equipment 3,899 3,427 6,929 5,885
Interest income on leases
and other 2,163 1,679 4,151 3,363
Company centers 264 511 630 929
--------- --------- --------- ---------
Total revenues 17,047 15,097 31,827 27,900
Cost and Expenses:
Franchise operations 4,328 3,301 8,488 6,499
Franchise development 1,742 1,588 2,954 2,752
Cost of supplies and
equipment sold 2,912 2,867 5,189 4,807
Marketing 1,713 1,000 3,061 2,174
General and administrative 2,099 2,526 4,341 4,904
Company centers 284 521 680 946
Litigation settlement
expenses 5,000 -- 5,000 --
--------- --------- --------- ---------
Total cost and expenses 18,078 11,803 29,713 22,082
Operating Income (loss) (1,031) 3,294 2,114 5,818
Interest on investments and
other 220 142 476 276
--------- --------- --------- ---------
Income (loss) before
provision (benefit) for
income taxes (811) 3,436 2,590 6,094
Provision for income taxes (341) 1,345 990 2,381
--------- --------- --------- ---------
Net income (loss) $(470) $2,091 $1,600 $3,713
========= ========= ========= =========
Net income (loss) per
common share: $(.04) $ .18 $ .14 $ .33
========= ========= ========= =========
Weighted average common and
common equivalent shares
outstanding 11,198 11,488 11,774 11,362
========= ========= ========= =========
</TABLE>
See accompanying notes.
<TABLE>
MAIL BOXES ETC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six months ended October 31,
1996 1995
------------ -----------
<S> <C> <C>
Operating Activities:
Net income $1,600 $3,713
Adjustments to reconcile net income to net
cash provided from (used in) operating
activities:
Depreciation and amortization 523 511
Gain on sale of equipment under
sales-type lease agreements (241) (361)
Changes in assets and liabilities:
Restricted cash 80 411
Accounts and notes receivable 461 (1,349)
Receivable from National Media Fund 770 550
Assets leased to franchisees and
inventories (1,032) (818)
Re-acquired area and center rights (86) 254
Other current assets (1,447) (349)
Other assets (191) 202
Accounts payable 288 1,004
Franchisee deposits 89 (381)
Royalties, referrals and commissions
payable (26) (152)
Accrued employee expenses and related
taxes (929) (30)
Other accrued expenses and litigation 4,806 648
Income taxes payable (838) (589)
--------- ---------
Net cash flows provided from operating
activities 3,827 3,264
Investing Activities:
Net change in short-term investments (2,840) (2,999)
Additions to property and equipment (215) (166)
Principal payments received on sales-type
leases 1,777 1,895
Re-acquired area rights (339) --
--------- ----------
Net cash flows (used in) investment
activities (1,617) (1,270)
Financing Activities:
Borrowings under revolving loan 930 1,300
Repayments under revolving loan (1,700) (1,850)
Repayments on notes payable (136) (63)
Repurchase of common shares (283) (220)
Proceeds from the issuance of common shares 945 909
--------- ----------
Net cash flows provided from (used in)
financing activities (244) 76
Increase in cash and cash equivalents 1,966 2,070
Cash and cash equivalents at beginning of
period 1,416 391
--------- ----------
Cash and cash equivalents at end of period $3,382 $2,461
========= ==========
Supplemental Disclosure for Cash Flow
Information:
Cash paid during the period for income
taxes $3,270 $3,431
Interest 85 85
Supplemental Schedule with Non-Cash Investment
and Financing Activities:
Equipment sold under sales-type agreements $1,048 $1,389
Additions to debt for acquisition of
equipment -- 110
Additions to debt for acquisition of Area
rights 1,780 --
</TABLE>
See accompanying notes.
PART I - FINANCIAL INFORMATION
MAIL BOXES ETC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1. BASIS OF PRESENTATION:
Note 1. Presentation
The condensed consolidated balance sheet as of October 31, 1996, the
condensed consolidated statements of operations for the three-month periods
and six-month periods ended October 31, 1996 and 1995, and the condensed
consolidated statements of cash flows for the six-month periods then ended
have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations,
and cash flows have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. In addition, certain Risk Factors may also
impact future financial reports. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the 1996 Annual Report on Form 10-K,
as well as the Risk Factors discussed in the Form 10-K Report. The results
of operations for the quarter and the six months ended October 31, 1996 are
not necessarily indicative of the operating results for the full year.
Certain reclassifications have been made to prior period balances to conform
to current period presentations.
