-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ICCwUr/iqIyAwI5f4d7CXqkT5Tn0tEo8+JcB5Ih/doSTd2UBCVRa/MaQ/oOVo3v0 D05Are3vKDQg4m0D6swkrA== 0001017062-01-500303.txt : 20010516 0001017062-01-500303.hdr.sgml : 20010516 ACCESSION NUMBER: 0001017062-01-500303 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAMPS COM INC CENTRAL INDEX KEY: 0001082923 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 770454966 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26427 FILM NUMBER: 1634752 BUSINESS ADDRESS: STREET 1: 3420 OCEAN PARK BOULEVARD STREET 2: SUITE 1040 CITY: SANTA MONICA STATE: CA ZIP: 90405 BUSINESS PHONE: 3105817200 MAIL ADDRESS: STREET 1: 2900 31ST STREET SUITE 150 CITY: SANTA MONICA STATE: CA ZIP: 90405 10-Q 1 d10q.txt QUARTERLY REPORT ENDED 03/31/2001 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2001 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission file number 000-26427 ___________________________ Stamps.com Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 77-0454966 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.)
Address of Principal Executive Offices: 3420 Ocean Park Boulevard, Suite 1040 Santa Monica, California 90405 Registrant's Telephone Number, Including Area Code: (310) 581-7200 Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A ___________________________ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The registrant does not have different classes of common stock. As of May 4, 2001, there were approximately 50,241,851 shares of the registrant's common stock issued and outstanding. STAMPS.COM INC. FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED MARCH 31, 2001 TABLE OF CONTENTS
Page ---- PART I. FINANCIAL INFORMATION................................................................................. 2 ITEM 1. FINANCIAL STATEMENTS........................................................................ 2 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....... 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................. 24 PART II. OTHER INFORMATION.................................................................................... 25 ITEM 1. LEGAL PROCEEDINGS........................................................................... 25 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS................................................... 26 ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................................................. 27 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................... 27 ITEM 5. OTHER INFORMATION........................................................................... 27 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................ 27
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STAMPS.COM INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2001 2000 ------------- --------------- (unaudited) (In thousands) ASSETS Current assets: Cash and short-term investments............................................... $ 209,050 $ 243,929 Restricted cash............................................................... 4,038 4,010 Accounts receivable........................................................... 1,991 2,546 Note Receivable from former officer, net of allowance......................... 3,181 3,181 Prepaid expenses.............................................................. 1,429 5,185 --------- --------- Total current assets....................................................... 219,689 258,851 Property and equipment, net......................................................... 29,788 45,585 Goodwill and other intangible assets, net........................................... 2,721 166,450 Other assets........................................................................ 6,221 16,052 --------- --------- Total assets............................................................ $ 258,419 $ 486,938 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.............................................................. $ 916 3,656 Accrued expenses.............................................................. 8,445 14,913 Deferred revenue.............................................................. 862 1,809 Current portion of long-term debt and capital leases.......................... 277 3,828 --------- --------- Total current liabilities........................................................... 10,500 24,206 Long-term debt and capital leases, less current portion............................. -- Commitments and contingencies....................................................... 5,286 Minority interest in consolidated subsidiary........................................ -- 34,765 Stockholders' equity: Common stock.................................................................. 50 49 Additional paid-in capital.................................................. 708,005 708,007 Notes receivable from stock sales......................................... (101) (101) Deferred compensation....................................................... (9,671) (11,642) Accumulated deficit......................................................... (450,364) (273,632) --------- --------- Total stockholders' equity................................................. 247,919 422,681 --------- --------- Total liabilities and stockholders' equity............................... $ 258,419 $ 486,938 ========= =========
The accompanying notes are an integral part of these financial statements. 2 STAMPS.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, --------------------------------------- 2001 2000 ----------------- ----------------- (in thousands, except per share data) Revenues..................................................... $ 5,259 $ 2,036 Cost of revenues............................................. 3,187 5,733 --------- -------- Gross profit.......................................... 2,072 (3,697) Operating expenses: Sales and marketing................................... 4,288 20,500 Research and development.............................. 4,082 3,395 General and administrative............................ 6,802 5,304 Amortization and write-off of goodwill and other intangibles.......................................... 172,817 4,625 Restructuring and writedown charges................ 11,021 -- Acquired in-process research and development....... -- 2,000 Deferred compensation amortization................. 1,445 1,753 Loss from EncrypTix................................ 5,601 390 --------- -------- Total operating expenses........................... 206,056 37,967 --------- -------- Loss from operations......................................... (203,984) (41,664) Other income (expense): Interest expense...................................... (12) (46) Interest income....................................... 4,069 4,822 Gain from shut down of EncrypTix...................... 23,195 -- --------- -------- Net loss..................................................... $(176,732) $(36,888) ========= ======== Basic and diluted net loss per share......................... $(3.60) $(0.86) ========= ======== Weighted average shares outstanding used in basic and diluted per-share calculation........................ 49,117 43,021 ========= ========
The accompanying notes are an integral part of these financial statements. 3 STAMPS.COM INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months ended March 31, ----------------------------------- 2001 2000 --------------- ------------ (In thousands) Operating activities: Net Loss....................................................... $(176,732) $(36,888) Adjustments to reconcile net loss to net cash used in operating activities: Provision for doubtful accounts........................... 373 -- Depreciation and amortization............................. 1,390 5,791 Amortization and write-off of goodwill and other intangibles............................................... 172,817 -- Amortization of deferred compensation..................... 1,445 1,753 Charge for acquired in-process research and development............................................... -- 2,000 Loss on disposal and writedown of assets.................. 16,080 -- Net gain on shut down of EncrypTix........................ (23,195) -- Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable.................................... 182 (1,316) Prepaid expenses....................................... 3,756 5,236 Other assets........................................... 733 -- Accounts payable....................................... (2,740) (2,169) Accrued expenses....................................... (6,468) (863) Deferred revenue....................................... (947) (39) Minority interest...................................... (11,570) -- --------- -------- Net cash used in operating activities............................ (24,876) (26,495) Investing activities: Purchase of short-term investments, net........................ -- (50,268) Purchase of restricted cash investments........................ (28) -- Sale of short-term investments, net............................ 111,148 -- Acquisition of property and equipment.......................... (1,663) (6,250) Acquisition of iShip.com, net of cash acquired................. -- (2,111) Other.......................................................... -- (1,520) --------- -------- Net cash provided by (used in) investing activities.............. 109,457 (60,149) Financing activities: Repayment of long-term debt and capital leases................. (8,837) (389) Issuance of redeemable preferred stock of subsidiary, net................................................ -- 29,260 Issuance of common stock under ESPP............................ 175 -- Proceeds from exercise of stock options........................ 350 1,048 --------- -------- Net cash provided by (used in) financing activities.............. (8,312) 29,919 --------- -------- Net increase (decrease) in cash and cash equivalents............. 76,269 (56,725) Cash and cash equivalents at beginning of period................. 69,536 326,820 --------- -------- Cash and cash equivalents at end of period....................... 145,805 270,095 Short term investments........................................... 63,245 98,194 --------- -------- Cash and short term investments.................................. $ 209,050 $368,289 ========= ========
The accompanying notes are an integral part of these financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL INFORMATION WITH RESPECT TO March 31, 2001 AND 2000 IS UNAUDITED) 1. Summary of Significant Accounting Policies Basis of Presentation The financial statements are unaudited, other than the balance sheet at December 31, 2000, and, in the opinion of management, reflect all adjustments that are necessary for a fair presentation of the results for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full fiscal year or for any future period. These financial statements should be read in conjunction with the financial statements as of December 31, 2000 and related notes included in the Company's Annual Report on Form 10-K/A filed with the Securities and Exchange Commission (the "SEC") on April 27, 2001. Principles of Consolidation The consolidated financial statements include the accounts of Stamps.com Inc. (the "Company") and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements. Reclassifications Certain prior period balances have been reclassified to conform to current period presentation. 2. Writedown of Intangible Assets related to iShip.com On March 7, 2000, the Company completed the acquisition of iShip.com, Inc.("iShip"), a development stage enterprise that developed Internet-based shipping technology. The acquisition was accounted for as a purchase in accordance with the provisions of Accounting Principles Board Opinion ("APB") No. 16. Under the purchase method of accounting, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. jointly announced that United Parcel Service would acquire Mail Boxes Etc. USA, Inc. Mail Boxes Etc. USA, Inc. represented a significant future source of revenue and market leverage for the Company's enterprise shipping services that were acquired in the iShip acquisition. United Parcel Service also informed the Company that it is unlikely to have Mail Boxes Etc. USA, Inc. continue to use the Company's enterprise shipping services in the future. The Company is in discussions with United Parcel Service to find a resolution. As a result of the March 2001 events, the Company has reduced goodwill and other intangibles associated with the purchase of iShip to reflect the present value of future cash flows, net of estimated transaction costs. This resulted in a non-cash charge of $163.6 million in the first quarter of 2001. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL INFORMATION WITH RESPECT TO March 31, 2001 AND 2000 IS UNAUDITED) 3. EncrypTix Ceases Operations On November 16, 1999, the Company announced the formation of a subsidiary, EncrypTix, Inc., to develop secure printing opportunities in the events, travel and financial services industries. In February 2000, the Company invested $1.0 million and granted EncrypTix a license to its technology in those three specific fields of use. EncrypTix raised approximately $35 million in private financing. On March 12, 2001, EncrypTix ceased operations and effected a general assignment of its assets for the benefit of its creditors. EncrypTix took this action due to the inability to secure additional funding. The Company does not expect to be impacted by any of EncrypTix's resulting liabilities. Additionally, the Company terminated its license agreement with EncrypTix and maintains limited licenses to various EncrypTix intellectual property. Due to this cessation in business, the Company has written off the invested $1.0 million and taken a one-time gain to eliminate the cumulative loss from EncrypTix in the amount of $23.2 million in the first quarter of 2001. 