Stamps.com 2002 Annual Report Download - page 64

Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of the purchase price of the 187,000 shares, accrued interest on the purchase price and other fees and indebtedness incurred by Mr.Payne, less
the proceeds from his sale of the Company’ s common stock during the third quarter of 2000.
In April 2000, the Company agreed to guarantee Mr.Payne’ s margin account in the event the value of the shares pledged was insufficient
collateral to secure the indebtedness outstanding under the margin account. The guarantee was in the form of a single-purpose line of credit
extended to Mr.Payne which would have a balance due to the Company to the extent the value of the pledged shares is insufficient collateral to
secure indebtedness outstanding under the margin account. This line of credit was secured by all of Mr.Payne’ s assets.
Mr. Payne agreed to sell a minimum of 100,000 shares of common stock during each fiscal quarter (beginning the third fiscal quarter of 2000)
in order to pay down the indebtedness outstanding under the margin account. Pursuant to this agreement, Mr.Payne sold 7,500 shares at a price
of $4.50 per share and 95,500 shares at a price of $4.3125 per share on August 29, 2000. Mr.Payne also sold 15,000 shares at a price of $2.94
per share on November15, 2000 and 85,000 shares at a price of $3.02 per share on November17, 2000. The sale of these 200,000 shares during
the third and fourth fiscal quarters resulted in aggregate repayment of indebtedness in the amount of approximately $730,000.
In November 2000, Mr. Payne executed a promissory note in favor of the Company in the amount of $6.6million. The payment of the note was
secured by a pledge of all shares of the Company’ s common stock and all shares of EncrypTix, Inc. held by Mr.Payne. The entire principal
balance and all accrued and unpaid interest was due and payable on June30, 2001.
In December 2000 the Company established a reserve of $3.3 million related to the note receivable from Mr.Payne. The reserve was calculated
as the difference between the note’ s carrying value, $6.5million, and the underlying value of the stock on December31, 2000, $3.2million
($2.78 per share).
In May 2002, the Company received 1,411,000 shares of the Company’ s common stock from Mr.Payne as payment in full of the promissory
note executed in November 2000. The shares were recorded at cost as treasury stock in the quarter ended June30, 2002 for the full value of
notes receivable from Mr.Payne, net of reserve in the amount of $3.3million ($2.33 per share) and subsequently retired in the quarter ended
September30, 2002.
14.Stockholders’ Equity
Notes Receivable
In connection with the issuance of Common Stock during 1999, the Company exchanged shares with a fair value of $117,000 for full recourse
notes receivable of the same amount. These notes receivable bear interest at 9% per annum and were paid off in May 2002. The unpaid balance
of these notes receivable for the years ended December 31, 2002 and 2001 was $0 and $101,000, respectively.
15.Employee Stock Plans
Stock Incentive Plans
The 1999 Stock Incentive Plan (the “1999 Plan”) serves as the successor to the 1998 Stock Plan (the “Predecessor Plan”). The 1999 Plan
became effective in June1999. At that time, all outstanding options under the Predecessor Plan were transferred to the 1999 Plan, and no further
option grants can be made under the Predecessor Plan. All outstanding options under the Predecessor Plan continue to be governed by the terms
and conditions of the existing option agreements for those grants, unless the Company’ s compensation committee decides to extend one or more
features of the 1999 Plan to those options.
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2003. EDGAR Online, Inc.