Source: http://www.freefranchisedocs.com/ups-store-UFOC.php
Timestamp: 2019-04-23 16:51:58+00:00

Document:
The franchisee will own and operate a The UPS Store® service business featuring shipping, packaging, postal, business, and communication services.
Only if you and MBE agree to enter into a non-mandatory Center Option Agreement, you must pay a Center option fee, the amount of which is negotiated between MBE and you based upon the number of Centers, the length of the option term and the size and value of the option territory. The initial franchise fee is $29,950 if this is your first Center and $19,950 if this is your second or subsequent Center. To qualify for a multiple center discount initial Franchise Fee, you must own fifty percent (50%) or greater of the ownership interest in at least one of your existing Franchises and in this new franchise. As set forth in this circular, the initial franchise fee may be lower if you participate in one of these programs: Rural, Veterans, Conversion, or Special Venue. The estimated initial investment required for a traditional (non-Rural and non-Veterans) Center ranges between $170,766 and $279,375.
SUBJECT TO APPLICABLE LAW, THE FRANCHISE AGREEMENT PERMITS THE FRANCHISEE TO SUE MAIL BOXES ETC., INC. ONLY IN CALIFORNIA. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE MAIL BOXES ETC., INC. IN CALIFORNIA THAN IN YOUR HOME STATE.
THE FRANCHISE AGREEMENT STATES THAT CALIFORNIA LAW GOVERNS MOST OF THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
Information about comparisons of franchisors is available. Call the state administrators listed in Exhibit 7 or your public library for sources of information.
Registration of this franchise with the state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the appropriate State agency listed in Exhibit 7.
The effective dates of this offering circular in the states with franchise registration laws (and where Mail Boxes Etc., Inc. must file an annual registration renewal or annual exemption renewal) are set forth in Exhibit 7 (List of State Administrators).
C. Conditional Assignment of Telephone Number, etc.
To simplify the language in this offering circular, the words "MBE", "we", "our" and "us" refer to Mail Boxes Etc., Inc., the franchisor. "You" means the person or entity who buys the franchise.
As required by law, this offering circular has been prepared in "plain Enghsh." To fully understand all your and our rights and obligations to each other, you must still carefully review the actual agreements that you will execute. These will control if there is any dispute between us.
Only if mutually desired by you and MBE, you and MBE may enter into a non-mandatory Center Option Agreement (Exhibit 2). This gives the option holder the exclusive conditional right to secure the real estate and franchise rights for a Center within a particular geographic area. Not all option holders become our franchisees. See Exhibit 2 for details.
You will sign a Franchise Agreement (Exhibit 1), to operate a single Center at a location, which you choose, subject to our acceptance. Centers are generally located in highly visible locations in strip shopping centers or in high foot-traffic downtown areas.
The market for the goods and services you will sell is established, and your customers will be the general public. You will have to compete for this market with other businesses selling the same or similar products and services on a local, regional and national basis. You may also compete with specialty service providers such as copy centers, quick print centers and office supply companies. We believe you can compete effectively as a result of the broad range of products and services you may offer to customers, our marketing programs, service arrangements, advertising and promotion programs and service distribution network. Centers will be operated year round, although we anticipate that a substantial portion of your sales may occur during the holiday season.
In addition to offering a franchise opportunity in "traditional" Center locations, MBE also offers a franchise opportunity at "Special Venues" as that term is defined in the Franchise Agreement, which includes colleges, universities, hotels, resorts, military bases, convention centers, airports, self-storage facilities, inside other retailers ("store-within-store"), office buildings, bus or train stations, and outlet or regional malls. The Franchise Agreement offers you a right of first refusal to develop Special Venues in your franchise Territory.
MBE also offers a "Rural Program" for certain small-town markets. One of the key features of this program is a reduction in the capital requirements associated with these Rural Program Centers. See Item 5 of this Offering Circular for a description of the reduced Initial Franchise Fee under the Rural Program. See Item 7 for a description of the reduced start-up costs under the Rural Program.
We also offer Area Franchises by a separate circular. Area Franchisees are authorized to assist us in the sale of individual franchises within a protected territory, in return for a portion of the franchise fee. In markets where we utilize Area Franchisees, Area Franchisees also assist us by providing services to franchisees in their territory. We retain the right to provide support from our corporate office and are not required to have an Area Franchisee located in your franchise territory.
Our predecessor, Mail Boxes Etc. USA, Inc., was incorporated in California in May 1980. Mail Boxes Etc. USA, Inc. is a wholly owned subsidiary of Mail Boxes Etc., which is a California corporation that was incorporated in November, 1993. Both of these corporations changed their name after April 30,2001.
On April 30, 2001, United Parcel Service General Services Co., ("UPS General Services," an indirect wholly owned subsidiary of United Parcel Service, Inc., both Delaware corporations) acquired substantially all of the assets, and some of the liabilities (but none of the stock) of Mail Boxes Etc. and Mail Boxes Etc. USA, Inc. Immediately thereafter, all such acquired assets and liabilities, other than goodwill and long term investments, were transferred by UPS General Services to United Parcel Service of America, Inc. ("UPS of America"). Immediately thereafter, all such transferred assets and liabilities that were transferred from UPS General Services to UPS of America - except for all MBE-related intellectual property - were transferred to UPS of America's wholly owned subsidiary, "Mail Boxes Etc., Inc.," a Delaware corporation that was incorporated on March 9, 2001, and referred to in this offering circular as "MBE," "we," "our" and "us."
Accordingly, as of April 30, 2001: (1) neither Mail Boxes Etc., nor Mail Boxes Etc. USA, Inc. hold any ownership interest in the assets of the new franchisor company, "Mail Boxes Etc., Inc." and (2) neither United Parcel Service, Inc. nor any of its wholly owned subsidiaries (including but not limited to "Mail Boxes Etc., Inc.") holds any ownership interest in (or responsibility for the liabilities of) Mail Boxes Etc. (the former parent company) or Mail Boxes Etc. USA, Inc. (the former franchisor company).