4. Reduction in Workforce and Restructuring In February 2001, in an effort to more rapidly decrease its operating losses and enhance its ability to achieve profitability sooner, the Company reduced its total number of employees by approximately 50% to 150 employees, including full time, part time and contract employees. The Company also continued other cost cutting efforts, including the termination of fixed-cost marketing deals and the redeployment of sales and marketing expenditures to programs that have a higher return on investment. The Company took a one-time charge of $11.0 million in the first quarter of 2001 consisting of $7.7 million related to restructuring, employee severance and fixed asset write-offs, $2.3 million related to the termination of certain contractual arrangements and $1.0 million related to the write-off of an investment in EncrypTix. 5. Legal Proceedings Please refer to "Part II--Other Information--Item 1--Legal Proceedings" of this report for a discussion of legal proceedings. 6. Computation Of Historical Net Loss Per Share Basic earnings per share is computed by dividing the net earnings available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net earnings for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares, consisting of unvested restricted common stock and incremental common shares issuable upon the exercise of stock options and warrants and upon conversion of convertible preferred stock, are excluded from the diluted earnings per share calculation if their effect is anti-dilutive. 7. Related Party Transactions In February 2000, Mr. Payne (former Chairman of the Board, Chief Executive Officer and director) purchased 187,000 shares of the Company's common stock on the open market for an aggregate purchase price of approximately $6.0 million. Mr. Payne purchased the shares on margin and the margin account was secured by a pledge of 1,467,500 shares of the Company's common stock held by Mr. Payne, of which approximately 593,750 shares are subject to repurchase by the Company. As of October 31, 2000, Mr. Payne's total indebtedness under the margin account was approximately $6.7 million, which amount consists 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. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (ALL INFORMATION WITH RESPECT TO March 31, 2001 AND 2000 IS UNAUDITED) In April 2000, the Company agreed to guarantee Mr. Payne's margin account in the event the value of the shares pledged is insufficient collateral to secure the indebtedness outstanding under the margin account. The guarantee is in the form of a single-purpose line of credit extended to Mr. Payne which will 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 is secured by all of Mr. Payne's assets. In addition, the Company has entered into a loan repayment agreement with Mr. Payne and the brokerage firm where he maintains his margin account. Under the terms of that agreement, the Company agrees to guarantee Mr. Payne's margin account. The agreement further provides that, without previous notice to or consent from Mr. Payne, the Company may require the sale of any or all shares of Stamps.com stock held by Mr. Payne in order to satisfy any balances due under the terms of Mr. Payne's margin account. More specifically, the Company may require such sales in the event the closing price of Stamps.com on Nasdaq is below $6 per share for three consecutive trading days or if the closing price of Stamps.com on Nasdaq is greater than $30 per share on any trading day. The loan repayment agreement also provides that the brokerage firm may not extend Mr. Payne any additional credit, except to allow for the accrual of interest against the outstanding balance of the margin account. 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 November 15, 2000 and 85,000 shares at a price of $3.02 per share on November 17, 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 $6.6 million. 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 is due and payable on June 30, 2001, subject to certain acceleration provisions that are triggered upon, among other things, a change of control or the delisting of the Company's common stock by NASDAQ. The company has established a reserve of $3,346,000 related to the note receivable from Mr. Payne. The reserve is calculated as the difference between the note's carrying value, $6,527,000, and the underlying value of the stock on December 31, 2000, $3,181,000 (2 25/32 per share). 8. Subsequent Events Acquisition of E-Stamp Corporation Assets On April 27, 2001, the Company acquired 31 patents and other intellectual property rights from E-Stamp Corporation, including the E-Stamp name and rights to the E-Stamp.com Internet domain for $7.5 million. Intuit, Inc. Lawsuit On April 18, 2001, Intuit, Inc. filed a suit against the Company for alleged breach of contract in the California Superior Court for the County of Santa Clara. The suit alleges that the Company improperly terminated its contract with Intuit and seeks damages of $4 million plus interest and costs associated with the lawsuit. The Company believes that the agreement was terminated on March 1, 2001 due to Intuit's failure to perform adequately under the contract, among other reasons. The Company is currently evaluating the claims against it as well as potential counterclaims. The Company has not responded to the suit and is uncertain of the outcome of the suit. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to expectations concerning matters that are not historical facts. Words such as "projects," "believes," "anticipates," "estimates," "plans," "expects," "intends," and similar words and expressions are intended to identify forward-looking statements. Although Stamps.com believes that such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. Important language regarding factors that could cause actual results to differ materially from such expectations are disclosed herein including, without limitation, in the "Risk Factors" beginning on page 12. All forward-looking statements attributable to Stamps.com are expressly qualified in their entirety by such language. Stamps.com does not undertake any obligation to update any forward-looking statements. You are also urged to carefully review and consider the various disclosures we have made which describe certain factors which affect our business, including the risk factors set forth at the end of Part I, Item 2 of this Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto. Stamps.com, iShip.com/(TM)/, Stamps.com Internet Postage and the Stamps.com logo are our trademarks. This Report also includes trademarks of entities other than Stamps.com. Overview Stamps.com/(TM)/ provides easy, convenient and cost-effective Internet- based services for mailing or shipping letters, packages or parcels anytime and anywhere in the United States. Our core mailing and shipping services are designed to allow individual consumers or employees of small businesses or larger enterprises to select a carrier, print US postage or shipping labels from multiple carriers, schedule a pick-up, track a package and apply enterprise-wide business rules to manage and account for mailing and shipping costs. With all of our services, no additional hardware is required; a customer can access our services through an existing Internet connection and print postage or shipping labels with ordinary laser or inkjet printers. Recent Developments In the quarter ended March 31, 2001, we have continued to implement our new business strategy begun in October 2000 to enhance our ability to achieve profitability by focusing on our core business of Internet postage and shipping. In February 2001, in an effort to more rapidly decrease our operating losses, we reduced the total number of employees by approximately 50% to 150 employees, including full time, part time and contract employees. We also continued other cost cutting efforts, including the termination of fixed-cost marketing arrangements, and the redeployment of sales and marketing expenditures to programs that have a higher return on investment. We took a one-time charge in the first quarter of 2001 of $11.0 million consisting of $7.7 million related to restructuring, employee severance and fixed asset write-offs, $2.3 million related to the termination of certain contractual arrangements and $1.0 million related to the write-off of an investment in EncrypTix. Concurrently with the implementation of our new business strategy, we are also considering other strategic alternatives that may be available to us, including the possible sale of all or part of our business. In October 2000, we stopped making contractual payments on, and subsequently in February 2001, we signed an agreement exiting, our marketing agreement with America Online, Inc. We expect this to result in savings of $27 million over the next two years. In February 2001, we experienced another significant change in personnel at the senior management level, including the resignations of our Senior Vice President and General Manager, Enterprise Business Unit, David N. Duckwitz, our Vice President, Sales, Enterprise Business Unit, Blake Karpe, and our Senior Vice President and General Manager, Small Business Unit, Douglas Walner. We do not currently have any plans to replace any of these senior management positions. In March 2001, David Bohnett resigned from our Board of Directors. We expect to continue to experience changes in personnel at the senior management and Board level as part of our restructuring process. Bruce Coleman remains as our interim Chief Executive Officer, and we have not yet found a permanent replacement. If we fail to attract and retain a qualified individual as our Chief Executive Officer, our business, financial condition and results of operations will be adversely affected. If our new business strategy is not successful, we will not achieve profitability as currently planned, if at all. On November 16, 1999, we announced the formation of a subsidiary, EncrypTix, Inc., to develop secure printing opportunities in the events, travel and financial services industries. In February 2000, we invested $1.0 million and granted EncrypTix a license to our technology in those three specific fields of use. EncrypTix raised 8 approximately $35 million in private financing. On March 12, 2001, EncrypTix ceased operations and effected a general assignment of its assets for the benefit of its creditors. EncrypTix took this action due to the inability to secure additional funding. We do not expect to be impacted by any of EncrypTix's resulting liabilities. Additionally, we terminated our license agreement with EncrypTix and maintain limited licenses to various EncrypTix intellectual property. On March 7, 2000, we completed the acquisition of iShip.com, Inc. pursuant to which iShip.com, Inc. became our wholly-owned subsidiary. iShip.com, Inc. was a development stage enterprise developing Internet-based shipping technology. In connection with the acquisition, we issued approximately 5.6 million shares of our common stock in exchange for all outstanding shares of iShip.com, Inc. capital stock and reserved an additional 1.6 million shares of our common stock for issuance upon the exercise of iShip.com, Inc. options and warrants we assumed in connection with the acquisition. The acquisition was accounted for as a purchase. In connection with the iShip.com, Inc. acquisition, we recorded a significant amount of goodwill and intangibles. At December 31, 2000, the un- amortized intangibles related to the iShip.com, Inc. acquisition was $175.3 million. iShip.com, Inc. On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. jointly announced that United Parcel Service would acquire Mail Boxes Etc. USA, Inc. Mail Boxes Etc. USA, Inc. represented a significant future source of revenue and market leverage for our enterprise shipping services that were acquired in the iShip acquisition. United Parcel Service also informed us that it is unlikely to have Mail Boxes Etc. USA, Inc. continue to use the Company's enterprise shipping services in the future. We are in discussions with United Parcel Service to find a resolution. As a result of the March, 2001 events, the Company has reduced goodwill and other intangibles associated with the purchase of iShip to reflect the present value of future cash flows, net of estimated transaction costs. This resulted in a non-cash charge of $163.6 million in the first quarter of 2001. On April 27, 2001, we acquired certain intellectual property assets relating to Internet-based postage printing and management from E-Stamp Corporation, one of our former competitors for a purchase price of $7.5 million. The portfolio of 31 patents and trademarks that we acquired from E-Stamp Corporation include the E-Stamp name and rights to the E-Stamp.com Internet domain. We plan to use these intellectual property assets to expand the services available to our existing customer base and to target the larger market of small businesses and home offices. However, certain of the intellectual property rights we acquired from E-Stamp Corporation are the subject of a lawsuit brought by Pitney Bowes and could be determined by a court to be invalid or unenforceable. Such a determination could make the intellectual property rights we acquired worthless. Internet Postage Services We offer an Internet Postage service targeted at consumers and small businesses with less than 100 employees. Service fee revenues for our Internet Postage service are generated from the two service plans that we are currently offering to our users, the Simple Plan and the Power Plan. Under the Simple Plan, a user purchases postage at face value for a monthly convenience fee of 10% of the value of postage printed. Prior to November 2000, there was a monthly minimum fee of $1.99 and a monthly maximum fee of $19.99 under the Simple Plan. Beginning in November 2000, the monthly minimum fee was increased to $4.49 for new customers and the monthly maximum fee was discontinued. All customers who existed at the time of the price increase remain at the $1.99 minimum pricing level. The Power Plan was introduced at the beginning of our second quarter of 2000 in response to customer requests for a fixed monthly pricing plan with unlimited usage. Under the Power Plan, a customer may purchase and use unlimited postage at face value, for a flat monthly fee that ranges from $15.99 to $18.99. For the first quarter of 2001, over 50% of our service fee revenue was generated from Power Plan customers. Service fees are calculated and charged at the end of a monthly billing cycle. We also generate revenues from controlled access advertising to our existing customer base, and revenue share and bounty arrangements. In the first quarter of 2001, we grew our customer base for the Internet Postage service by 15 thousand customers to 322 thousand customers, and saw a 220% increase in our Internet Postage revenues to $4.8 million as compared to our Internet Postage revenues of $1.5 million in the first quarter of 2000. 