-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VApE893OXyjNY9h9ivtvLJiiQv6h8grCQbWsKl1ME1ut36hYiOD8K34NAmoUkvov jhMmtYzx3N5vggtL3ytMjg== 0000791014-96-000016.txt : 19961216 0000791014-96-000016.hdr.sgml : 19961216 ACCESSION NUMBER: 0000791014-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAIL BOXES ETC CENTRAL INDEX KEY: 0000791014 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 330010260 STATE OF INCORPORATION: CA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14821 FILM NUMBER: 96680021 BUSINESS ADDRESS: STREET 1: 6060 CORNERSTONE CT CITY: SAN DIEGO STATE: CA ZIP: 92121-3791 BUSINESS PHONE: 6194558800 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended 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 MAIL BOXES ETC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
October 31, April 30, ASSETS 1996 1996 ------------ ------------- (Unaudited) 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 ========= =========
See accompanying notes. MAIL BOXES ETC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three months ended Six months ended 10/31/96 10/31/95 10/31/96 10/31/95 ---------- ---------- ---------- ---------- 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 ========= ========= ========= =========
See accompanying notes. MAIL BOXES ETC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six months ended October 31, 1996 1995 ------------ ----------- 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 --
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 EX-10 2 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. EX-27 3 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 1997 10-Q
5 1,000 APR-30-1997 MAY-01-1996 OCT-31-1996 6-MOS 5,375 24,665 27,296 3,432 769 51,591 9,742 4,538 82,090 15,744 0 0 0 15,404 48,019 82,090 6,929 31,827 5,189 29,713 0 0 0 2,590 990 1,600 0 0 0 1,600 .14 .14
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