Letter from Quixtar re TIF

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April 22, 2002

Dear Independent Business Owner:

We are writing to you in a highly unusual step given the seriousness of the issues that have developed over the past several months. First let me say that if you have never heard of the Entry Level Plan or Maximum Achievement Program pack, then you need read no further. If, however, you've received information about the Entry Level Plan or you've purchased the Maximum Achievement Program pack, this letter contains important information of which you need to be aware. We are sending you this letter to:

(1) Help you understand the exhaustive communication process in which Quixtar has engaged, in attempting to resolve Rules concerns, with the former Diamonds who have organized and implemented the Entry Level Plan;

(2) Explain our legal evaluation of the Entry Level Plan;

(3) Advise you of actions taken by the Corporation against the businesses of certain Diamonds for violation of the IBO Rules of Conduct;

(4) Advise you of your rights under the Rules of Conduct to seek a refund of any Business Support Materials (BSMs) from the seller;

(5) Help you ensure the future of your business by complying with the Rules of Conduct with respect to the Entry Level Plan and the Maximum Achievement Program (MAP);

(6) Clarify for you that Quixtar is not in any way connected to the Entry Level Plan or the Maximum Achievement Program and does not in any manner endorse or support either of these.

Communication History

For the past three and a half months, the Corporation has engaged in extensive dialogue with members of Team in Focus leadership about the promotion of the Entry Level Plan and the Foundation Plan. Based on what we've seen as well as communications from IBOs to Quixtar, you may have received the false impression that the Corporation supports or has approved these programs. To the contrary, after careful review of the Entry Level Plan, Quixtar (as well as its independent outside legal counsel) firmly believe the Entry Level Plan is a clear violation of the IBO Rules of Conduct.

The following timeline describes how the current situation developed.

Late December 2001 We received inquiries of a general nature from which we learned that the Diamonds affiliated with Team In Focus (TIF) were planning to offer a multilevel marketing plan to IBOs affiliated with Quixtar.

January 9, 2002 In a letter, we advised those Diamonds of the Rules concerns this raised and asked for their cooperation to ensure that any plan they introduced would fully comply with Quixtar Rules and the applicable law.

February 2, 2002 Staff from the Corporation's Business Conduct and Rules division attended a meeting in which the "Implementation Phase" was presented and in which the video by the same name was also reviewed.

February 12, 2002 A letter was sent from Business Conduct and Rules to all TIF Diamonds that clearly explained the various rules that were at issue from the presentation. The letter also asked that all promotion of the Implementation Phase be stopped pending a meeting with three of the Diamonds who were representatives of the rest of TIF.

February 19, 2002 Quixtar executives flew to Tallahassee to meet with three of the Diamonds to work toward resolution. As explained in that meeting, the proposed Entry Level Plan presented significant legal and Rules issues due to its pyramidal nature. We brought the issues back and fully evaluated every possible solution to the problems we saw.

March 7, 2002 After full consideration of our concerns, we sent to all TIF Diamonds an exhaustive summary of this meeting that clearly indicated the issues and resolution where possible.

March 8, 2002 Given the seriousness of the issues surrounding the Entry Level Plan, Quixtar once again requested that all promotions of this particular Plan be ended. However, in spite of an agreement to do so, certain Diamonds continued to hold meetings promoting the Entry Level Plan.

March 25, 2002 Accordingly, we provided the TIF Diamonds with a letter advising that they were in violation of Rule 4.9 (Deceptive Trade Practices) and Rule 4.10 (Illegal Activity), and we supported that determination with a 13-page opinion from outside legal counsel as required under the IBO Rules of Conduct.

We cannot overstate how serious Quixtar is about the threat the Entry Level Plan creates to the long-term security of the Quixtar business. The Entry Level Plan jeopardizes everyone's Quixtar-affiliated business, and the Corporation will not allow a few individuals to place the business at risk for all IBOs. Accordingly, the Diamonds were given one final request not to launch the Entry Level Plan at the Nashville function. As you are probably aware, the Entry Level Plan was, in fact, launched in opposition to the Rules of Conduct. Unfortunately, in spite of our exhaustive efforts, these Diamonds placed Quixtar in the position of having to enforce the Rules of Conduct and, accordingly, the Quixtar businesses of certain Diamonds have been terminated.

Legal Evaluation

As mentioned above, we have spent countless hours speaking with the Diamonds about the elements of the Entry Level Plan. Our last communication set forth our understanding of the facts, and our review of the materials in the Maximum Achievement Program pack confirmed our understanding. There is no doubt in our mind that the Entry Level Plan is illegal.

What are illegal pyramid schemes? If you have any doubts about these legal issues, you should, of course, consult your own attorney. What follows is our very brief and simplified summary of the basic legal principles that prohibit illegal pyramid schemes. Any plan in which ¨ participants are encouraged to make a substantial up-front payment, most of which represents compensation immediately paid upline for the act of recruiting or inducing the new participant to pay the money, and ¨ participants are told they can earn back their up-front payment by persuading others to make similar payments, based on similar promises that they can make money from recruiting others, and so on, and ¨ where no real product or service is sold to end-user consumers who don't expect to make money by encouraging others to join the pyramid, and ¨ those placed higher in the pyramid (or those who join earlier) have a better chance to recoup their investment than those getting in later has all of the bad characteristics of an illegal pyramid scheme. The Entry Level Plan appears to have all of these bad features.