Note 2. Litigation
On November 6, 1996, the Company entered into a comprehensive settlement of
various lawsuits and claims made by certain franchisees in several lawsuits
being pursued in San Diego County Superior Court.
Under the settlement agreement, the Company agreed to pay $4 million in cash
and deliver an aggregate amount of 39,080 shares of its common stock over a
period of two years. This settlement expense is reflected in the Company's
financial results for the second quarter ended October 31, 1996, by
establishing a $5 million reserve.
The Company is still involved in various other lawsuits and potential claims
from its franchisees which arise in the ordinary course of the Company's
business. While the Company cannot predict the outcome of all other matters,
management does not believe that the disposition of these other matters will
have a material adverse effect on the Company's results of operations
or financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Three months ended October 31, 1996 compared to Three months ended October 31,
1995:
Revenues for Mail Boxes Etc. ("MBE" or the "Company") for the three months
ended October 31, 1996, increased by $1.950 million or 13% from the same quarter
of the prior year. Revenues from royalty and marketing fees increased by
$1.147 million or 17% over the prior period. The increase in royalty and
marketing fees is due to the approximately 10% same-store sales increase
experienced by the network during the second quarter of FY 97 and the
increased number of centers in operation to 3,211 at October 31, 1996,
compared with 2,894 at October 31, 1995. At close of business on October 31,
1996, there were 2,712 domestic centers and 499 centers outside the U.S.A.
for a total of 3,211 centers operating worldwide.
Total franchise fees, which mostly consist of individual, renewal and transfer,
master license, and international sales, increased by $94 thousand or 4%.
Revenues from domestic, individual franchise fees increased by $479 thousand
or 26% compared to the three months ended October 31, 1995. This resulted
from the sale of 100 new individual franchises during the second quarter of
FY 97 as compared to 80 during the second quarter of FY 96. The remainder
of this revenue category includes international sales of individual and area
franchises by master licensees for $65 thousand which represents 41%
increase, and transfer and renewal fees of $292 thousand which represents a
21% increase over same period in FY 96. There were no sales of master
licenses in the second quarter of FY 97 as compared to $515 thousand in the
same period of FY 96.
Revenues from the sale of supplies and equipment increased by $472 thousand
or 14% despite the slight decrease in the number of centers opening in the
quarter ended October 31, 1996, compared to the same period of FY 96. This
increase was due to the emphasis on existing centers upgrades. The sales
margin increased from 16% to 25% due to a more favorable sales mix in the
second quarter of FY 97 compared to the same period of FY 96. In the second
quarter 1996 there were also more sales of software and computer components
which have higher gross margins. Interest income on leases and other
increased by $484 thousand or 29% as compared to the three months ended
October 31, 1995. The major components of this revenue category include
interest income earned on leases and notes receivable, late fees, finance
charges, training fees, and various administrative fees. Interest income on
leases decreased by $52 thousand or 14%. Interest income on notes
receivable remained virtually the same when compared to the second quarter
of FY 96. Training fees increased by $46 thousand or 19%. Administrative
fees on national vendor contracts increased by $156 thousand or 49% as the
transaction volumes increased. Late fees decreased by $55 thousand or 87% and
finance charges decreased by $26 thousand or 47%. The drastic decline in
those two revenue categories was due to the Company's increased emphasis on
collecting delinquent accounts and implementation of programs to reduce
delinquencies. Revenues from the Company owned and operated centers
decreased by $247 thousand or 48%. This drastic decrease was due to closure
of one of the Company's experimental centers in the second quarter of FY 97.
Cost and expenses for the three months ended October 31, 1996 increased by
$6.275 million or 53% when compared to the three months ended October 31, 1995.
The increase in franchise operations expenses was $1.027 million or 31% over
FY 96 and resulted primarily from the increase in royalties paid to area
franchisees for their share of the royalty income which they earn in part,
by providing ongoing support to the network. These costs will generally
increase in the same manner as the network's royalty revenue growth. Royalties
paid to area franchisees increased by $365 thousand or 14% over second
quarter FY 96. This increase is directly related to the increase in royalty
fees recorded during the second quarter of FY 97. The remaining increase in
the franchise operations expenses was the result of increased effort to
support a larger network. Franchise development expenses increased by $154
thousand or 10%. This increase is due to the increased domestic and
international sales efforts and the increased commissions paid to area
franchisees due to the sale of 20 more centers during the second quarter
of FY 97 when compared to the same period of FY 96.
