Stamps.com 2003 Annual Report Download - page 63

Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the Company’s 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 the Company and/or certain of its
officers or directors knew of or recklessly disregarded these practices by the underwriter defendants, and failed to disclose them in the
Company’s public filings. Plaintiffs seek damages and statutory compensation, including prejudgment and post-judgment interest, costs and
expenses (including attorneys’ fees), and rescissionary damages. In April 2002, plaintiffs filed a consolidated amended class action complaint
against the Company and certain of its 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, the Company moved to dismiss the consolidated
amended class action complaint. In October 2002, pursuant to a stipulation and tolling agreement with plaintiffs, the Company’s current and
former board members and/or officers were dismissed without prejudice. In February 2003, the court denied the Company’s motion to dismiss
the consolidated amended class action complaint. In June 2003, the Company approved a proposed Memorandum of Understanding among the
plaintiffs, issuers and insurers as to terms for a settlement of the litigation against the Company. The proposed settlement terms would not
require Stamps.com to make any payments. The proposed settlement is subject to approval by the court.
In addition to the class action lawsuits against the Company, over 1,000 similar lawsuits have also been brought against over 250 companies
which issued stock to the public in 1998, 1999, and 2000, and their underwriters. These lawsuits (including those naming the Company)
followed publicized reports that the Securities and Exchange Commission was investigating the practice of certain underwriters in connection
with initial public offerings. All of these lawsuits have been consolidated for pretrial purposes before United States District Court Judge Shira
Scheindlin of the Southern District of New York. The Company has placed its underwriters on notice of the Company’s rights to
indemnification, pursuant to its agreements with the underwriters. The Company has also provided notice to its directors and officers insurers,
and believes that the Company has insurance applicable to the lawsuits. The Company also believes that the claims against it and its officers
and directors are without merit, and intend to defend the lawsuits vigorously.
16. Events Subsequent to Date of Auditor’s Report (Unaudited)
Return of Capital
On January 28, 2004 the Board of Directors declared a one-time return of capital cash dividend of $1.75 per share to shareholders of record
as of the close of business on February 9, 2004, paid on February 23, 2004. Based on 45,045,514 common shares outstanding, less treasury
stock of approximately 648,000 on the date of record, February 9, 2004, the total cash dividend was approximately $78 million.
As a result of the cash distribution and pursuant to FASB Interpretation No. (FIN) 44, the exercise price of all active employee stock options
prior to the ex-dividend date was reduced. Outstanding options with a strike price greater than or equal to the fair market value (FMV) of the
stock immediately prior to the ex-dividend date received a strike price reduction equal to the cash distribution, or $1.75 per share. For
outstanding options with a strike price below the FMV immediately prior to the ex-dividend date, the reduction was such that the aggregate
intrinsic value of the options was not increased, and the ratio of exercise price to market price per share was not reduced.
Reverse Split
On January 28, 2004, the Company’s Board of Directors authorized a reverse stock split of the Company’s common stock, subject to
shareholder approval. Shareholders of Stamps.com, at the annual meeting of shareholders to be held on April 23, 2004, will be asked to grant
the Board of Directors the authority to select the exact exchange ratio of either one-for-two (1:2), one-for-three (1:3) or one-for-four (1:4), with
the exact ratio to be determined by the Board of Directors at the time it elects to effect a split. The par value of the Company’s common stock
would
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