Headquartered in Atlanta, UPS is the world's largest express carrier and largest package delivery company, serving more than 200 countries and territories around the world with 2006 revenues of S47.5 billion. (Source: UPS 2006 Annual Report to Shareholders.) Other than through its subsidiary MBE starting on April 30, 2001, UPS has not offered franchises for the same type of business as is described in this circular or any other business.
"Gold Shield." As of March 1, 2007 our domestic franchise network (not including Puerto Rico or the U.S. Virgin Islands) consists of approximately 4,436 Centers, of which approximately 4,253 are The UPS Store and approximately 183 are Mail Boxes Etc.
We also sell master licenses in foreign countries under which the master licensee obtains the exclusive right to develop and operate Centers in one or more foreign countries and the right to sell franchises to others who, in turn, own and operate individual Centers. Most international Centers will be Mail Boxes Etc. but in the future some international Centers may be The UPS Store. We currently own and operate no The UPS Store Centers. We have not offered franchises in any other line of business. As of the date of this Offering Circular, we do not conduct any other business activities.
Various Federal, state, and local laws, rules, and regulations ("laws") may impact the operation of your Center. Examples include: (i) United States Postal Service regulations, including certain forms and notifications to U.S. Postmasters, for example, filing a USPS Form 1583 on each mailbox customer you service, and complying with certain customer return addressing requirements; (ii) laws governing the shipment and transport of hazardous substances, alcoholic beverages, firearms, food, plants, agricultural products, animals; (iii) inspection of scales by the Dept. of Weights and Measures; and (iv) laws requiring you to accept service of process for customers in some States. In addition, many Centers offer notary services. Notaries are usually regulated by state laws, which may require fingerprinting and a competency test. Certain services such as money transfers/money orders may also require fingerprinting or a bond.
You should also investigate whether there are state or local regulations and requirements that may apply in the geographic area in which you intend to conduct business and should consider both their effect and cost of compliance.
Our agents for service of process are listed in Exhibit 8.
Mr. Higberg has been our Director since March 20, 2002 and is currently UPS, Inc.'s Vice President, Corporate Strategy and Retail Channel Management.
Mr. Davis has been our Director, Treasurer and Assistant Secretary since April 2001. He has been Senior Vice President, Chief Financial Officer and Treasurer of UPS, Inc. since the first quarter of 2001. He became UPS, Inc.'s Vice Chairman in December 2006.
Ms. McClure has been our Director, Secretary and Assistant Treasurer since January 1, 2006 and since such time has also served as Senior Vice President-Legal and Compliance, General Counsel and Secretary for United Parcel Service, Inc. ("UPS"). From April 1, 1999 to December 31, 2005 she served as Corporate Legal Department Manager and District Manager for UPS in Atlanta, GA.
Mr. Drisaldi has been our Director since February 2004. From 1996 until August 2003, Mr. Drisaldi was Vice President of Sales for UPS within the Northeast Region. In September 2003, he became Vice President of Sales within the Corporate Retail Services organization. In February 2004, Mr. Drisaldi became Vice President, UPS Corporate Retail Services in Atlanta, GA, with responsibility for all of UPS's retail businesses.
Mr. Mathis has been our President since October 1, 2002. He was our Executive Vice President of Operations from April 2001 until September 2002.
Mr. Thomison has held his current position since February 22, 2007, when he added responsibility for domestic operations to his previous responsibility for operations outside of the U.S. From September 10, 2004 until February 22, 2007 he was responsible for domestic franchise sales plus franchise development and operations outside of the U.S. Mr. Thomison was our Vice President, Domestic Franchises Sales from May 19,2003 to September 10, 2004. From November 3, 1998 through May 16, 2003 he was UPS, Inc.'s Director of Sales for Southeast California.
Mr. Higginson has been our Senior Vice President - Franchise Relations since April 2001.
On January 19, 2005, Tim Davis became our Vice President, Technology. From March 11, 2004 until January 9, 2005 he was General Manager of iShip, Inc. (a wholly-owned, independent subsidiary of United Parcel Service) based in Bellevue, Washington. Tim Davis was our Vice President, Technology on February 28, 2002 until March 10, 2004.
Mr. Inzunza has been our Vice President, Industrial Engineering since May 1, 2003. From May 2003 through October 2005 he also was our Vice President of Product Development & Management. From February 2003 until April 2003, he was our Northeast Region Area Coordinator. From August 2002 through January 2003, he was a project manager at UPS Retail Services in Atlanta.
Mr. Crockett began this position on February 22, 2007. He became our Vice President of Marketing on August 30, 2004. From August 2003 until August 2004, he provided freelance marketing consulting services. From January 2002 through August 2003, Mr. Crockett was Senior Director, Strategy and Innovation for McDonald's Corporation (East Division) in Philadelphia, Pennsylvania.
Ms. Abate has been our Vice President, General Counsel and Assistant Secretary since April 2001.
Kevin Foley became our Vice President of Human Resources and Learning on February 7, 2005. From January 2003 through February 2005, Kevin was UPS's Human Resources Manager in the Great Basin District in Salt Lake City, Utah. From January 2002 through December 2002, Kevin was UPS's Workforce Planning Manager in Buffalo, New York.
Ms. Wehner became our Vice President, Product Development & Management in October 2005. From April 2004 to October 2005 she was our Region Coordinator, Vice President of International Operations. From February 2003 to April 2004 she was our Region Coordinator, Southwest Region. From August 2001 through January 2003 she was our Executive Director, Strategic Marketing.
Ms. Takai began this position on February 22, 2007, managing both international and domestic sales, real estate development, and design and construction. From May 2004 until February 22, 2007, she managed our franchise development outside of the U.S. From 2002 to May 2004, Ms. Takai worked for UPS as Southeast Region International Sales Manager.
Area Franchisees: As disclosed in Item 1, Area Franchisees assist us in providing services to franchisees. Information concerning our Area Franchisees for the State in which your proposed Option Territory or franchise Territory is located is in the attached Exhibit "9."
