Stamps.com 2006 Annual Report Download - page 20

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 U.S. 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 public offerings, and allege that the
underwriters engaged in improper commission practices and stock price manipulations in connection with the sale of our common stock. The
lawsuits 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 interest, costs and
expenses (including attorneys’ fees). Over 1,000 similar lawsuits have been brought against over 250 companies that issued stock to the public
from 1998 until 2000, and their underwriters. All of these lawsuits have been consolidated for pretrial purposes before U.S. District Court
Judge Shira Scheindlin.
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 June 2003, we approved a proposed Memorandum of Understanding among the plaintiffs, issuers and
insurers as to terms for a settlement of the litigation against us, which was further documented in a Stipulation and Agreement of Settlement
filed with the court. The proposed settlement, which would not require Stamps.com to make any payments, was preliminarily approved by the
court in February 2005 and was the subject of a fairness hearing in April 2006, but remains subject to final approval by the court.
We have placed our underwriters on notice of our rights to indemnification, pursuant to our agreements with the underwriters, but under
the terms of the proposed settlement, we cannot assert these claims except as a defense to a claim against us by the underwriters. We have also
provided notice to our directors’ and officers’ insurers who have agreed to fund the proposed settlement.
In October 2004, the court issued an order regarding class certification in certain related matters. In December 2006, the U.S. Court of
Appeals for the Second Circuit vacated that order, and determined that the related matters could not be certified as a class. Plaintiffs have filed
a petition for rehearing of the appellate court decision. The appellate court’s decision renders uncertain whether our proposed settlement can be
finally approved and consummated. If the proposed settlement does not receive final approval or is not consummated for any reason, we intend
to defend the lawsuits vigorously because we believe that the claims against us and our officers and directors are without merit.
We are not currently involved in any other material legal proceedings, nor are we aware of any other material legal proceedings pending
against us.
Item 4. Submission of Matters To A Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter ended December 31, 2006.
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