Stamps.com 2005 Annual Report Download - page 18

Shares of our common stock held by existing stockholders may be sold into the public market, which could cause the price of our common
stock to decline.
If our stockholders sell into the public market substantial amounts of our common stock purchased in private financings prior to our initial
public offering, or purchased upon the exercise of stock options or warrants, or if there is a perception that these sales could occur, the market
price of our common stock could decline. All of these shares are available for immediate sale, subject to the volume and other restrictions
under Rule 144 of the Securities Act of 1933.
Item 1b. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters are located in a 36,000 square foot facility in Los Angeles, California under a lease expiring in February 2010.
We believe that our existing facility is suitable and adequate for our present purposes, and that such facility is substantially being utilized or we
have plans to utilize it.
Item 3. Legal Proceedings
On October 25, 2004, VCode Holdings, Inc. and VData LLC filed suit against Adidas Salomon AG in the United States District Court for
the District of Minnesota, alleging infringement of U.S. Patent No. 5,612,524 (“the ‘524 patent”), which allegedly covers use of data matrices.
The complaint sought an injunction, unspecified damages, and attorneys’ fees. On or about December 30, 2004, the plaintiffs filed a First
Amended Complaint against us, as well as Adidas Salomon AG, Adidas America, Inc., Advanced Micro Devices, Inc., Boston Scientific Corp.
and Hitachi Global Storage Technologies (Thailand), Ltd., alleging infringement of the ‘524 patent. On July 25, 2005, the Court granted the
plaintiffs' motion to file a Second Amended Complaint adding Hitachi Global Storage Technologies, Inc. as a defendant. Adidas Salomon AG,
Adidas America, Inc. and Advanced Micro Devices, Inc. have each settled for undisclosed terms. The court has scheduled the trial of this case
to commence on September 1, 2006. We dispute the plaintiffs’ claims and intend to defend the lawsuit vigorously.
On October 22, 2004, Kara Technology Incorporated filed suit against us in the United States District Court for the Southern District of
New York, alleging, among other claims, that Stamps.com infringed certain Kara Technology patents and that Stamps.com misappropriated
trade secrets owned by Kara Technology, most particularly with respect to our NetStamps feature. Kara Technology seeks an injunction,
unspecified damages, and attorneys’ fees. On February 9, 2005, the court granted our motion to transfer this suit to the United States District
Court for the Central District of California. The court has scheduled a “Markman” hearing to construe the terms of the Kara Technology
patents for March 20, 2006, and has scheduled a trial commencement date of May 23, 2006. We dispute Kara Technology’s claims and intend
to defend the lawsuit vigorously.
In May and June 2001, we were named, together with certain of our current and former board members and/or officers, as a defendant in
11 purported class-action lawsuits, filed in the United States District Court for the Southern District of New York. The lawsuits allege
violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with our initial public offering and secondary
offering of our common stock. The lawsuits also name as defendants the principal underwriters in connection with our initial and secondary
public offerings, including Goldman, Sachs & Co. (in some of the lawsuits sued as The Goldman Sachs Group Inc.) and BancBoston Robertson
Stephens, Inc. The lawsuits allege that the underwriters engaged in improper commission practices and stock price manipulations in connection
with the sale of our common stock. The lawsuits also allege that we and/or certain of our officers or directors knew of or recklessly disregarded
these practices by the underwriter defendants, and failed to disclose them in our public filings. Plaintiffs seek damages and statutory
compensation, including prejudgment and post-judgment interest, costs and expenses (including attorneys’ fees), and rescissory damages. In
April 2002, plaintiffs filed a consolidated amended class action complaint against us and certain of our current and former board members
and/or officers. The consolidated amended class action complaint includes similar allegations to those described above and seeks similar relief.
In July 2002, we moved to dismiss the consolidated amended class action complaint. In October 2002, pursuant to a stipulation and tolling
agreement with plaintiffs, our current and former board members and/or officers were dismissed without prejudice. In February 2003, the court
denied our motion to dismiss the consolidated amended class action complaint. In June 2003, we approved a proposed Memorandum of
Understanding among the plaintiffs, issuers and insurers as to terms for a
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