9 Internet Shipping Services We offer an Internet-based, multi-carrier mailing and shipping service that is targeted both at small businesses with less than 100 employees and at large companies with more than 100 employees. We believe that our enterprise service for corporations with 100 or more employees will enable them to centrally manage and control costs from mailing and shipping activities across multiple carriers and can be distributed to thousands of corporate desktops using only a Web browser. The largest customer to date of the enterprise service is Mail Boxes Etc. USA, Inc., a retail business, communication and postal services franchiser. There are currently over 1,400 Mail Boxes Etc. USA, Inc. franchises utilizing our services. During the first quarter of 2001, we received $500,000 in service fee revenue from Mail Boxes Etc. USA, Inc. as compared to $500,000 in service fees during the first quarter of 2000. Under our 2000 agreement with Mail Boxes Etc. USA, Inc., we were entitled to receive a fixed monthly service fee of $500,000 until December 31, 2000. Starting on January 1, 2001, our fixed monthly service fee was replaced by a per package transaction fee. As of March 31, 2001, we had not received payment of $1.5 million of fees for services provided in 2000, nor any transaction fees for services provided in 2001, due to a dispute relating to certain product features. We have not recognized any revenue related to this agreement for the service or transaction fees that have not been collected. We are currently working with Mail Boxes Etc. USA, Inc. in an effort to resolve the dispute. Results of Operations Revenue. Revenue is derived primarily from two sources: (1) service fees charged to customers for the ability to print postage directly from their printer, and (2) revenue received from Mail Boxes Etc. USA, Inc., for shipping tools used by Mail Boxes Etc. USA, Inc. franchise locations. Total revenue increased from $2.0 million to $5.3 million for the three months ended March 31, 2000 and 2001, respectively. The increase in revenue is primarily due to a growth in the customer base from approximately 188,000 at March 31, 2000 to 322,000 at March 31, 2001, and to an increase in the mix of higher revenue Power Plan customers. [Other revenue consists primarily of bounties and commissions on sales of products to our customers by third parties.] Cost of Revenues. Cost of revenues principally consists of customer service, promotional expenses, and system operating costs. Cost of revenues was $3.2 million for the three months ended March 31, 2001, compared to $5.7 million for the three months ended March 31, 2000. During the first quarter of 2001, our cost of revenues decreased primarily due to increased automation and reduced labor costs in our customer support operations. We also reduced promotional expenses as we decreased the amount of free postage given to each customer. We also implemented a new type of free postage that expires after a period of 30 days, resulting in less postage used by each individual customer. Sales and Marketing. Sales and marketing expenses principally consist of costs associated with strategic partnership relationships and compensation and related expenses for personnel engaged in marketing and business development activities. Sales and marketing expenses were approximately $4.3 million compared to $20.5 million for the three months ended March 31, 2001 and 2000, respectively. The decrease in sales and marketing expenses resulted from fewer sales and marketing personnel, as well as a more focused spend of discretionary marketing dollars on programs that provide a higher return on investment. Research and Development. Research and development expenses principally consist of compensation for personnel involved in the development of the Internet Postage and enterprise shipping service, expenditures for consulting services and third-party. Research and development expenses for the three months ended March 31, 2001 were $4.1 million compared to $3.4 million for the three months ended March 31, 2000. The increase is primarily due to the fact that the results for the quarter ended March 31, 2000 only include the research and development expenses associated with the iShip.com, Inc. operations after that acquisition was completed on March 7, 2000. General and Administrative. General and administrative expenses principally consist of compensation and related costs for executive and administrative personnel, fees for legal and other professional services, and depreciation of equipment and software used for general corporate purposes. General and administrative expenses for the three months ended March 31, 2001 and 2000 were $6.8 million and $5.3 million, respectively. The increase is primarily due to the fact that the results for the quarter ended March 31, 2000 only include the general and 10 administrative expenses associated with the iShip.com, Inc. operations after that acquisition was completed on March 7, 2000. The increase is also due to increased depreciation expense associated with the investments made during 2000 in equipment and software for general corporate purposes. Restructuring and Write-down Charges. In February 2001, in an effort to more rapidly decrease our operating losses and enhance our ability to achieve profitability sooner, we reduced our total number of employees by approximately 50% to 150 employees, including full time, part time and contract employees. We also continued other cost cutting efforts, including the termination of fixed- cost marketing deals, and the redeployment of sales and marketing expenditures to programs that have a higher return on investment. We took a one-time charge in the first quarter of 2001 of $11.0 million consisting of $7.7 million related to restructuring, employee severance and fixed asset write-offs, $2.3 million related to the termination of certain contractual arrangements and $1.0 million related to the write-off of an investment in EncrypTix. Deferred Compensation Amortization. During 1998 and 1999, we granted stock options with exercise prices that were less than the estimated fair value of the underlying shares of common stock for accounting purposes on the date of grant. This results in amortization expenses of deferred compensation over the period that these options vest, which ranges from three to four years from the date of grant. Deferred compensation amortization for the three months ended March 31, 2001 and 2000 was $1.4 million and $1.8 million, respectively. This decrease was a result of fewer personnel at Stamps.com following our October 2000 and February 2001 reductions in force. Loss from EncrypTix. For the three months ended March 31, 2001 and 2000, the losses associated with the operation of our EncrypTix subsidiary were $5.6 million and $0.4 million, respectively. This increase was primarily a result of growth in personnel employed in the EncrypTix subsidiary. Other Income (Expense). Other income (expense) consisted of income from cash equivalents and short-term investments, plus a gain from the shutdown of our EncrypTix subsidiary, less interest expense related to financing obligations. Other income (expense) for the three months ended March 31, 2001 and 2000 was $27.3 million and $4.8 million, respectively. This increase is due to a one-time gain from the shutdown of our EncypTix subsidiary of $23.2 million that we recognized during the first quarter of 2001. The increase was offset by lower interest income in the first quarter of 2001 as compared to the first quarter of 2000, and was a result of a lower cash balance. Liquidity and Capital Resources As of March 31, 2001 we had approximately $213 million cash and short term investments. We regularly invest excess funds in short-term money market funds and commercial paper and do not engage in hedging or speculative activities. In the first quarter of 2000, our majority-owned subsidiary, EncrypTix, raised approximately $34.8 million in private financing from a group of financial and strategic investors. The proceeds of this financing were used by EncrypTix for research and development, sales and marketing and general working capital purposes. On March 12, 2001, EncrypTix ceased operations and effected a general assignment of its assets for the benefit of its creditors. EncrypTix took this action due to the inability to secure additional funding. We do not expect to be impacted by any of EncrypTix's resulting liabilities. Additionally, we terminated our license agreement with EncrypTix and maintain limited licenses to various EncrypTix intellectual property. In May 1999, we entered into a facility lease agreement for the corporate headquarters with aggregate lease payments of approximately $4.8 million through May 2004. Also, in March 2000 we entered into a facility lease agreement for a Bellevue, Washington facility with aggregate lease payments of approximately $17 million. For all excess space that resulted from our October 2000 and February 2001 restructurings, we are actively marketing the space for sublet. Net cash used in operating activities was $24.9 million and $26.5 million for the three months ended March 31, 2001 and 2000, respectively. The decrease in net cash used in operating activities resulted primarily from cost-cutting activities, including the restructuring that took place in the fourth quarter of 2000 and in the first quarter of 2001. 11 Net cash provided by investing activities was $109.5 million for the three months ended March 31, 2001 as compared to net cash used by investing activities of $60.1 million for the three months ended March 31, 2000. The increase in net cash provided by investing activities resulted primarily from the sale of short- term investments during the first quarter of 2001. Net cash used by financing activities was $8.3 million for the three months ended March 31, 2001 as compared to net cash provided by financing activities of $29.9 million for the three months ended March 31, 2000. The difference resulted primarily from cash raised by the EncrypTix subsidiary during the three months ended March 31, 2000. We anticipate that our current cash balances will be sufficient to fund our operations through June 2002. We may require additional capital to fund our business, and we cannot be certain that additional funds will be available on satisfactory terms when needed, if at all. See "Risk Factors--We may need to raise additional capital in the future through the issuance of additional equity or convertible debt securities or by borrowing money, and additional funds may not be available on terms acceptable to us." RISK FACTORS You should carefully consider the following risks and the other information in this Report and our other filings with the SEC before you decide to invest in our company or to maintain or increase your investment. The risks and uncertainties described below are not the only ones facing Stamps.com. Additional risks and uncertainties may also adversely impact and impair our business. If any of the following risks actually occur, our business, results of operations or financial condition would likely suffer. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. This Report contains forward-looking statements based on the current expectations, assumptions, estimates and projections about Stamps.com and the Internet industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described in this section and elsewhere in this Report. Stamps.com does not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. Risks Related to Our Business Because we have a limited operating history, there is limited information upon which you can evaluate our business. We are still in the early stages of our development, and our limited operating history makes it difficult to evaluate our business and prospects. Our Internet Postage service has only been available since October 22, 1999 and our enterprise shipping services have yet to be released on a widespread basis. Due to our limited operating history, it is difficult or impossible to predict future results of operations, including operating expenses and revenues. Moreover, due to our limited operating history, any evaluation of our business and prospects must be made in light of the risks and uncertainties often encountered by early-stage companies in Internet-related markets. Many of these risks are discussed in the subheadings below, and include our (a) ability to meet and maintain government specifications for our Internet Postage service, specifically US Postal Service requirements; (b) complete dependence on Internet Postage and shipping services that currently do not have substantial market acceptance; (c) potential need to expand our sales and support organizations; (d) ability to establish and promote our brand name; (e) ability to expand our operations to meet the commercial demand for our services, when it arises; (f) development of and reliance on strategic and distribution relationships; (g) ability to prevent and respond quickly to service interruptions; (h) ability to minimize fraud and other security risks; and (i) ability to compete with companies with greater capital resources and brand awareness. If we are unsuccessful in addressing these risks or in executing our new business strategy, our business, results of operations and financial condition would be materially and adversely affected. 