Cost of supplies and equipment increased slightly by $45 thousand or 2%.
This increase is lower than the increase in sales of supplies and equipment
which resulted in a 56% increase in the gross margin due to a more favorable
product mix in the 3 months ended October 31, 1996 when compared to the same
period ended October 31, 1995.
Marketing expenses increased by $713 thousand or 71% when compared to the
second quarter ended October 31, 1995. This increase is due to the production
of more commercials and an increase in sales advertising in the second quarter
of FY 97. General and administrative expenses decreased by $427 thousand or
17% over the second quarter of FY 96. This decrease is primarily due to the
conclusion of the lawsuits and the decrease in reserves for certain non-
reoccurring items.
The Company centers' cost and expenses decreased by $237 thousand or 45% due
to the closure of one of the company owned centers in the second quarter of
FY 97. A litigation settlement expense of $5 million was incurred in the
second quarter of FY 97 as a result of the reserve created for the settlement
of long standing lawsuits involving 33 former franchise owners and one
current owner.
Other income (interest on investments and other) increased by $78 thousand or
55% for the quarter ended October 31, 1996, compared to the quarter ended
October 31, 1995. This increase is due to the increase in short-term
investments.
Net income for the three months ended October 31, 1995, decreased from $2.091
million to a net loss of $470 thousand for the quarter ended October 31, 1996,
and earnings (loss) per share decreased from $.18 to $(.04), as a result of the
reserve set aside for the settlement of the lawsuits.
Revenues for the six months ended October 31, 1996 increased by $3.927 million
or 14% over the prior year's same period. Revenues from royalty and marketing
fees increased by $2.285 million or 17% over the prior period. These increases
are the result of growth of the network through the opening of 148 domestic
individual centers and 57 centers outside of the United States during the
first six months of FY 97 and the increase in the same store sales.
Total revenues from franchise fees increased slightly by $109 thousand or 2%
during the first six months of FY 97 when compared to the same period FY 96.
This revenue category consists mostly of individual, renewal and transfer,
master license, and international sales. Revenues from domestic individual
franchise fees increased by $429 thousand or 13% due to the sale of 162 new
centers in the first six months of FY 97 when compared to 145 centers in the
same period of FY 96. There were no sales of master licenses in FY 97 as
compared to $515 thousand in the first half of FY 96. The remainder of this
revenue category includes international sales of individual and area
franchises for $124 thousand which represents a 19% decrease, and transfer
and renewal fees for $598 thousand which represents a 31% increase as
compared to the first half of FY 96.
Revenue from the sale of supplies and equipment increased by $1.044 million
or 18% despite the slight decrease in the number of centers opening in the six
months ended October 31, 1996, compared to the same period of FY 96 as
discussed earlier. Interest income on leases and other increased by $788
thousand or 23%. The major components of this revenue category include
interest income on leases, interest on notes receivable, finance charges, late
fees, training fees, and various administrative fees. Interest income on
leases decreased by $102 thousand due to the lower interest rates. Interest
income on notes receivable remained virtually the same during the first six
months of FY 97 as compared to the first six months of FY 96. Training fees
increased by $36 thousand or 18%. Administration fees on national vendor
contracts increased by $473 thousand or 79% over the same period of FY 96.
Revenues from late fees and finance charges both decreased during the period
ended October 31, 1996 as discussed earlier. Revenues from the company
owned and operated centers decreased by $299 thousand or 32% as compared
to the same period in FY 96 due to the reasons cited earlier.
Costs and expenses for the six months ended October 31, 1996 increased by
$7.631 million or 35% when compared to the six months ended October 31, 1995.
The increase in franchise operations expenses was $1.989 million or 31%. This
increase is mostly due to the increase in royalties paid to area franchisees.
Total royalties paid were $5.786 million for the six months ended October 31,
1996 compared to $5.042 million in the same period last year. This increase
is lower than the 17% increase in royalty fees booked in the first six months
of 1996 because no royalties are paid out on company owned areas. The
remaining increase in the franchise operations expenses was the result of
increased effort to support a larger network.
Franchise development expenses increased by $202 thousand or 7% for the six
months ended October 31, 1996. This increase is due to the increased domestic
and international sales efforts and the increased commissions paid to area
franchisees due to the sale of 17 more centers during the first six months
of FY 97 as compared to the same period of FY 96. Costs of supplies and
equipment increased by $382 thousand or 8% as compared to the six months ended
October 31, 1995. This increase is partially due to the increase in sale of
supplies and equipment. Gross margin increased from 18% to 25% due to the
favorable product mix.