Where the MAP money goes. During our meeting in Tallahassee on February 19, TIF leaders advised us that the sale price of the Maximum Achievement Program pack would be around $300 and that the cost to the TIF leaders of producing each MAP pack would be approximately $100. They also told us that about $120 of the $300 purchase price would be paid in immediate bonuses to the seller and upline, and the remaining $80 would be reserved by the Diamonds. We have not been advised that there has been any material change in this information, even though we have asked to be corrected if this information was incorrect.

As you can see, $200 of the $300 payment for the MAP pack is devoted to compensate the seller and upline for inducing a participant to buy the MAP pack. TIF leadership also repeatedly confirmed and their literature confirms that the only people to whom the MAP pack will be offered are Quixtar-affiliated IBOs, and that each of these IBOs will be told that they can quickly earn back their $300 investment plus a profit by persuading other people to sign up as IBOs and buy the MAP pack. Thus, the only way to earn income from the MAP pack is by recruiting others; there is no way to sell MAP packs to non-IBOs and no reason a non-IBO would want to buy a MAP pack. Indeed, Quixtar's Rules prohibit the sale of non-Quixtar products and services to non-IBOs through the line of sponsorship.

Who wins; who loses. Finally, and perhaps most importantly, the Entry Level Plan as described to us by Team In Focus is set up in a way that those at the top will automatically gain more than those who buy the MAP pack later on. The basic reason for this is that no one will ever buy more than one MAP pack, but everyone who buys a MAP pack needs to sell two additional MAP packs to make any income ($50). According to TIF's literature, an IBO will need more than a dozen MAP packs sold in his or her "right" and "left" legs just to break even. Each of those dozen must find 12 or more one-time MAP pack customers to break even, and so on. We believe it is inevitable that the last people to buy the MAP pack will have no chance to make the income promised by the Entry Level Plan, and that the Entry Level Plan is inherently deceptive and unfair to Quixtar-affiliated IBOs.

Against the Rules. Rules 4.9 and 4.10 of the IBO Rules of Conduct forbid IBOs from engaging in any deceptive or unlawful trade practice or operating any illegal or unlawful business enterprise. For full text of the Rules, see: www.quixtar.com > office > business info > business rules.

Against the law. Compensation systems like the Entry Level Plan have consistently been condemned as deceptive and unlawful pyramid schemes by courts and state and federal law enforcement agencies like the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), U.S. Postal Service, and many state consumer protection agencies. If you have any doubts about this, you should consult a qualified attorney, and you ought to suggest that he or she study the 1979 FTC opinion that explains in detail why the compensation plan on which the Quixtar business is based is NOT an illegal pyramid. The FTC opinion describes several varieties of illegal pyramids that closely resemble the Entry Level Plan and are fundamentally different from Quixtar. For more information on the elements of an illegal pyramid and fraudulent schemes, see: http://ftc.gov/bcp/conline/pubs/invest/mlm.htm

Actions Taken

It was our sincere hope that, out of mutual respect and partnership, the Diamonds who have been terminated would have complied with our repeated requests to not launch the deceptive and illegal Entry Level Plan. We spent months consulting with them in an effort to help them build their Quixtar-affiliated businesses and teach others to build successful Quixtar-affiliated businesses without using deceptive or illegal techniques. Nevertheless, the Entry Level Plan was launched at the Nashville function the weekend of April 12, 2002.

As a result of the launch of the Entry Level Plan and its associated Maximum Achievement Program, certain Quixtar Diamonds placed themselves in direct violation of repeated warnings from the Corporation and, therefore, the Quixtar-affiliated businesses of certain Diamonds have been terminated.

Rights to a Refund

IBOs who bought the MAP pack are entitled under the IBO Rules of Conduct to a full refund from the seller. The IBO Rules of Conduct require sellers of BSMs to provide refunds upon request within 180 days of purchase. Should you wish a refund, you will need to contact the person from whom you purchased the MAP pack. If you have sold a MAP pack and collected money, you are required upon request to give a full refund to each person to whom you sold the MAP pack. Furthermore, you may wish to review any additional refund provisions under which the MAP pack was purchased.

Ongoing Compliance with the Rules

Quixtar believes that the Entry Level Plan and the representations that were made regarding it are fraudulent. Any IBO who continues to promote the Entry Level Plan would be violating the same rules for which some of the Diamonds were terminated. Accordingly, promotion of the Entry Level Plan subjects any IBO to discipline under the IBO Rules of Conduct (up to and including termination).

Bottom Line: the Entry Level Plan Is Not Quixtar Everyone who receives this communication is a Quixtar-affiliated IBO, who has taken the initiative to create an independent business under one of the world's most successful and time-tested business opportunity..

The former Diamonds had been extremely successful with Quixtar, and their position of success gave them a platform from which they could, as independent entrepreneurs, teach others the techniques that led to their success with Quixtar. Unfortunately, this small group chose instead to launch an illegal pyramid scheme called the Entry Level Plan. The Entry Level Plan has no connection to Quixtar and, as discussed above, violates Quixtar's Rules as well as federal and state law.

We hope our decisive action against some of the former Diamonds makes it completely clear that Quixtar will do whatever it takes to protect you and the Quixtar business opportunity for the millions of other IBOs who comply with the Rules.

If you would like to review FAQs (Frequently Asked Questions) on this matter, please e-mail us at: [email protected]

Sincerely,
Rob Davidson
Vice President
Global Business Conduct / Rules