Stamps.com 2003 Annual Report Download - page 61

Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Employee Stock Purchase Plan
In June 1999, the Company’s Board of Directors adopted an Employee Stock Purchase Plan (ESPP or Purchase Plan) which allows eligible
employees of the Company to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions.
Eligible participants may contribute up to 15% of cash earnings through payroll deductions, and the accumulated deductions will be applied
to the purchase of shares on each semi-annual purchase date. The purchase price per share will be equal to 85% of the fair market value per
share on the participant’s entry date into the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase
date.
Upon adoption of the plan, 300,000 shares of common stock were reserved for issuance. This reserve will automatically increase on the first
trading day in January each year, beginning in calendar year 2000, by an amount equal to 1% of the total number of outstanding shares of the
Company’s common stock on the last trading day in December in the prior year. The increase on January 1, 2001 was 496,542 based upon
49,654,227 shares outstanding on December 31, 2000. The increase on January 1, 2002 was 507,227 based upon 50,722,713 shares outstanding
on December 31, 2001. The increase on January 1, 2003 was 444,885 based upon 44,488,469 shares outstanding on December 31, 2002. In no
event will any annual increase exceed 521,571 shares.
Total shares of common stock issued during 2003, 2002 and 2001 were 53,733, 33,744 and 132,295, respectively.
Savings Plan
During 1999, the Company implemented a savings plan for all eligible employees, which qualifies under Section 401(k) of the Internal
Revenue Code. Participating employees may contribute up to 15% of their pretax salary, but not more than statutory limits. The Company
matches 50% of the first 4% a participant contributes. The Company expensed approximately $115,000, $86,000 and $238,000 in 2003, 2002
and 2001, respectively, related to this plan.
15. Legal Proceedings
On June 16, 1999, Pitney Bowes sued the Company for alleged patent infringement in the United States District Court for the District of
Delaware (“Pitney I”). The suit originally alleged that the Company was infringing two patents held by Pitney Bowes related to postage
application systems and electronic indicia. The suit sought treble damages, a preliminary and permanent injunction from further alleged
infringement, attorneys’
fees and other unspecified damages. The Company answered the complaint on August 6, 1999, denying the allegations
of patent infringement and asserting a number of affirmative defenses. Pitney Bowes filed a similar complaint in early June 1999 against E-
Stamp Corporation, alleging infringement of seven Pitney Bowes patents. On April 13, 2000, Pitney Bowes asked the court for permission to
amend its complaint to drop allegations of patent infringement with respect to one patent and to add allegations of patent infringement with
respect to three other patents. On July 28, 2000 the court entered Pitney Bowes’ amended complaint. On June 18, 2001, E-Stamp and Pitney
Bowes agreed to settle their litigation.
On September 18, 2000, Pitney Bowes filed another patent infringement lawsuit against the Company in the United States District Court for
the Eastern District of Texas, alleging that the Company was infringing four patents owned by Pitney Bowes related to multi-carrier shipping
(“Pitney II”). The suit sought unspecified damages and a permanent injunction from further alleged infringement. The Company answered the
complaint on December 1, 2000, denying the allegations of patent infringement and asserting a number of affirmative defenses. The United
Parcel Service acquired our iShip multi-carrier shipping service assets on May 18, 2001. On September 4, 2001, the
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