Carl M. Jacobson. et al. v. Mail Boxes Etc. USA. Inc. and Lawrence Ovian (Middlesex County Superior Court, Massachusetts, Civil Action #92-2746, filed April 1992.) In this case, the plaintiff franchise owners alleged breach of contract, misrepresentation and breach of fiduciary duty and sought damages in excess of $250,000. Our predecessor filed an answer denying all allegations and filed counterclaims. In February 1995, the trial court dismissed all the fraud claims, the fiduciary duty claim and one contract claim. The jury found in favor of our predecessor on the remaining breach of contract claims, but found in favor of Graham on the unfair business practices claim and awarded $167,000 in damages plus approximately $70,000 in attorneys' fees. The Court of Appeals affirmed the trial court's judgment on July 8, 1997, and the Supreme Judicial Court of Massachusetts denied our predecessor's Application for further appellate review. On August 18, 1997, our predecessor settled this matter with all plaintiffs for the sum of $415,000.
Mail Boxes Etc. USA. Inc. v. B. J. Postals Service Corp.. and Edgar L. Trocke (Superior Court of California, County of San Diego, Case #663854, filed April 1993.) Our predecessor filed suit against a former franchise owner and an individual obligor/guarantor for breach of contract and breach of equipment lease agreement. In July 1993, the defendant franchise owner filed an answer and cross-complaint seeking relief for fraud, breach of contract, breach of fiduciary duty, unfair business practices, and tortious breach of the implied covenant of good faith and fair dealing. Based upon discovery, it is believed that the Defendant franchise owner sought damages in excess of $100,000 and approximately $250,000 in punitive damages in addition to unknown damages for emotional distress. This case was consolidated with the Helm case below at Item No. 4. Reference should be made to that case for further discussion of the status of this case.
Helm Group, et al. v. Mail Boxes Etc.. USA. Inc. (Circuit Court of the Eighteenth Judicial Circuit in Seminole, Florida, Case #92-2487-CAI5K, filed September 22, 1992). Plaintiff franchise owners filed their actions alleging breach of contract, fraudulent inducement, rescission, and breach of good faith in entering into their franchise agreement and sought compensatory damages in excess of $15,000 and punitive amounts unknown and believed to be in excess of approximately $250,000. Our predecessor filed a motion to transfer for lack of venue and a motion to dismiss. The motion to transfer was granted, and plaintiffs dismissed the action upon transfer to the federal court in San Diego. Our predecessor also filed a complaint against The Helm Group, et al., in San Diego Superior Court on October 19, 1992 (Case #657375) alleging breach of contract for failure to pay royalties. The Helm Group removed the case to federal court in San Diego, (Case #92-1870) and filed a motion to dismiss for lack of venue, which was granted. The case was dismissed.
relief for breach of contracts, breach of equipment leases, indemnity, inducing breach of contract, tortious interference with contractual relations and common counts. Our predecessor resolved the dispute with one of the franchise owner plaintiffs, who dismissed his claims against our predecessor. On May 24, 1995, the Court decided to proceed with actual trial of the cases of four of the franchise owners as "test cases" in an attempt to help resolve the entire matter. In March 1996, the franchise owners sought to add claims for alleged violation of the California Franchise Investment Act. The court denied the test case franchise owners' request to add the claims but granted the motion as to the remaining plaintiffs. In its final ruling, the court granted our predecessor's motions and dismissed the causes of action relating to earnings claims and working capital and denied the motions relating to the "success rate," unfair business practices and negligent misrepresentation claims. Trial commenced in October 1996. In the course of trial, the parties agreed to settle the four test cases in addition to the following: all but one franchise owner's claims in the Helm action (Item No. 4 - above); all but two franchise owners' claims in the Conklin action (Item No. 6, below); the Watson action (Item No. - 7, below); and the Hider action (Item No. 5, below). Under the comprehensive settlement agreement, in which our predecessor did not admit liability, our predecessor paid $4 million in cash and delivered approximately 39,080 shares of its common stock. It was also agreed that all of the MBE franchise owners involved in the settlement who were no longer in the MBE franchise system would completely de-identify as MBE franchises, including removal of any remaining MBE trademarks and logos from their businesses.
Mail Boxes Etc. USA. Inc. v. Hider. et al. (Superior Court of California, County of San Diego, Case #678314, filed in June of 1994.) Our predecessor filed this action for collection of unpaid promissory notes against a former franchise owner and individual obligors/guarantors. The franchise owner and individual defendants filed an answer and cross-complaint, which, in essence, mirrored the second amended Complaint in the Helm action (Item No. 4 - above). This matter was stayed by the court pending resolution of the four test cases and was settled as discussed in Item 4, above.
Conklin. et al. v. Mail Boxes Etc. USA. Inc. (Superior Court of California, County of San Diego, Case #680260, filed August 26, 1994.) This case was filed by nine franchise owner plaintiffs and also mirrored the second amended complaint in the Helm action (Item No. 4 - above). Plaintiffs sought compensatory damages in an unknown amount, $250,000 each in punitive damages, and damages for emotional distress. This matter was stayed by the court pending resolution of the four test cases and was settled as discussed in Item 4, above.
Mail Boxes Etc. USA. Inc. v. Arthur Watson, et al. (Superior Court of California, Santa Clara County, Case No H-178982-5, filed September 1994.) Our predecessor filed this action seeking damages in excess of $60,000 for breach of the Franchise Agreement, breach of the equipment lease and for repossession of leased equipment. The court denied on equitable grounds, but without prejudice, our predecessor's request for a writ of possession. Defendants filed a counterclaim similar to the claims of the franchise owners in the Helm case (Item No. 4 - above). The court, upon a motion to transfer, transferred the case to San Diego, California. This case was stayed pending trial of the four test cases and was settled as discussed in Item 4, above.
order awarding our predecessor injunctive relief, including the right to take possession of the business premises, operate the business as the former franchise owner's agent, sell the business as an MBE franchise, and assign the business phone number to our predecessor, with monetary damages for unpaid royalties for the period the former franchise owner operated as an independent business, and reasonable attorneys' fees incurred by the plaintiff. Defendants filed an appeal, which was denied, and the trial court judgment was upheld. Defendants sought a motion for reconsideration, which was denied. The parties agreed to resolve the judgment in this matter under which the Defendant turned over possession of the business premises to our predecessor and paid the sum of $43,000 to our predecessor.