Marketing expenses increased by $887 thousand or 41% when compared to the six
months ended October 31, 1995. This increase is due to the production of more
commercials and an increase in sales advertising in the first half of FY 97.
General and administrative expenses decreased by $563 thousand or 11% in the
first six months of FY 97 over the six months period ended October 31, 1995.
This decrease is due to the decreased reserves for certain non-reoccurring
items and termination of the lawsuits. The company owned centers cost
decreased by $266 thousand or 28% over the same period of FY 96. This
decrease is due to the closure of one of the company centers in second quarter
of FY 97.
Litigation settlement expenses increased by $5 million because of establishing
reserves for settlement of long standing lawsuits involving 33 former franchise
owners and one current owner.
Other income (interest on investments and other) increased by $200 thousand
or 72% for the six months ended October 31, 1996, compared to the six months
ended October 31, 1995, due primarily to the increase in short-term investments.
Net income decreased by $2.113 million or 57% and earnings per share decreased
by 58% for the six months ended October 31, 1996, compared to the six months
ended October 31, 1995. This decrease is due to the settlement of the lawsuits.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at October 31, 1996 was $35.847 million compared to $33.143
million at April 30, 1996. The company believes it has adequate financial
resources for its present and projected operating requirements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In early November 1996, the Company entered into a comprehensive settlement
agreement resolving all of the claims brought by the owners of 33 former MBE
Centers and one current MBE Center. As described in the Company's 10-Q Report
for the quarter ended July 31, 1996, and in the 10-K Report for the year ended
April 30, 1996, these claims were being pursued in lawsuits filed in San
Diego County Superior Court. These suits were entitled Mail Boxes Etc. USA,
Inc v. B.J. Postal Services et al.; The Helm Group, Inc. et al. v. Mail Boxes
Etc. USA, Inc.; and Conklin, et al. v. Mail Boxes Etc. USA, Inc.
The settlement provides that Mail Boxes Etc. will pay $4 million in cash and
deliver an aggregate amount of 39,080 shares of its common stock over a
period of two years. Under the settlement agreement, the complaints of the
current and former franchisees are resolved without any admission of
liability on the part of the Company. It was also agreed that all of the Mail
Boxes Etc. franchisees involved in the lawsuits who are no longer in the MBE
franchise system would completely remove any remaining MBE trademarks and
logos from their stores.
ITEM 6.
(a) EXHIBITS
10. Employment Agreement between James H. Amos, Jr. and the Company.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended October 31, 1996.
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.
MAIL BOXES ETC.
-----------------------
Registrant
By: Gary S. Grahn Date: 12/11/96
------------------------------- ------------
Gary S. Grahn
Chief Financial Officer
EXHIBIT 10
9/18/96
EMPLOYMENT AGREEMENT
This is an agreement between Mail Boxes Etc. USA, Inc. ("MBE") and James H.
Amos, Jr. ("Amos") to be effective as of September 19, 1996 ("Effective Date").
The purpose of this agreement is to set forth the terms and conditions under
which Amos will be employed by MBE.
1. Term of Employment. MBE will employ Amos for a definite period of time
beginning on the Effective Date, and continuing through September 30, 1997.
The employment may be terminated before September 30, 1997, only if there is
good cause for termination or if there is a sale or merger of MBE. "Good
cause for termination" is limited to intentional misconduct, gross negligence,
insubordination, dishonesty, or inability or refusal to perform your duties.
The employment will automatically continue on and after October 1, 1997
(unless, before then, the employment has been terminated for good cause or
due to a sale or merger) on an "at will" basis unless and until either MBE
or Amos tender to the other a written notice of termination, which notice
will be tendered at least 30 days before the effective date of the termination.
As is more fully set forth in the MBE Employment Handbook, "at will" employment
means employment with the Company is entered into voluntarily for no definite
period of time. Therefore, when employment with MBE is "at will," Amos is free
to resign at any time for any reason and, similarly, MBE is free to conclude
the employment relationship at any time for any reason. If, at any time after
September 30, 1997, the employment is terminated by MBE for any reason other
than good cause for termination (as defined above) or a sale or merger of MBE, \
then MBE will continue to pay to Amos his base salary set forth below, and
will continue to provide medical insurance coverage (under the then-existing
terms of MBE's medical insurance plan), for six months after the date of such
termination.