12 Our revenues and operating results may fluctuate in future periods and we may fail to meet expectations, which may cause the price of our common stock to decline. Given our limited operating history, we have not generated any significant revenues from our operations. Our revenues and operating results are difficult to predict and may fluctuate significantly from period-to-period particularly because our Internet Postage and shipping services are new and our prospects uncertain. If revenues or operating results fall below the expectations of investors or public market analysts, the price of our common stock could decline substantially. Factors that might cause our revenues, margins and operating results to fluctuate include the factors described in the subheadings below as well as: (a) the success of our Internet Postage and shipping services; (b) the costs of defending ourselves in litigation; (c) the costs of our marketing programs to establish and promote the Stamps.com brand name; (d) the demand for our Internet Postage and shipping services; (e) our ability to develop and maintain strategic distribution relationships; (f) the number, timing and significance of new products or services introduced by both us and our competitors; (g) our ability to develop, market and introduce new and enhanced services on a timely basis; (h) the level of service and price competition; (i) the increases in our operating expenses; (j) US Postal Service regulation and policies; (k) the success of implementing our new business strategy and of reducing expenses; and (l) general economic factors. Our cost of revenues includes costs for systems operations, customer service, Internet connection and security services; all of these costs will fluctuate depending upon the demand for our services. In addition, a substantial portion of our operating expenses is related to personnel costs, marketing programs and overhead, which cannot be adjusted quickly and are therefore relatively fixed in the short term. Our operating expense levels are based, in significant part, on our expectations of future revenues. If our expenses precede increased revenues, both gross margins and results of operations would be materially and adversely affected. Moreover, our new business strategy of reducing expenses may directly and correspondingly cause our revenues to substantially decline. Due to the foregoing factors and the other risks discussed in this annual report, you should not rely on period-to-period comparisons of our operating results as an indication of future performance. We have a history of losses, expect to incur losses in the future and may never achieve profitability, which may reduce the trading price of our common stock. Since we began operations in 1998, we have incurred substantial operating losses in every period. As a result of accumulated operating losses, we have an accumulated deficit of $450.4 million as of March 31, 2001. Since inception, we have funded our business through selling our stock, not from cash generated by our business. We expect to continue to incur significant sales and marketing, research and development, and administrative expenses and therefore could continue to experience net losses and negative cash flows for several years, and perhaps for the duration of our corporate existence. For the quarter ended March 31, 2001, we only generated $5.3 million in revenues. Even if sales of our products and services begin to grow, we may not generate sufficient revenues to achieve profitability in the future. In addition, as a result of our acquisition of iShip.com, Inc. in March 2000, our losses have increased, and our losses could continue to increase, because of additional costs and expenses related to: amortization of goodwill and other intangibles and deferred compensation resulting from the acquisition; an increase in the number of employees; an increase in sales and marketing activities; additional facilities and infrastructure; and assimilation of operations and personnel. In connection with the iShip.com, Inc. acquisition, we recorded a significant amount of intangibles, the amortization of which will significantly and adversely affect our operating results. On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. jointly announced that United Parcel Service would acquire Mail Boxes Etc. USA, Inc. Mail Boxes Etc. USA, Inc. represented a significant future source of revenue and market leverage for our enterprise shipping services. Mail Boxes Etc. USA, Inc. was also a significant customer of United Parcel Service. United Parcel Service has informed us that it is unlikely to have Mail Boxes Etc. USA, Inc. continue to use our online shipping services in the future. In light of the March 2001 events, we recorded a reduction to the remaining goodwill in the first quarter of 2001 in the amount of $159.0 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 13 Overall, we will need to generate significant revenues and successfully implement our new business strategy to achieve and maintain profitability. We recently implemented new pricing plans that may adversely affect our future revenues and profitability. Our ability to generate gross margins depends upon the ability to generate significant revenues from a large base of active customers. We recently changed our pricing plans for our Internet Postage service. In order to attract customers in the future, we may run special promotions and offer discounts on fees, postage and supplies. We cannot be sure that customers will be receptive to the new fee structure for our Internet Postage service or to the fee structure that we will implement for our Internet shipping services. Even if we are able to establish a sizeable base of users, we still may not generate sufficient gross margins to become profitable. In addition, our ability to generate revenues or achieve profitability could be adversely affected by special promotions or additional changes to our pricing plans. The change in payment terms associated with a significant contract or the termination of that contract could adversely affect our financial condition and results of operations. During the first quarter of 2001, we received $500,000, or approximately 10% of our total revenue for the quarter, from Mail Boxes Etc. USA, Inc. Under our 2000 agreement with Mail Boxes Etc. USA, Inc., we were entitled to receive a fixed monthly service fee of $500,000 until December 31, 2000. Starting on January 1, 2001, our fixed monthly service fee was replaced by a per package transaction fee. As of March 31, 2001, we had not received payment of $1.5 million of fees for services provided in 2000, nor any transaction fees for services provided in 2001, due to a dispute relating to certain product features. We have not recognized any revenue related to this agreement for the service or transaction fees that have not been collected. We are currently working with Mail Boxes Etc. USA, Inc. in an effort to amicably resolve this dispute. On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. jointly announced that United Parcel Service would acquire Mail Boxes Etc. USA, Inc. Mail Boxes Etc. USA, Inc. represented a significant future source of revenue and market leverage for our online shipping services. United Parcel Service has informed us that it is unlikely to have Mail Boxes Etc. USA, Inc. continue to use our online shipping services, which would adversely affect our financial condition and results of operations. Even if Mail Boxes Etc. USA, Inc. continues to use our online shipping services, the transaction-based fee structure will yield lower revenues than the fixed monthly fee structure for the foreseeable future. If our new business strategy is not successfully implemented, our financial condition and results of operations will be adversely affected. In the quarter ended March 31, 2001, we have continued to implement our new business strategy begun in October 2000 to enhance our ability to achieve profitability by focusing on our core business of Internet postage and shipping. In February 2001, in an effort to more rapidly decrease our operating losses, we reduced the total number of employees by approximately 50% to 150 employees, including full time, part time and contract employees. We also continued other cost cutting efforts, including the termination of fixed-cost marketing arrangements, and the redeployment of sales and marketing expenditures to programs that have a higher return on investment. Our new strategy entails risks relating to our ability to attract our targeted customers to offset potential customer losses in other areas and the ability of our new management team to implement this strategy. There is no guarantee our new management team will be able to effectively or efficiently implement our new business strategy or that, if effectively implemented, our business strategy will benefit us or help us achieve profitability. Failure to execute our plan to significantly reduce expenses or to attract new customers in high margin lines of business in significant numbers will adversely effect our financial condition and results of operations. In addition, our new business strategy could result in a substantial loss of customers which would have an adverse impact on our financial condition and results of operations. 14 We may not be able to successfully identify and consummate viable strategic alternatives. Concurrently with the implementation of our new business strategy, we are considering other strategic alternatives that may be available to us, including the possible sale of all or part of our business. However, there can be no assurance that we will be able to find a buyer, or that a buyer would be willing to acquire all or part of our business at an acceptable price or on acceptable terms. Recent personnel changes may interfere with our operations. In February 2001, we experienced another significant change in personnel at the senior management level, including the resignations of our Senior Vice President and General Manager, Enterprise Business Unit, David N. Duckwitz, our Vice President, Sales, Enterprise Business Unit, Blake Karpe, and our Senior Vice President and General Manager, Small Business Unit, Douglas Walner. We do not currently have any plans to replace any of these senior management positions. In March 2001, David Bohnett resigned from our Board of Directors. We expect to continue to experience changes in personnel at the senior management and Board level as part of our restructuring process. Bruce Coleman remains as our interim Chief Executive Officer, and we have not yet found a permanent replacement. If we fail to attract and retain a qualified individual as our Chief Executive Officer, our business, financial condition and results of operations will be adversely affected. If our new business strategy is not successful, we will not achieve profitability as currently planned, if at all. In February 2001, we reduced the total number of our employees by approximately 50% to 150 employees, which included full time, part time and contract employees. These transitions have resulted and will continue to result in some disruption to our ongoing operations. If we do not successfully attract and retain skilled personnel for permanent management and other key personnel positions, we may not be able to effectively implement our business plan. Our success depends largely on the skills, experience and performance of the members of our senior management and other key personnel. Any of the individuals can terminate his or her employment with us at any time. If we lose additional key employees and are unable to replace them with qualified individuals, our business and operating results could be seriously harmed. In addition, our future success will depend largely on our ability to continue attracting and retaining highly skilled personnel. As a result, we may be unable to successfully attract, assimilate or retain qualified personnel. Further, we may be unable to retain the employees we currently employ or attract additional personnel. The failure to attract and retain the necessary personnel could seriously harm our business, financial condition and results of operations. We can not predict the value of our acquisition of certain intellectual property assets of E-Stamp Corporation. As described under "Recent Developments," we acquired certain intellectual property assets relating to Internet-based postage printing and management from E-Stamp Corporation, one of our former competitors. There can be no assurance that the intellectual property assets we acquired will provide value to our company or will help us to achieve profitability as currently planned, if at all. In addition, certain of the intellectual property rights we acquired from E-Stamp Corporation are the subject of a lawsuit brought by Pitney Bowes and could be determined by a court to be invalid or unenforceable. Such a determination could make the intellectual property rights we acquired worthless. See "Legal Proceedings." The success of our business will depend upon acceptance by customers of our Internet Postage and shipping services. We expect that our Internet Postage and enterprise Internet shipping services will generate a significant portion of our near-term future revenues. Accordingly, we depend heavily on the commercial acceptance of our Internet Postage and enterprise Internet shipping services. If we fail to successfully gain commercial acceptance of our Internet Postage and enterprise Internet shipping services, we will be unable to generate significant revenues. To date, a substantial market for Internet Postage and enterprise Internet shipping services has not developed, and we cannot assure you that it will develop. More specifically, we cannot predict if our target customers will choose the Internet as a means of purchasing postage or of facilitating their mailing and shipping transactions, if customers will 15 be willing to pay a fee to use our service, or if potential users will select our system over our competitors' or