Mail Boxes Etc. USA. Inc. v. Nick DeLeone. et al. (Superior Court of California, San Diego, Case No. 686575, filed March 17,1995.) Our predecessor filed this action against franchise owners to collect past due royalties and other sums, among other claims for relief. The franchise owners filed a separate action against MBE and an Area Franchisee, Donna D. Vandenburg. et al. v. Mail Boxes Etc. USA. Inc.. (Case No. 687510). After our predecessor and the other defendants filed motions to dismiss that complaint, the plaintiff franchise owners voluntarily did so. Our predecessor added causes of action to the original case including requests for enforcement of the post-term covenants, fraud, interference with economic advantage, injunctive relief and relief for trademark infringement. The parties agreed in April 1997 to settle this matter with the Defendants paying our predecessor 352,000, assigning to our predecessor any rights they claim to the mark "Etc. Etc." and completely de-identifying as an MBE franchise, as well as agreeing to other miscellaneous items.
LRM Little Boxes. Inc. and Linda Mike v. Mail Boxes Etc. USA. Inc.. et al. (District Court of Minnesota, County of Hennepin, Fourth Judicial District, no case number assigned, filed on or about December 1994.) A franchise owner in Minnesota filed this action against our predecessor, its officers and directors and Tera MB Corp., the Area Franchisee, and its officers, including Robert Clausen. The complaint alleged, among other things, violation of the Minnesota Franchise Act, common law fraud/misrepresentation, breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and promissory estoppel. The matter was submitted to binding arbitration in June 1995, with the arbitrator awarding $49,252 to the franchise owner, terminating the franchise as of May 7, 1995, and directing the respondents to assume the franchise owner's obligations under the real estate and equipment leases.
Emmy Associates. Inc. v. Mail Boxes Etc. USA. Inc. et al. (District Court of Minnesota, County of Hennepin, Fourth Judicial District, no case number assigned, served May 1995.) A franchise owner commenced suit against our predecessor and Robert Clausen, an officer of the Area Franchisee alleging, among other things, fraud/misrepresentation, breach of fiduciary duty, breach of contract, and injunctive relief to prohibit our predecessor from terminating the Franchise Agreement for the franchise owner's failure to pay royalties and other sums due to our predecessor. Our predecessor denied the allegations. This matter settled through mediation in January 1997. The terms of the settlement allowed Emmy Associates to disenfranchise including full de-identification within 90 days of January 16, 1997. The Franchise Agreement of Emmy Associates Inc., was terminated under the Settlement Agreement. Also, under the Settlement Agreement, another MBE franchise may not open for business within one mile of the site occupied by Emmy Associates for a period of six months.
12. Mail Boxes Etc. USA. Inc. v. Mervl R. Robertson and Sue Robertson (Superior Court of Arizona, Maricopa County, Case No. CV-95-13687, filed on or about August 21, 1995.) Our predecessor filed suit against former franchise owners who did not renew their Franchise Agreement. Our predecessor sought to enforce post-term provisions in the Franchise Agreement and requested specific performance and injunctive relief in addition to its breach of contract and trademark infringement claims. The court granted the defendants' motion for summary judgment in September 1996 as to our predecessor's contract claims and denied our predecessor's motion. The matter settled in January 1999, with our predecessor and the Area Franchisee acquiring the Center and the defendant franchise owners agreeing not to compete with our predecessor for two years.
13. Execucenters. Inc. v. Mail Boxes Etc. USA. Inc. (U.S. District Court, District of Connecticut, Case No. 396CV87PCD, filed on January 18, 1996.) An Area Franchisee sought injunctive relief to enjoin our predecessor from terminating the Area Franchise rights for failing to renew. The court granted the request for injunctive relief. The Area Franchisee also filed a complaint with the American Arbitration Association in Connecticut (Case No. 7311400125 96LDP), which was transferred to San Diego, California. Our predecessor filed a response and a counter-claim, which it later dismissed, pursuing only its affirmative defenses. Prior to commencing the arbitration hearing, the parties participated in a mediation, which ultimately resulted in a settlement of this matter in December 1996. Our predecessor repurchased the Area for $180,000.
14. Brian T. Flvnn and KBF. Inc. v. Mail Boxes Etc. USA. Inc. and Steven D. Lubrano (Superior Court, Commonwealth of Massachusetts, Barnstable Division, Case No. 96-181, filed on or about March 1996.) A former franchise owner filed an action seeking damages against our predecessor and a former Area Franchisee, alleging breach of contract, fraud, breach of fiduciary duty and violation of M.G.L.C. 93A. Our predecessor then removed this action to federal court. The matter was subsequently settled with our predecessor paying $8,000 to Plaintiff and with Plaintiff returning certain equipment to our predecessor.
15. Pauline Empie. Beverly Parrish and Donald Parrish v. Mail Boxes Etc. (Superior Court of California, San Diego Judicial District, Case No. 698781, filed April 2, 1996.) Two groups of MBE franchise owners filed a complaint alleging violation of the California Franchise Investment Law, fraud, unfair trade practices and negligent misrepresentation. This matter was subsequently stayed pending trial of the four test cases referred to in Item 4, above. In December 1996, our predecessor and Empie agreed to resolve this matter with Empie agreeing to pay our predecessor the sum of $3,500 and being permitted to sell the business as an independent business. The Parrish matter was settled in June 1997 by agreement in which our predecessor waived certain accounts receivable and paid $82,500 to Beverly Parrish.
16. Shahid Sheikh. William Calvin and Leveta Calvin v. Mail Boxes Etc. USA. Inc. (California Superior Court, County of San Diego, Case No. 703809, filed September 18, 1996.) The owners of two MBE franchises filed a complaint alleging fraud, violation of the California Franchise Investment Law, unfair business practices and negligent misrepresentation. The complaint is virtually identical to the amended complaint filed in the Empie matter, discussed in Item 15, above. Plaintiffs sought general and punitive damages according to proof, an injunction prohibiting alleged unfair business practices, restitution of money and property allegedly obtained as a result of such alleged unfair practices, and attorneys' fees. The parties reached a settlement in June 1998, which involved our predecessor waiving a portion of its back-due royalties and lease payments.