2. Title and Responsibilities. While employed by MBE, Amos will have the
title of President and Chief Operating Officer, and he will have responsibility
for the general management of the operations of MBE and the MBE Network.
3. Reporting. Amos will report directly to A. W. DeSio, Chief Executive
Officer, or as otherwise directed.
4. Salary. MBE will pay to Amos a base salary of $220,000 per year. In
addition, for the duration of his employment by MBE, Amos will be considered
for annual bonuses and stock options (in addition to those set forth below)
based on the same criteria as other officers of MBE.
5. Benefits. MBE will provide Amos the same "perks" that MBE provides to
other officers of MBE, including but not limited to vacation and sick leave,
participation in MBE's profit sharing plan, health plan, and 401(k) plan, and
the use of a Company van under the same terms and conditions as those
applicable to other officers of MBE.
6. Stock Options.
a. Subject to the terms and conditions of the Mail Boxes Etc. 1995
Employee Stock Option Plan ("Stock Option Plan"), Amos will be granted an
initial option to purchase 50,000 shares of MBE common stock with an exercise
price equal to the NASDAQ price per share at closing on the Effective Date
(the "Option Price"). The options shall vest over a four year period at
twenty-five percent (25%) per year on October 1, 1997, October 1, 1998,
October 1, 1999, and October 1, 2000, respectively, provided Amos is currently
employed by MBE on those dates, except that the options scheduled to vest on
October 1, 1997 shall vest on that date if Amos is employed on September 30,
1997. In addition, as set forth in the Stock Option Plan, the stock options
may be exercised only if Amos is employed by MBE on the date of exercise or may
be exercised within 90 days after the date of termination of employment.
b. In addition, in the event an agreement for the sale or merger of MBE
is entered into prior to September 30, 2000, then all of Amos' options shall
immediately vest and become exercisable as provided in the Plan, provided that
either (i) Amos is then employed by MBE or (ii) the employment of Amos
terminated no more than 90 days before the public announcement of the sale or
merger of MBE.
7. Sale or Merger of MBE.
a. In the event that a sale or merger of MBE occurs or is publicly
announced prior to October 1, 1998, Amos will have, in addition to the options
set forth above, a nonqualified option to purchase for the Option Price, as
defined above, 25,000 shares of common stock. This option will vest on the
day on which there is a public announcement of such sale or merger, and may
be exercised at any time from that day until the time of the sale or merger,
at which time the option provided by this paragraph will terminate.
b. If Amos' employment is terminated solely due to a sale or merger of
MBE within the first 24 months, MBE will continue to pay to Amos his base salary
set forth above, and will continue to provide medical insurance coverage (under
the then-existing terms of MBE's medical insurance plan), for one year after the
date of such termination.
8. Housing. MBE will pay the rent for a home to be leased by Amos in San
Diego until June 30, 1997, or until Amos sells his home in Plano, Texas,
whichever occurs first; provided, however, that MBE shall not be obligated
to pay more than $2,500 per month in rent pursuant to this paragraph.
9. Moving Expenses. MBE will pay reasonable expenses incurred to move Amos
and his belongings from Plano, Texas to San Diego. Amos agrees to inform the
Chief Financial Officer of MBE of the amount of moving expenses to be incurred,
and to obtain his approval of the amount, before the expenses are incurred.
All relocation expenses (including but not limited to rent under Paragraph
No. 8 above) to be paid directly by MBE and all relocation expenses to
be paid initially by Amos but subsequently reimbursed by MBE will be "grossed
up" so that Amos will be made whole for any and all income-tax liability
(either state or federal or both) resulting from any such payment or
reimbursement being treated as taxable income to Amos.
10. Entire Agreement. The entire agreement between MBE and Amos is set
forth in this agreement and in the other documents and plans referenced herein,
including but not limited to the MBE Employee Handbook, the MBE Employment
Arbitration Agreement, and the Mail Boxes Etc. 1995 Employee Stock Option Plan,
and neither party is relying on any representations or warranties not set
forth in this agreement or in a document referenced herein.
To memorialize their agreement to the terms and conditions set forth above,
MBE and Amos now affix their signatures below.
MAIL BOXES ETC. USA, INC.
By: A.W. DeSio
---------------------------------
A. W. ("Tony") DeSio, President
and Chief Executive Officer
James H. Amos, Jr.
---------------------------------
JAMES H. AMOS, JR.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<PERIOD-TYPE> 6-MOS
<CASH> 5,375
<SECURITIES> 24,665
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0
0
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</TABLE>