over alternative methods such as online invoicing, bill payment and financial transactions. The success of our business will depend upon our ability to make our Internet Postage and shipping services widely available, and to achieve widespread adoption of our services. We face numerous risks in conjunction with the introduction, sale and commercial availability of our services because of our very limited experience with the commercial rollout and use of our services. Specifically, our Internet Postage service was introduced on October 22, 1999 and our enterprise Internet shipping services have yet to be deployed. As a result, we cannot be sure that our services will be widely available or adopted, that they will successfully process large numbers of user transactions or that our services will contain features that appeal to the broad range of customers that we target. If we experience problems with the availability, adoption, scalability or functionality of our services or if we are unable to offer attractive service enhancements in a timely manner, our ability to attract and retain customers and our results of operations will be adversely impacted. If we do not achieve the brand recognition necessary to succeed in the Internet postage and shipping markets, our business will suffer. We must quickly build our Stamps.com brand to gain market acceptance for our services. We believe it is imperative to our long-term success that we obtain significant market share for our services before our competitors do. We must make substantial expenditures on product development, strategic relationships and marketing initiatives in an effort to establish our brand awareness. In addition, we must devote significant resources to ensure that our users are provided with a high quality online experience supported by a high level of customer service. We cannot be certain that we will have sufficient resources to build our brand and realize commercial acceptance of our services. In addition, our new business strategy of reducing expenses could limit our ability to establish our brand awareness. If we fail to gain market acceptance for our services, our business will suffer dramatically or may fail. If we fail to effectively market and sell our Internet Postage and shipping services, we may never achieve profitability and our business will be substantially harmed and could fail. In order to acquire customers and achieve wide distribution and use of our services, we must develop and execute cost-effective marketing campaigns and sales programs. Given the limited amount of time that our services have been commercially available, if at all, we have very limited experience conducting marketing campaigns. In addition, we have recently increased our emphasis on direct selling efforts and have only recently retained the resources necessary to support a direct sales channel. However, we have very limited experience regarding our ability to acquire customers through a direct sales channel. In connection with our new business strategy, we have significantly reduced our marketing budget, which could prevent us from pursuing certain marketing campaigns and sales programs. As a result of these limited marketing and sales experiences, and our reduced marketing budget, we cannot predict our ability to attract customers for our services, and we may fail to generate significant interest in any of our services. Furthermore, we may be unable to generate significant interest in our services in a cost-effective manner. If we fail to generate interest in our services or to acquire customers in a cost-effective manner, our results of operations will be adversely affected and we may never achieve profitability. If we fail to meet the demands of our customers, our business will be substantially harmed and could fail. Our Internet Postage and shipping services must meet the commercial demands of our customers, which are expected to range from small businesses to large enterprises. We cannot be sure that our services will appeal to or be adopted by such a wide range of customers. In addition, given our limited experience selling our services to and implementing our services with enterprise customers, we cannot predict the length of enterprise sales cycles, the implementation times for our services or the extent to which an enterprise will employ our services. Our technology also may not be capable of servicing the needs of these large enterprise customers. Moreover, our ability to obtain and retain customers depends on our customer service capabilities. As part of our new business strategy, we have significantly reduced our support offerings. If we are unable at any time to address customer service issues adequately or to provide a satisfactory customer experience for current or potential customers, our business and reputation may be harmed. If we experience extensive interest in our services, we may fail to meet the expectations of customers due to limited experience in operating our services and the strains this demand will place on our Web 16 site, customer service operations, professional services group, network infrastructure or systems. If we fail to meet the demands of our customers or if our customers implement and employ our services more slowly than we expect, our business, results of operation and ability to achieve profitability will be negatively affected. If we cannot grow our business, and effectively manage that growth, our business will be adversely affected and could fail. Our new business strategy of significantly reducing expenses could have a substantial impact on our ability to develop and introduce new products and services; attract, serve and retain new customers; reliably improve our Web site, network infrastructure and systems; implement new systems, procedures and controls; and increase brand awareness. If our business begins to grow, we may not be able to manage our growth effectively. A period of business expansion could place a significant strain on our managerial, operational and financial resources. Our personnel, systems, procedures and controls may be inadequate to support our future operations. If we are unable to manage our growth effectively or experience disruptions during periods of expansion, our business will suffer and our financial condition and operating results will be seriously affected. Success by Pitney Bowes in its suits against us alleging patent infringement could prevent us from offering our Internet Postage and shipping services and severely harm our business or cause it to fail. On June 16, 1999, Pitney Bowes sued us for alleged patent infringement in the United States District Court for the District of Delaware. The suit originally alleged that we are infringing two patents held by Pitney Bowes related to postage application systems and electronic indicia. The suit seeks treble damages, a preliminary and permanent injunction from further alleged infringement, attorneys' fees and other unspecified damages. We 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 one of our competitors, 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 September 18, 2000 Pitney Bowes filed another patent infringement lawsuit against us in the United States District Court for the Eastern District of Texas, alleging that we are infringing four patents owned by Pitney Bowes related to shipping. The suit seeks unspecified damages and a permanent injunction from further alleged infringement. We answered the complaint on December 1, 2000, denying the allegations of patent infringement and asserting a number of affirmative defenses. The outcome of the litigation that Pitney Bowes has brought against us is uncertain. Therefore, we can give no assurance that Pitney Bowes will not prevail in its suits against us. See "Legal Proceedings." If Pitney Bowes prevails in its suits against us, we may be prevented from selling postage on the Internet. Alternatively, the Pitney Bowes suits could result in limitations on how we implement our service, delays and costs associated with redesigning our service and payments of license fees and other payments. Thus, if Pitney Bowes prevails in its suits against us, our business could be severely harmed or fail. In addition, the litigation could result in significant expenses and diversion of management time and other resources. On August 17, 1998, Pitney Bowes issued a press release stating that it holds dozens of US patents related to computer-based postage metering and that it intended to engage in discussions with other marketers of computer-based postal products to license Pitney Bowes technology. Prior to Pitney Bowes filing a lawsuit against us, we were in license discussions with Pitney Bowes. We intend to continue these discussions; however, we cannot predict whether these discussions will continue, the outcome of these discussions or the impact of Pitney Bowes' intellectual property claims on our business or the Internet postage market. If Pitney Bowes is able to prevail in its claims against us and if we do not enter into a license relationship with Pitney Bowes, our business could be impacted severely or fail. In addition, as described above, Pitney Bowes could obtain monetary and injunctive relief against us. 17 Success by Cybershop in its suit against us seeking damages and recognition of its ownership of the domain name "stamps.com" could prevent us from using the domain name "stamps.com" and could require a change of name of the Company, severely harming our business or causing it to fail. On December 13, 2000, Cybershop (a British Columbia, Canada partnership) and its general partners filed suit against us in the U.S. District Court for the Southern District of Texas, alleging that in 1998 a third party fraudulently transferred ownership of the Internet domain name "stamps.com" away from Cybershop and subsequently transferred it to us. The third party is also a named defendant in the suit. The complaint seeks legal resolution and recognition of Cybershop's ownership of the "stamps.com" domain name and seeks unspecified monetary damages against the third party. On January 9, 2001, we filed a motion to dismiss the suit. On February 16, 2001, Cybershop filed an amended complaint, alleging new causes of action, including conversion, invasion of privacy, trespass, and private nuisance, and seeking declaratory judgment for return of the domain name registration to Cybershop. On March 5, 2001, we filed a motion to dismiss the amended complaint. The outcome of the litigation is uncertain, and we can give no assurance that Cybershop will not prevail in the suit against us. If Cybershop prevails in its claims against us, we may be liable for monetary damages. Additionally, if Cybershop is successful in the lawsuit, we may be required to relinquish the domain name "stamps.com" and transfer the domain name registration to Cybershop. Relinquishing ownership of the "stamps.com" domain name would require us to use a different domain name as the primary Internet address and web page for our company, and we may need to change the name of our company itself from "Stamps.com Inc." as well. Changing the name of our company, and using a new Internet domain name, could significantly and negatively affect our brand recognition and customer acquisition and retention. Furthermore, a change in our company name or Internet domain name could result in significant costs in seeking to build new brand recognition. Thus, if Cybershop prevails in its suit against us, our business could be severely harmed or even fail. See "Legal Proceedings." Even if Cybershop's claim is unsuccessful, the Cybershop litigation could result in significant expenses and diversion of management time and other resources that could negatively affect our business. Third party assertions of violations of their intellectual property rights could adversely affect our business. Substantial litigation regarding intellectual property rights exists in our industry. Third parties may currently have, or may eventually be issued, patents upon which our products or technology infringe. Any of these third parties might make a claim of infringement against us. We may become increasingly aware of, or we may increasingly receive correspondence claiming, potential infringement of other parties' intellectual property rights. We could incur significant costs and diversion of management time and resources to defend claims against us regardless of their validity. We may not have adequate resources to defend against these claims and any associated costs and distractions could have a material adverse effect on our business, financial condition and results of operations. In addition, litigation in which we are accused of infringement might cause product development delays, require us to develop non-infringing technology or require us to enter into royalty or license agreements, which might not be available on acceptable terms, or at all. If a successful claim of infringement were made against us and we could not develop non-infringing technology or license the infringed or similar technology on a timely and cost- effective basis, our business could be significantly harmed. Any loss resulting from intellectual property litigation could severely limit our operations, cause us to pay license fees, or prevent us from doing business. See "Legal Proceedings." A failure to protect our own intellectual property could harm our competitive position. We rely on a combination of patent, trade secret, copyright and trademark laws and contractual restrictions, such as confidentiality agreements and licenses, to establish and protect our rights in our products, services, know- how and information. We have 34 issued United States patents and 10 issued international patents, and have filed 63 United States patent applications and 18 international patent applications, inclusive of those recently acquired from E-Stamp Corporation. We have also applied to register a number of trademarks and service marks. We plan to apply for other patents, trademarks and service marks in the future. We may not receive patents for any