Howard Perlman. et al. v. Mail Boxes Etc. USA. Inc.. et al. (Superior Court of California, County of Sacramento, Case No. 97 ASO 1119, filed March 1997.) Howard Perlman, a former Area Franchisee and former officer of our predecessor, filed suit against our predecessor. The complaint alleges breach of contract, misrepresentation, infliction of emotional distress, wrongful termination, and other related causes of action, in connection with the respective financial obligations of the parties, the former employment of Mr. Perlman with our predecessor, and a transaction involving a particular MBE center owned by Mr. and Mrs. Perlman. The Complaint sought compensatory and exemplary damages and attorneys' fees. Other Plaintiffs included Mr. Perlman's wife, Charmaine Perlman, and a corporation owned by Mr. and Mrs. Perlman, MBGMS, Inc. In a separate action, Mail Boxes Etc. USA. Inc. v. Howard L. Perlman and Charmaine Perlman (California Superior Court, County of Sacramento, Case No. 97ASO 1187, filed March 1997.), our predecessor filed an action against Howard and Charmaine Perlman for declaratory relief and an injunction, including a cause of action for judicial foreclosure of collateral, primarily consisting of six MBE Centers, under a promissory note and a security agreement executed by Howard and Charmaine Perlman in favor of our predecessor. Our predecessor obtained temporary judicial relief to take possession of and operate certain Centers in order to protect and preserve our predecessor's collateral and to assist the customers of the MBE Centers. In June 1997, the parties reached a preliminary overall settlement agreement which attempted to resolve all of the parties' claims, including those relating to Mr. Perlman's allegations of unlawful termination, all matters regarding Mr. Perlman's MBE Center and the financial obligations of both parties. In September 1997, the parties reached a settlement in this case whereby our predecessor paid Perlman $233,650.00; all promissory notes between the parties were canceled; and our predecessor assumed responsibility for six MBE Centers in Sacramento formerly owned by Perlman.
Marty L. Johnson, et al. v. Mail Boxes Etc. USA. Inc.. et al. (Washington Superior Court, King County Case No. 97-2-10379-7KNT, filed May 1997.) Marty L. Johnson and Cindy L. Johnson, former MBE franchise owners, filed suit in Washington Superior Court against our predecessor, Tim Wagner and Linda Wagner (former Area Franchisees in Washington) and New Dimensions Inc., a corporation controlled by Mr. and Mrs. Wagner. The Complaint alleges that the Wagners made misleading earnings claims, that the franchise that the Plaintiffs purchased in 1995 was sold in violation of disclosure obligations under Washington law, and that the Wagners were not registered as sub-franchisors with Washington as required by the Franchise Investment Protection Act. The Complaint sought rescission, damages, exemplary damages and attorneys' fees. Our predecessor counter-claimed for past due royalties and fees. Our predecessor's motion for partial summary judgment was granted in November 1998, leaving only claims of alleged technical violations of Washington law. A second summary judgment motion, filed by our predecessor, was granted in March 1999, with the Court ruling that the Area Franchisees were not sub-franchisors as defined in Washington law, and the court then dismissed all the Johnson's claims. The Washington State Court of Appeals affirmed the lower court ruling for our predecessor and the dismissal of the action.
removed the action to the District Court and answered the complaint. Our predecessor interposed a counter claim for monies due on various promissory notes, as well as royalties and other fees due on individual MBE Centers owned by Plaintiff. Mediation on October 20, 1998 resulted in a complete settlement wherein our predecessor's termination of the Area Franchise was confirmed, and defendant agreed to pay plaintiffs $1.5 million over five years.
Randy Ingram and Shannon Ingram v. Mail Boxes Etc. USA, Inc.. Howard L. Perlman. Charmain Perlman and Does 1 through 50. inclusive, (Superior Court of the State of California, County of Sacramento, Case No. 98AS00310, filed January 21, 1998.) Plaintiffs brought an action against our predecessor and a former Area Franchisee, Howard and Charmaine Perlman, in connection with a transaction in which plaintiffs had contracted with Mr. and Mrs. Perlman to purchase an MBE Center owned by the Perlman's. Plaintiffs alleged that the Perlmans and our predecessor acted wrongfully in connection with a demand by our predecessor for monies due our predecessor from the Perlman's. Plaintiffs alleged causes of action against MBE for intentional misrepresentation, negligent misrepresentation, violation of California Corporations Code sections 31001 and 31300, and intentional interference with contractual relationship. The complaint asked for general, special and exemplary damages. Our predecessor and the Ingrams settled at mediation on November 2, 1998, whereby our predecessor agreed, without an admission of any liability, to payment of $25,000 to the Ingrams, conditioned upon approval by the Court of a good faith settlement under California Code of Civil Procedure Section 887.6 and a full release. The Ingrams' complaint against our predecessor was dismissed without prejudice on January 14, 1999.
Back to Texas. Inc.. a Texas Corporation, and Karl P. Mattlage. an Individual v. Mail Boxes Etc. USA. Inc.. a California Corporation: Phoenix Leasing Incorporated, a California Corporation: COH. Ltd.. a Texas Limited Partnership: and Larry Brooks, an Individual (District Court, Travis County, TX, 345 the Judicial District, Case No. 98-01618, filed on February 13, 1998.) Plaintiff filed an action against our predecessor and an Area Franchisee, Larry Brooks, COH, Ltd. (a lessor), and Phoenix Leasing Incorporated (a lender) in connection with plaintiffs purchase of an existing MBE Center. Plaintiff alleged that defendants acted wrongfully in failing to inform plaintiff about various aspects of the transaction, including the cost of operations of the franchised business, details concerning the financing being provided to plaintiff, and details regarding the assignment of the ground lease which covered the MBE Center involved in the transaction. Plaintiff had paid and/or obligated itself to pay approximately $36,350.00 to defendant Phoenix Leasing in connection with the transaction. The plaintiff pled claims for misrepresentation and deceit, breach of contract, and civil conspiracy and sought a declaratory judgment that all contracts involved in the transaction were null and void. Plaintiff asked for general damages, declaratory judgment and attorney's fees. On May 22, 1998, all parties agreed to a settlement of this action, which involved a new MBE Franchisee taking over the MBE Center and various parties paying defendant Phoenix Leasing a total of $30,000, including $11,200 paid by plaintiff; $10,000 paid out of die proceeds of the sale of the MBE Center to the new Franchisee; and the payment of $8,800 by our predecessor. Dismissal of this action was filed June 26, 1998.
motion for summary judgment seeking a permanent injunction to enforce the covenant against competition and, alternatively, a preliminary injunction enforcing the non-competition covenant. Considine filed a cross motion for summary judgment, which was granted. Our predecessor's request for an expedited appeal to the Ninth Circuit Court of Appeals was allowed, with oral argument in March 2000. The court denied plaintiffs appeal on July 11, 2000 in an unpublished opinion. The case was resolved with our predecessor paying $26,500 to Considine for attorneys' fees.
23. Steinberg, as Trustee of the Bankruptcy Estate in re: Harvev E. Carter and Nancy R. Carter v.MBE. Tim Wagner and Linda Wagner (Washington State Superior Court, County of King, Case No. 98-2-12064-9 KNT, filed May 28, 1998.) The Trustee for the Bankruptcy Estate of Harvey E. Carter and Nancy R. Carter, former MBE franchise owners, filed suit in Washington Superior Court against our predecessor, Tim Wagner and Linda Wagner (former Area Franchisees in Washington) and New Dimensions Inc., a corporation controlled by Mr. and Mrs. Wagner. The Complaint was identical in almost all respects to that filed by Mr. and Mrs. Marty Johnson, discussed above in Item 19, and was filed by the same attorney. Our predecessor filed its Notice of Appearance in December 1998, and the action has not been pursued further by the plaintiffs.
24. Mail Boxes Etc. USA. Inc. v. USA Technologies Inc. (U.S. District Court, Southern District of California, Case No. 98 CV 18847S (LSP), filed September 3, 1998) and In the Matter of USAT v. MBE (American Arbitration Association, Claim No. 73 Y 18000353 98 NEM, filed September 28, 1998.) Our predecessor filed this action in the San Diego County Superior Court against USA Technologies " ("USAT") as the result of alleged failure of the credit card technology provided by USAT for the ICW computer work station system. The complaint sought rescission and damages for breach of contract and money had and received. USAT removed to federal court and filed an arbitration demand in Pennsylvania with the American Arbitration Association on September, 1998, claiming that our predecessor breached the joint venture agreement between USAT and our predecessor for the distribution and marketing of the MBE Business Express units. On May 13, 1999, the agreement between USAT and our predecessor was terminated. Our predecessor successfully moved the arbitration to San Diego, and the parties agreed to combine both actions in federal court in San Diego. USAT filed a counterclaim in federal court, alleging breach of fiduciary duty and the implied covenant of good faith and fair dealing, trade libel and claims for money had and received. USAT demanded several million dollars for settlement. This matter was ultimately settled with USAT paying $160,000 to our predecessor which was paid to participating MBE franchisees to reimburse them for their out of pocket expenses.
send packages through the U.S. Postal Service at any time after March 9, 1994; (11) paid an amount for postage, stamp sales or metered mail that exceeded the actual postage required to be affixed by the U.S. Postal Service; and (iii) were not informed by MBE or its franchisees that the amount charged for postage, stamp sales or metered mail exceeded the postage required to be affixed for the U.S. Postal Service. On March 24, 2004, the Court granted Ho leave to file his Second Amended Complaint naming Mail Boxes Etc., Inc., United Parcel Service General Services Co., and United Parcel Service, Inc. (collectively the "UPS Entities") as defendants in the action and asserting claims under the ICFA and various conspiracy and fraudulent conveyance claims. Our predecessor and the UPS Entities filed motions to dismiss the Second Amended Complaint. On August 12, 2004, the Court granted these motions without prejudice. Thereafter, on September 2, 2004, Ho filed his Third Amended Complaint, again naming our predecessor and the UPS Entities as defendants. Defendants filed motions to dismiss. On January 24, 2005, the Court dismissed the ICFA and conspiracy claims against United Parcel Service General Services Co., and United Parcel Service, Inc. with prejudice, then dismissed with leave to replead the conspiracy claims against our predecessor and Mail Boxes Etc., Inc., the fraudulent conveyance claims against our predecessor and Mail Boxes Etc., Inc. and the conspiracy to fraudulently convey assets claim against our predecessor and Mail Boxes Etc., Inc., United Parcel Service General Services Co., and United Parcel Service, Inc. On February 10, 2005, Ho filed his Fourth Amended Complaint, naming only our predecessor, Mail Boxes Etc., Inc., Store 2710 (franchisee) and Nancy Newport as defendants. The defendants filed motions to dismiss the civil conspiracy and fraudulent conveyance claims and their respective motions were granted. Thereafter, defendants filed a motion to decertify the class. Soon after the filing of this motion, the parties entered into a Stipulation and Settlement Agreement to resolve this action on terms satisfactory to all parties involved. The Court preliminarily approved the terms of the settlement, however, on December 19, 2006, the Court refused to grant final approval of the settlement.
Jairo Adriano da Silva Filho v. Mail Boxes Etc. USA. Inc. (Superior Court for the State of California, County of San Diego, Case No. GIC 736425, filed October 1, 1999.) Plaintiff claims damages resulting from our predecessor's alleged misrepresentation at the time of sale of the Master License and alleged lack of support in breach of contract. On May 11, 2001, our predecessor prevailed on a motion for summary adjudication. The court dismissed Adriano's claims for intentional misleading statements, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, rescission, restitution and the request for punitive damages. One cause of action for breach of contract survived. Without an admission of any liability, the parties reached a settlement in which our predecessor paid $250,000 to Adriano in exchange for Adriano relinquishing all contractual Master License rights over the territory at issue and a full release.
which was granted on March 23, 2001.