of our patent applications. Even if patents are issued to us, claims issued in these patents may not protect our technology. In addition, a court might hold any of our patents, trademarks or service marks invalid or unenforceable. Even if our patents are upheld or are not challenged, third parties may develop alternative technologies or products without infringing our patents. If our 18 patents fail to protect our technology or our trademarks and service marks are successfully challenged, our competitive position could be harmed. We also generally enter into confidentiality agreements with our employees, consultants and other third parties to control and limit access and disclosure of our confidential information. These contractual arrangements or other steps taken to protect our intellectual property may not prove to be sufficient to prevent misappropriation of technology or deter independent third party development of similar technologies. Additionally, the laws of foreign countries may not protect our services or intellectual property rights to the same extent as do the laws of the United States. See "Risk Factors--Success by Cybershop in its suit against us seeking damages and recognition of its ownership of the domain name "stamps.com" could prevent us from using the domain name "stamps.com" and could require a change of name of our Company, severely harming our business or causing it to fail." If we are unable to maintain and develop our strategic relationships and distribution arrangements, our Internet Postage and shipping services may not achieve commercial acceptance. We have established strategic relationships with a number of third parties. To date, our strategic relationships generally involve the promotion and distribution of our services through our partners' products, services and Web sites. Recently, we have increased our focus on the direct sales channel and have entered into arrangements to have a third party direct sales force offer our services. In return for promoting or selling our services, our partners may receive revenue-sharing opportunities or per-customer bounties. In order to achieve wide distribution of our services, we believe we must establish additional strategic relationships to market our services effectively. If one or more of our partners terminates or limits its relationship with us, our business could be severely harmed or fail. We have limited experience in establishing and maintaining strategic relationships, and we may fail in our efforts to establish and maintain these relationships. Our current strategic relationships have not yet resulted in significant revenues, primarily because we have only recently commercially released our Internet Postage service, and our enterprise shipping services have not yet been commercially released. As a result, our strategic partners may not view their relationships with us as significant or vital to their businesses and, consequently, may not perform according to our expectations. We have little ability to control the efforts of our strategic partners and, even if we are successful in establishing strategic relationships, these relationships may not be successful. System and online security failures could harm our business and operating results. Our services depend on the efficient and uninterrupted operation of our computer and communications hardware systems. In addition, we must provide a high level of security for the transactions we execute. We rely on internally- developed and third-party technology to provide secure transmission of postage and other confidential information. Any breach of these security measures would severely impact our business and reputation and would likely result in the loss of customers. Furthermore, if we are unable to provide adequate security, the US Postal Service could prohibit us from selling postage over the Internet. Our systems and operations are vulnerable to damage or interruption from a number of sources, including fire, flood, power loss, telecommunications failure, break-ins, earthquakes and similar events. We have entered into an Internet hosting agreement with Exodus Communications, Inc. to maintain our Internet Postage servers at Exodus' data center in Southern California. Our operations depend on Exodus' ability to protect its and our systems in its data center against damage or interruption. Exodus does not guarantee that our Internet access will be uninterrupted, error-free or secure. Our servers are also vulnerable to computer viruses, physical, electrical or electronic break- ins and similar disruptions. We have experienced minor system interruptions in the past and may experience them again in the future. Any substantial interruptions in the future could result in the loss of data and could completely impair our ability to generate revenues from our service. We do have a business interruption plan that we continue to refine and update; however, we do not presently have a full disaster recovery plan in effect to cover loss of facilities and equipment. In addition, we do not have a "fail-over" site that mirrors our infrastructure to allow us to operate from a second location. We have business interruption insurance; however, we cannot be certain that our coverage will be sufficient to compensate us for losses that may occur as a result of business interruptions. A significant barrier to electronic commerce and communications is the secure transmission of confidential information over public networks. Anyone who is able to circumvent our security measures could misappropriate 19 confidential information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against potential security breaches or to alleviate problems caused by any breach. We rely on specialized technology, both within our own infrastructure and that provided by Exodus, to provide the security necessary for secure transmission of postage and other confidential information. Advances in computer capabilities, new discoveries in security technology, or other events or developments may result in a compromise or breach of the algorithms we use to protect customer transaction data. Should someone circumvent our security measures, our reputation, business, financial condition and results of operations could be seriously harmed. Security breaches could also expose us to a risk of loss or litigation and possible liability for failing to secure confidential customer information. As a result, we may be required to expend a significant amount of financial and other resources to protect against security breaches or to alleviate any problems that they may cause. The effects of expansion may adversely affect our financial condition, results of operations and existing stockholders. We may establish subsidiaries, enter into joint ventures or pursue the acquisition of new or complementary businesses, products or technologies in an effort to enter into new business areas, diversify our sources of revenue and expand our product and service offerings outside the Internet postage market. Although we have no commitments or agreements and are not currently engaged in discussions for any material acquisitions or investments, we continue to evaluate incremental revenue opportunities and derivative applications of our technology and may pursue and develop those opportunities with strategic partners and investors, both domestically and internationally. To the extent we pursue new or complementary businesses, we may not be able to expand our service offerings and related operations in a cost-effective or timely manner. We may experience increased costs, delays and diversions of management's attention when integrating any new businesses or service. We may lose key personnel from our operations or those of any acquired business. Furthermore, any new business or service we launch that is not favorably received by users could damage our reputation and brand name in the Internet postage and shipping or other markets that we enter. We also cannot be certain that we will generate satisfactory revenues from any expanded services or products to offset related costs. Any expansion of our operations would also require significant additional expenses, and these efforts may strain our management, financial and operational resources. Additionally, future acquisitions may also result in potentially dilutive issuances of equity securities, the incurring of additional debt, the assumption of known and unknown liabilities, and the amortization of expenses related to goodwill and other intangible assets, all of which could have a material adverse effect on our business, financial condition and operating results. New issuances of securities may also have rights, preferences and privileges senior to those of our common stock. We may need to raise additional capital in the future through the issuance of additional equity or convertible debt securities or by borrowing money, and additional funds may not be available on terms acceptable to us. If our cost-cutting program associated with our new business strategy is successfully implemented, we believe that our current cash balances will allow us to fund our operations through June 2002. However, we may require substantial working capital to fund our business and we may need to raise additional capital. Our future capital needs depend on many factors, including market acceptance of our postage and shipping services; the level of promotion and advertising of our postage and shipping services; the level of our development efforts; our rate of customer acquisition and retention for our Internet Postage and shipping services; and changes in technology. In addition, the various elements of our business and growth strategies, including our plans to support fully the commercial release of our services, our introduction of new products and services and our investments in infrastructure will require additional capital. We cannot be certain that additional funds will be available on satisfactory terms when needed, if at all. If we are unable to raise additional necessary capital in the future or generate sufficient working capital, we may be required to curtail our operations significantly or obtain funding through the relinquishment of significant technology or markets. Raising additional capital through the sale of equity or convertible debt securities would have a dilutive effect on existing stockholders, and securities we issue may have rights superior to our common stock. 20 Risks Related to Our Industry US Postal Service regulations and fee assessments may cause disruptions or discontinuance of our business, may increase the cost of our service and may affect the adoption of Internet postage as a new method of mailing. We are subject to continued US Postal Service scrutiny and other government regulations. The continued availability of our Internet Postage service is dependent upon our service continuing to meet US Postal Service performance specifications and regulations. The US Postal Service could change its certification requirements or specifications for Internet postage or revoke the approval of our service at any time. If at any time our Internet Postage service fails to meet US Postal Service requirements, we may be prohibited from offering this service and our business would be severely and negatively impacted. In addition, the US Postal Service could suspend, terminate or offer services which compete against Internet postage, any of which could stop or negatively impact the commercial adoption of our Internet Postage service. Any changes in requirements or specifications for Internet postage could adversely affect our pricing, cost of revenues, operating results and margins by increasing the cost of providing our Internet Postage service. For example, the US Postal Service could decide to charge Internet postage vendors fees for the enrollment of each unique customer of the Internet postage product, which would be a cost that we would either absorb or pass through to customers. The US Postal Service has in fact invoiced each Internet postage vendor $8 for each digital certificate required for each consumer of Internet postage to securely print postage. We are currently discussing the necessity of this charge with the US Postal Service. If we are required to pay this per customer charge, the cost of our service could increase and the adoption of Internet postage as a new method of mailing could be adversely affected. The US Postal Service could also decide that Internet postage should no longer be an approved postage service due to security concerns or other issues. Our business would suffer dramatically if we are unable to adapt our Internet Postage service to any new requirements or specifications or if the US Postal Service were to discontinue Internet postage as an approved postage method. Alternatively, the US Postal Service could introduce competitive programs or amend Internet postage requirements to make certification easier to obtain, which could lead to more competition from third parties or the US Postal Service itself. See "Risk Factors--If we are unable to compete successfully, particularly against large, traditional providers of postage products like Pitney Bowes who enter the online postage and shipping markets, our revenues and operating results will suffer." In addition, US Postal Service regulations may require that our personnel with access to postal information or resources receive security clearance prior to doing relevant work. We may experience delays or disruptions if our personnel cannot receive necessary security clearances in a timely manner, if at all. The regulations may limit our ability to hire qualified personnel. For example, sensitive clearance may only be provided to US citizens or aliens who are specifically approved to work on US Postal Service projects. If we are unable to compete successfully, particularly against large, traditional providers of postage products such as Pitney Bowes who enter the online postage and shipping markets, our revenues and operating results will suffer. The market for Internet postage products and