Mail Boxes Etc. USA. Inc. v. Francis DeLeone. Patricia DeLeone. DeLeone Investment Group and DeLeone Investment Group III. (Superior Court for the State of California, County of San Diego, Case No.: GIC 744663, filed May 8, 2000.) Our predecessor filed suit against DeLeone et al. for breach of contract related to the non-payment of royalties for five (5) MBE Centers. DeLeone cross-complained against our predecessor for violations of the California Franchise Investment Act, negligent misrepresentation and rescission. DeLeone was a former Area Franchisee who entered into a written contract with our predecessor modifying the terms of tliree (3) MBE Centers when the area was sold. DeLeone alleged that the modification of these three (3) MBE Centers violated the California Franchise Investment Act. Our predecessor filed a motion for summary judgment against DeLeone. DeLeone responded with a motion for summary judgment against our predecessor. DeLeone's motion was denied in its entirety. Our predecessor's motion for summary judgment was granted in part and denied in part. However, the court did rule that DeLeone owed back due royalties and penalties. The parties reached an agreement in which all MBE Centers remain in the network, and DeLeone paid over $300,000 in back due royalties, late fees and penalties.
Paresh N. Shah v. US Office Products Company and Mail Boxes Etc. (U.S. District Court for the District of Maryland, Case No.: MJG 00CV2429, filed August 11, 2000). Shah sued our predecessor alleging breach of contract, violation of the Maryland Uniform Trade Secrets Act, breach of confidence, breach of fiduciary duty, conversion and breach of the implied covenant of good faith and fair dealing. Shah alleged that our predecessor misappropriated a confidential idea named SafeXchange in which our predecessor would operate as an Internet escrow service for packages purchased over the Internet. Our predecessor denied the allegations. Our predecessor further maintains that it was independently working on this concept prior to Shah and that the concept was readily available in the public domain. Although our predecessor denied any wrongdoing and vigorously disputes plaintiffs allegations, our predecessor agreed to pay $400,000 to plaintiff in exchange for a full release and settlement of this claim.
Supply Side. Inc.. v. Mail Boxes Etc. USA. Inc. (U.S. District Court, Northeastern District of Ohio, Eastern Division, Case No.: 1:00 CV 2210, filed September 1, 2000). Supply Side sued our predecessor for unfair competition, trade dress infringement, false advertising, palming off and copyright infringement. Our predecessor counterclaimed against Supply Side for unfair competition, trade dress infringement, false advertising, palming off and trademark infringement. Supply Side was a former vendor of our predecessor that supplied shipping, mailing and office supplies to MBE Centers, which were used to ship specific items such as CD's and tapes. Our predecessor terminated the agreement with Supply Side on or about May 12, 1997. Following the termination of the agreement, our predecessor entered into another agreement with a different distributor of shipping, mailing and office supplies. Supply Side alleged that the trade dress of the new shipping and mailing products infringed on Supply Side's trade dress. Our predecessor responded to the complaint alleging that it did not infringe on Supply Side's trade dress. Rather, our predecessor alleged that Supply Side infringed on the MBE trade dress and illegally used the MBE trademarks. Following the filing of the counterclaim Supply Side quickly entered into settlement discussions with our predecessor. This matter was resolved with no money being exchanged between the parties and the case has been dismissed.
facts, deceit, breach of contract, breach of fiduciary duty and unfair business practices. Horn requested compensatory damages in the amount of $200,000 and punitive damages in the amount of $500,000. This matter was originally filed in the Circuit Court of Baldwin County, Alabama. Our predecessor removed the matter to federal court in Alabama and subsequently had the matter transferred to the U.S. District Court, Southern District of California in San Diego, pursuant to the franchise agreement with Horn. Horn alleged that our predecessor failed to disclose demographic information related to the sale of a franchise which was material. Horn further alleges that had this demographic information been disclosed, Horn would not have purchased the franchise. Following the transfer of this matter to the U.S. District Court, Southern District of California in San Diego, the matter was dismissed without prejudice by the court on February 6, 2002 for failure to prosecute.
Wayne Smith v. Mail Boxes Etc. USA, Inc.. BSG Holdings Subsidiary. Inc., Mail Boxes Etc.. Inc.. and Wesley David and Sonva Davis. (U.S. District Court, Eastern District of California, Case No. CIV S-01-2271 WBS DAD, filed December 11, 2001). Plaintiff alleged that an additional fee charged by MBE Centers to assist customers with monetary compensation in the event of loss or damage to a package violates various consumer laws. Plaintiff sued MBE and a putative class of its franchisees was also named as defendants in this case. The case was consolidated with pending litigation against UPS and other defendants in a multi-district litigation proceeding relating to the collection of premiums for reinsured excess value ("EV") insurance ("MDL Proceeding") in federal district court in New York. In late 2003, the parties reached a global settlement resolving all claims and all cases in the MDL Proceeding and releasing claims asserted against all defendants, as well as Mail Boxes Etc., Inc. franchisees. In reaching the settlement, all of the defendants expressly denied any and all liability. On July 30, 2004, the court issued an order granting final approval to the substantive terms of the settlement. No appeals were filed and the settlement became effective on September 8, 2004. Pursuant to the settlement, UPS provided qualifying settlement class members (including MBE franchisees and customers of MBE franchisees) with vouchers toward the purchase of specified UPS services (available directly from UPS or from participating MBE franchisees) and agreed to pay the attorneys' fees and costs. Other defendants contributed to the costs of the litigation and settlement. The vouchers expired in July 2005 and the value of services for which vouchers were redeemed totaled $5 million. On November 2, 2005, the court issued an order awarding plaintiffs' counsel fees and costs in the total amount of $3 million. Payment of the plaintiffs' counsels' fees has not yet occurred because certain objectors to the settlement have appealed the court's decision to award no fees to objectors' counsel. The settlement did not have a material effect on MBE.'s financial condition, results of operations, or liquidity.