services is new and is intensely competitive. At present, Pitney Bowes has a software-based product commercially available and has a hardware-based product in beta testing. Neopost Industrie has hardware and software products in beta testing. If any of our competitors, including Pitney Bowes, provide the same or similar service as we provide, our operations could be adversely impacted. See "Business-- Competition." Internet postage may not be adopted by customers. These customers may continue to use traditional means to purchase postage, including purchasing postage from their local post office. If Internet postage becomes a viable market, we may not be able to establish or maintain a competitive position against current or future competitors as they enter the market. Many of our competitors have longer operating histories, larger customer bases, greater brand recognition, greater financial, marketing, service, support, technical, intellectual property and other resources than us. As a result, our competitors may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to Web site and systems development than us. This increased competition may result in reduced operating margins, loss of market share and 21 a diminished brand. We may from time to time make pricing, service or marketing decisions or acquisitions as a strategic response to changes in the competitive environment. These actions could result in reduced margins and seriously harm our business. If the market for Internet postage develops, we could face competitive pressures from new technologies or the expansion of existing technologies approved for use by the US Postal Service. We may also face competition from a number of indirect competitors that specialize in electronic commerce and other companies with substantial customer bases in the computer and other technical fields. Additionally, companies that control access to transactions through a network or Web browsers could also promote our competitors or charge us a substantial fee for inclusion. Our competitors may also be acquired by, receive investments from or enter into other commercial relationships with larger, better-established and better-financed companies as use of the Internet and other online services increases. In addition, changes in postal regulations could adversely affect our service and significantly impact our competitive position. We may be unable to compete successfully against current and future competitors, and the competitive pressures we face could seriously harm our business. We also compete with companies that provide shipping solutions to businesses. Customers may continue using the direct services (including online services) of the US Postal Service, United Parcel Service, FedEx and other major shippers, instead of adopting our multi-carrier, online service. Successful adoption of our shipping solutions may also be impeded by insufficient cooperation from major carriers that we need to provide our online services. Alternatively, traditional and/or potential competitors with greater resources than ours, like Pitney Bowes, may develop more successful Internet solutions or deter acceptance of our service offerings. In addition, companies including TanData Corporation, GoShip.com, BITS, Inc./Intershipper.net, Kewill Systems, Accuship, Neopost Industrie, Virtan, Inc./SmartShip Return.com and ClickReturns.com are competing in shipping services and/or offering their services through alliances with traditional major shippers. We also face a significant risk that large shipping companies will collaborate in the development and operation of an online shipping system that could make our Internet shipping services obsolete. On March 2, 2001, United Parcel Service and Mail Boxes Etc. USA, Inc. jointly announced that United Parcel Service would acquire Mail Boxes Etc. USA, Inc. Mail Boxes Etc. USA, Inc. represented a significant future source of revenue and market leverage for our online shipping services. United Parcel Service has informed us that it is unlikely to have Mail Boxes Etc. USA, Inc. continue to use our online shipping services. If we do not respond effectively to technological change, our services could become obsolete and our business will suffer. The development of our services and other technology entails significant technical and business risks. To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our online operations. The Internet and the electronic commerce industry are characterized by rapid technological change; changes in user and customer requirements and preferences; frequent new product and service introductions embodying new technologies; and the emergence of new industry standards and practices. The evolving nature of the Internet or the Internet postage and shipping markets could render our existing technology and systems obsolete. Our success will depend, in part, on our ability to license or acquire leading technologies useful in our business; enhance our existing services; develop new services or features and technology that address the increasingly sophisticated and varied needs of our current and prospective users; and respond to technological advances and emerging industry and regulatory standards and practices in a cost- effective and timely manner. Future advances in technology may not be beneficial to, or compatible with, our business. Furthermore, we may not be successful in using new technologies effectively or adapting our technology and systems to user requirements or emerging industry standards on a timely basis. Our ability to remain technologically competitive may require substantial expenditures and lead time. If we are unable to adapt in a timely manner to changing market conditions or user requirements, our business, financial condition and results of operations could be seriously harmed. 22 The success of our business will depend on the continued growth of the Internet and the acceptance by customers of the Internet as a means for purchasing postage and shipping services. Our success depends in large part on widespread acceptance and use of the Internet as a way to purchase postage and shipping services. This practice is at an early stage of development, and market acceptance of Internet postage and shipping services is uncertain. We cannot predict the extent to which customers will be willing to shift their purchasing habits from traditional to online postage and/or shipping services. To be successful, our customers must accept and utilize electronic commerce to satisfy their product needs. Our future revenues and profits, if any, substantially depend upon the acceptance and use of the Internet and other online services as an effective medium of commerce by our target users. The Internet may not become a viable long-term commercial marketplace due to potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. The commercial acceptance and use of the Internet may not continue to develop at historical rates. Our business, financial condition and results of operations would be seriously harmed if use of the Internet and other online services does not continue to increase or increases more slowly than expected; the infrastructure for the Internet and other online services does not effectively support future expansion of electronic commerce or our services; concerns over security and privacy inhibit the growth of the Internet; or the Internet and other online services do not become a viable commercial marketplace. Our operating results could be impaired if we or the Internet become subject to additional government regulation and legal uncertainties. With the exception of US Postal Service and Department of Commerce regulations, we are not currently subject to direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally, and laws or regulations directly applicable to electronic commerce. However, due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet, relating to user privacy; pricing; content; copyrights; distribution; characteristics and quality of products and services; and export controls. The adoption of any additional laws or regulations may hinder the expansion of the Internet. A decline in the growth of the Internet could decrease demand for our products and services and increase our cost of doing business. Moreover, the applicability of existing laws to the Internet is uncertain with regard to many issues, including property ownership, export of specialized technology, sales tax, libel and personal privacy. Our business, financial condition and results of operations could be seriously harmed by any new legislation or regulation. The application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and other online services could also harm our business. We have employees and offer our services in multiple states, and we may in the future expand internationally. These jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each state or foreign country. Our failure to qualify as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties. Other states and foreign countries may also attempt to regulate our services or prosecute us for violations of their laws. Further, we might unintentionally violate the laws of foreign jurisdictions and those laws may be modified and new laws may be enacted in the future. If we market our services internationally, government regulation could disrupt our operations. We may in the future begin to provide services in international markets. Our ability to provide our Internet Postage service in international markets would likely be subject to rigorous governmental approval and certification requirements similar to those imposed by the US Postal Service. For example, our Internet Postage service cannot currently be used for international mail because foreign postal authorities do not currently recognize information-based indicia postage. If foreign postal authorities accept postage generated by our service in the future, and if we obtain the necessary foreign certification or approvals, we would be subject to ongoing regulation by foreign governments and agencies. To date, efforts to create a certification process in Europe and other foreign markets are in a preliminary stage and these markets may not prove to be a viable opportunity for us. As a result, we cannot 23 predict when, or if, international markets will become a viable source of revenues for a postage service similar to ours. Our ability to provide service in international markets may also be impacted by the export control laws of the United States. Our software technology makes us subject to stronger export controls, and may prevent us from being able to export our products and services. Regulations and standards of the Universal Postal Union and other international bodies may also limit our ability to provide international mail services. If we enter the international market, our business activities will be subject to a variety of potential risks, including the adoption of laws and regulatory requirements, political and economic conditions, difficulties protecting our intellectual property rights and actions by third parties that would restrict or eliminate our ability to do business in these jurisdictions. If we begin to transact business in foreign currencies, we will become subject to the risks attendant to transacting in foreign currencies, including the potential adverse effects of exchange rate fluctuations. Risks Related to Our Stock Our charter documents could deter a takeover effort, which could inhibit your ability to receive an acquisition premium for your shares. The provisions of our Amended and Restated Certificate of Incorporation, Bylaws and Delaware law could make it difficult for a third party to acquire us, even it would be beneficial to our stockholders. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which could prohibit or delay a merger or other takeover of our company, and discourage attempts to acquire us. 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. These sales also could impair our future ability to raise capital through the sale of equity or equity-related securities at a time and price that we deem appropriate. Our stock price may be highly volatile and could drop, particularly because our business depends on the Internet. The trading price of our common stock has fluctuated widely in the past, and is expected to continue to do so in the future, as a result of a number of factors, many of which are outside our control. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many technology and Internet-related companies and that have often been unrelated or disproportionate to the operating performance of these companies. These broad market fluctuations and the perception of the valuation of the Internet company sector could adversely affect the market price of our common stock. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We have not used derivative financial instruments in our investment portfolio. Our short-term investments are comprised of U.S. government obligations and public corporate debt securities with maturities of less than one year at the date of purchase. At March 31, 2001, our short-term investments approximated $63 million and had a related weighted average interest rate of 6.19%. Interest rate fluctuations impact the carrying value of the portfolio. We do not believe that the future market risks related to the above securities will have material adverse impact on our financial position, results of operations or liquidity. 