TSM Services. Inc.. Raymond Marble and Mary Marble v. Mail Boxes Etc. USA. Inc. (U.S. District Court for the District of Minnesota,. removed to federal court March 21, 2002). Plaintiff sued our predecessor for rescission of a franchise agreement and alleges violations of the California Franchise Investment Act, the Minnesota Franchise Act and the Minnesota Consumer Fraud Act. Jurisdiction over this matter originated in the State of Minnesota, County of Washington, District Court, Tenth Judicial District. However, on or about March 21, 2002, our predecessor removed this matter to the U.S. District Court for the District of Minnesota. The parties reached an agreement in which our predecessor paid plaintiff $97,500. The MBE Center at issue remains in the system subject to all terms and conditions contained in the franchise agreement, with the exception of an early termination option.
28. Mail Boxes Etc. USA, Inc. v. Francis DeLeone. Patricia DeLeone. DeLeone Investment Group and DeLeone Investment Group HI. (Superior Court for the State of California, County of San Diego, Case No.: GIC 744663, filed May 8, 2000.) Our predecessor filed suit against DeLeone et al. for breach of contract related to the non-payment of royalties for five (5) MBE Centers. DeLeone cross-complained against our predecessor for violations of the California Franchise Investment Act, negligent misrepresentation and rescission. DeLeone was a former Area Franchisee who entered into a written contract with our predecessor modifying the terms of three (3) MBE Centers when the area was sold. DeLeone alleged that the modification of these three (3) MBE Centers violated the California Franchise Investment Act. Our predecessor filed a motion for summary judgment against DeLeone. DeLeone responded with a motion for summary judgment against our predecessor. DeLeone's motion was denied in its entirety. Our predecessor's motion for summary judgment was granted in part and denied in part. However, the court did rule that DeLeone owed back due royalties and penalties. The parties reached an agreement in which all MBE Centers remain in the network, and DeLeone paid over $300,000 in back due royalties, late fees and penalties.
29. Paresh N. Shah v. US Office Products Company and Mail Boxes Etc. (U.S. District Court for the District of Maryland, Case No.: MJG 00CV2429, filed August 11, 2000). Shah sued our predecessor alleging breach of contract, violation of the Maryland Uniform Trade Secrets Act, breach of confidence, breach of fiduciary duty, conversion and breach of the implied covenant of good faith and fair dealing. Shah alleged that our predecessor misappropriated a confidential idea named SafeXchange in which our predecessor would operate as an Internet escrow service for packages purchased over the Internet. Our predecessor denied the allegations. Our predecessor further maintains that it was independently working on this concept prior to Shall and that the concept was readily available in the public domain. Although our predecessor denied any wrongdoing and vigorously disputes plaintiffs allegations, our predecessor agreed to pay $400,000 to plaintiff in exchange for a full release and settlement of this claim.
30. Supply Side. Inc.. v. Mail Boxes Etc. USA. Inc. (U.S. District Court, Northeastern District of Ohio, Eastern Division, Case No.: 1:00 CV 2210, filed September 1, 2000). Supply Side sued our predecessor for unfair competition, trade dress infringement, false advertising, palming off and copyright infringement. Our predecessor counterclaimed against Supply Side for unfair competition, trade dress infringement, false advertising, palming off and trademark infringement. Supply Side was a former vendor of our predecessor that supplied shipping, mailing and office supplies to MBE Centers, which were used to ship specific items such as CD's and tapes. Our predecessor terminated the agreement with Supply Side on or about May 12, 1997. Following the termination of the agreement, our predecessor entered into another agreement with a different distributor of shipping, mailing and office supplies. Supply Side alleged that the trade dress of the new shipping and mailing products infringed on Supply Side's trade dress. Our predecessor responded to the complaint alleging that it did not infringe on Supply Side's trade dress. Rather, our predecessor alleged that Supply Side infringed on the MBE trade dress and illegally used the MBE trademarks. Following the filing of the counterclaim Supply Side quickly entered into settlement discussions with our predecessor. This matter was resolved with no money being exchanged between the parties and the case has been dismissed.
Wayne Smith v. Mail Boxes Etc. USA. Inc.. BSG Holdings Subsidiary. Inc.. Mail Boxes Etc.. Inc.. and Wesley David and Sonva Davis. (U.S. District Court, Eastern District of California, Case No. CIV S-01-2271 WBS DAD, filed December 11, 2001). Plaintiff alleged that an additional fee charged by MBE Centers to assist customers with monetary compensation in the event of loss or damage to a package violates various consumer laws. Plaintiff sued MBE and a putative class of its franchisees was also named as defendants in this case. The case was consolidated with pending litigation against UPS and other defendants in a multi-district litigation proceeding relating to the collection of premiums for reinsured excess value ("EV") insurance ("MDL Proceeding") in federal district court in New York. In late 2003, the parties reached a global settlement resolving all claims and all cases in the MDL Proceeding and releasing claims asserted against all defendants, as well as Mail Boxes Etc., Inc. franchisees. In reaching the settlement, all of the defendants expressly denied any and all liability. On July 30, 2004, the court issued an order granting final approval to the substantive terms of the settlement. No appeals were filed and the settlement became effective on September 8, 2004. Pursuant to the settlement, UPS provided qualifying settlement class members (including MBE franchisees and customers of MBE franchisees) with vouchers toward the purchase of specified UPS services (available directly from UPS or from participating MBE franchisees) and agreed to pay the attorneys' fees and costs. Other defendants contributed to the costs of the litigation and settlement. The vouchers expired in July 2005 and the value of services for which vouchers were redeemed totaled $5 million. On November 2, 2005, the court issued an order awarding plaintiffs' counsel fees and costs in the total amount of $3 million. Payment of the plaintiffs' counsels' fees has not yet occurred because certain objectors to the settlement have appealed the court's decision to award no fees to objectors' counsel. The settlement did not have a material effect on MBE.'s financial condition, results of operations, or liquidity.

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