24 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 16, 1999, Pitney Bowes sued us for alleged patent infringement in the United States District Court for the District of Delaware. The suit originally alleged that we are infringing two patents held by Pitney Bowes related to postage application systems and electronic indicia. The suit seeks treble damages, a preliminary and permanent injunction from further alleged infringement, attorneys' fees and other unspecified damages. We 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 one of our competitors, 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 September 18, 2000 Pitney Bowes filed another patent infringement lawsuit against us in the United States District Court for the Eastern District of Texas, alleging that we are infringing four patents owned by Pitney Bowes related to shipping. The suit seeks unspecified damages and a permanent injunction from further alleged infringement. We answered the complaint on December 1, 2000, denying the allegations of patent infringement and asserting a number of affirmative defenses. The outcome of the litigation that Pitney Bowes has brought against us is uncertain. Therefore, we can give no assurance that Pitney Bowes will not prevail in its suit against us. See "Risk Factors--Success by Pitney Bowes in its suits against us alleging patent infringement could prevent us from offering our Internet Postage and iShip services and severely harm our business or cause it to fail." On or about December 29, 1999, three individual plaintiffs filed a lawsuit against us in the California Superior Court for the County of Los Angeles. The complaint was amended on January 28, 2000 to add Mohan Ananda, one of our directors, as a defendant and to remove one of the plaintiffs from the suit. Plaintiffs asserted claims for breach of oral contract, quantum meruit, fraud and negligent misrepresentation. The plaintiffs alleged that they had an oral contract with Stamp Master, who allegedly was one of our predecessors, pursuant to which Stamp Master agreed to pay them "cash for cash compensation" for their services in securing investments for Stamp Master or in finding individuals to serve as board members. They further alleged that after successfully placing an individual on our board of directors and after that board member successfully obtained financing on our behalf, they were entitled to cash compensation for those efforts. The plaintiffs sought $13.3 million in compensatory damages, plus other unspecified compensatory damages, punitive and exemplary damages and attorneys' fees and costs incurred. On January 23, 2001, the Court granted a summary judgment motion filed by us and Mr. Ananda. Accordingly, judgment has been granted in favor of us and Mr. Ananda and the case has been dismissed. However, the plaintiffs have notified the court that they intend to appeal the judgment against them to an appellate court. On August 23, 2000, DraftWorldwide, Inc., which formerly served as one of our advertising and promotions agencies, filed a suit against us for alleged breach of contract in the Circuit Court of Cook County, Illinois. The suit alleged that we improperly terminated our contract with DraftWorldwide and sought damages of approximately $3.9 million plus interest and costs associated with the lawsuit. We denied the allegations contained in the complaint, and filed our own counterclaim, alleging that DraftWorldwide had breached the contract by failing to adequately perform under the contract and had acted in bad faith in negotiating an adjustment to the terms of the contract, as provided for in the contract. The parties recently reached a mutually acceptable resolution of the suit, and an order of dismissal was entered on March 19, 2001, resulting in both parties' dismissal, with prejudice, of their respective claims against each other. On December 13, 2000, Cybershop (a British Columbia, Canada partnership) and its general partners filed suit against us in the U.S. District Court for the Southern District of Texas, alleging that in 1998 a third party fraudulently transferred ownership of the Internet domain name "stamps.com" away from Cybershop and 25 subsequently transferred it to us. The third party is also a named defendant in the suit. The complaint seeks legal resolution and recognition of Cybershop's ownership of the "stamps.com" domain name and seeks unspecified monetary damages against the third party. On January 9, 2001, we filed a motion to dismiss the suit. On February 16, 2001, Cybershop filed an amended complaint, alleging new causes of action, including conversion, invasion of privacy, trespass, and private nuisance, and seeking declaratory judgment for return of the domain name registration to Cybershop. On March 5, 2001, we filed a motion to dismiss the amended complaint. The outcome of the litigation is uncertain, and we can give no assurance that Cybershop will not prevail. See "Risk Factors--Success by Cybershop in its suit against us seeking damages and recognition of its ownership of the domain name "stamps.com" could prevent us from using the domain name "stamps.com" and could require a change of name of the Company, severely harming our business or causing it to fail." On or about April 6, 2000, Metro Fulfillment, Inc. filed a lawsuit against Weigh-Tronix, Inc. for breach of contract, fraud, negligent misrepresentation, intentional inference with contract, negligent interference, breach of implied warranty and breach of express warranty. Metro Fulfillment, Inc. alleges that pursuant to its agreement with Weigh-Tronix, Inc., Metro Fulfillment, Inc. was not required to pay for postal scales that were purchased from Weigh-Tronix, Inc. until Metro Fulfillment, Inc. had actually sold those scales to end users. These scales were supposed to be sold through our Web site. Metro Fulfillment, Inc. further alleged that Weigh-Tronix, Inc. breached the agreement by seeking payment before the scales were actually sold to customers in breach of the agreement. Weigh-Tronix, Inc. in turn filed a third party complaint against us and Metro Fulfillment, Inc. for breach of contract and several common counts. The third party complaint seeks approximately $700,000.00 in compensatory damages, plus interest and attorney's fees. We have filed an answer to the third party complaint denying the allegations of the lawsuit. On February 28, 2001, Metro Fulfillment, Inc. filed a lawsuit against us stemming from services allegedly performed by Metro Fulfillment, Inc. under a Fulfillment Services Agreement. The complaint alleges claims for breach of contract, common counts and negligent misrepresentation. The complaint seeks damages of approximately $1.3 million. We have filed an answer to the complaint denying the allegations in the lawsuit. On April 18, 2001, Intuit, Inc. filed a suit against us for alleged breach of contract in the California Superior Court for the County of Santa Clara. The suit alleges that we improperly terminated our contract with Intuit and seeks damages of $4 million plus interest and costs associated with the lawsuit. We believe that the agreement was terminated on March 1, 2001 due to Intuit's failure to perform adequately under the contract, among other reasons. We are currently evaluating the claims against us as well as potential counterclaims, and have not responded to the suit. The outcome of this litigation is uncertain and we can give no assurance that Intuit will not prevail. We are not currently involved in any other material legal proceedings, nor have we been involved in any such proceeding that has had or may have a significant effect on our company. We are not aware of any other material legal proceedings pending against us. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On August 1, 2000, we entered into a Warrant Issuance Agreement with Cydcor Limited ("Cydcor"). Under the terms of the agreement, we are obligated to issue warrants to purchase shares of our common stock on a monthly basis. The number of shares underlying each warrant is based upon a calculation that determines net new customers that Cydcor obtains from direct sales of our Internet Postage service. The warrants issuable under the agreement are exercisable for a period of two years from the issuance date. Under the terms of this agreement, on January 31, 2001, we issued Cydcor a warrant to purchase 2,281 shares of our common stock at a price per share of $3.906; on February 28, 2001, we issued Cydcor a warrant to purchase 4,846 shares of our common stock at a price per share of $2.970; and on March 31, 2001, we issued Cydcor a warrant to purchase 4,389 shares of our common stock at a price per share of $3.000. The offer and sale of this warrant and the shares of common stock issuable upon conversion thereof is exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof. 26 ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. 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 March 31, 2001. ITEM 5. OTHER INFORMATION On April 27, 2001, we acquired certain intellectual property assets relating to Internet-based postage printing and management from E-Stamp Corporation, one of our former competitors. The assets that we acquired from E- Stamp Corporation include a portfolio of 31 patents and trademarks, including the E-Stamp name, and the E-Stamp.com Internet domain. We plan to use these intellectual property assets to expand the services available to our existing customer base and to target the larger market of small businesses and home offices. However, certain of the intellectual property rights we acquired from E-Stamp Corporation are the subject of a lawsuit brought by Pitney Bowes and could be determined by a court to be invalid or unenforceable. Such a determination could make the intellectual property rights we acquired worthless. See "Legal Proceedings." ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Exhibit ------- Number Description ------ ----------- 10.63+ Asset Purchase Agreement dated April 27, 2001 by and between the Company and E-Stamp Corporation. 99.32 Press Release, dated April 30, 2001, announcing the acquisition by the Company of certain assets of E-Stamp Corporation. _____________ + Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. (b) Reports on Form 8-K: On March 12, 2001, the Company filed a report on Form 8-K relating to the cessation of EncrypTix, Inc.'s operations and the effectuation of a general assignment for the benefit of its creditors. 27 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STAMPS.COM INC. (Registrant) May 14, 2001 By: /s/ KENNETH MCBRIDE ------------------------ Kenneth McBride Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) INDEX TO EXHIBITS Exhibit ------- Number Description ------ ----------- 10.63+ Asset Purchase Agreement dated April 27, 2001 by and between the Company and E-Stamp Corporation. 99.32 Press Release, dated April 30, 2001, announcing the acquisition by the Company of certain assets of E-Stamp Corporation. __________ + Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with Rule 24b-2, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. EX-10.63 2 dex1063.txt ASSET PURCHASE AGREEMENT WITH E-STAMP CORPORATION EXHIBIT 10.63 _______________________________________________________ ASSET PURCHASE AGREEMENT by and between E-STAMP CORPORATION and STAMPS.COM INC. as of April 27, 2001 _______________________________________________________ TABLE OF CONTENTS Page SECTION 1. DEFINITIONS............................................... 1 (a) "Affiliate".......................................... 1 (b) "Associate".......................................... 1 (c) "Confidential Information"........................... 1 (d) "Closing"............................................ 2 (e) "Closing Date"....................................... 2 (f) "Domain Names"....................................... 2 (g) "E-Stamp Internet Postage Technology"................ 2 (h) "IBIP"............................................... 2 (i) "IBIP Open Metering System".......................... 2 (j) "IBIP Vendors"....................................... 2 (k) "IP Assets".......................................... 2 (l) "Knowledge," "known to".............................. 3 (m) "Lahoti Litigation".................................. 3 (n) "Loss" or "Losses"................................... 3 (o) "Material Adverse Change" and "Material Adverse Effect"............................................ 3 (p) "Party" or "Parties"................................. 3 (q) "Patent Portfolio"................................... 3 (r) "Seller's Shipping and Logistics Business"........... 3 (s) "Solvent"............................................ 4 (t) "Trademarks"......................................... 4 SECTION 2. SALE OF ASSETS............................................ 4 SECTION 3. CONSIDERATION FOR TRANSFER AND ASSIGNMENT OF THE IP ASSETS............................................. 4 3.1 Purchase Price............................................ 4 SECTION 4. TRANSITION PERIODS; LICENSES BACK TO SELLER............... 5 4.1 Domain Names IP Addresses................................. 5 4.2 IP License Back........................................... 5 4.3 Patent Portfolio License Back............................. 5 SECTION 5. MUTUAL RELEASES; COVENANTS NOT TO SUE..................... 6 5.1 Mutual Releases........................................... 6 -i- TABLE OF CONTENTS (continued) Page 5.2 Seller's Covenant Not to Sue Buyer........................ 7 5.3 Buyer's Covenants Not to Sue Seller....................... 7 5.4 Covenants Not Assignable; Termination of Covenants........ 7 SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.................. 8 6.1 Organization and Qualification............................ 8 6.2 Authority Relative to this Agreement...................... 8 6.3 No Conflicts.............................................. 9 6.4 IP Assets................................................. 9 6.5 No Consent Required....................................... 10 6.6 Solvency.................................................. 10 6.7 Release of Lien........................................... 11 6.8 No Losses................................................. 11 6.9 Neopost Agreement......................................... 11 6.10 Disclaimer of Warranties.................................. 11 SECTION 7. REPRESENTATIONS AND WARRANTIES OF BUYER................... 11 7.1 Organization and Qualification............................ 11 7.2 Authority Relative to this Agreement...................... 12 7.3 No Conflict............................................... 12 7.4 No Consent Required....................................... 12 SECTION 8. COVENANTS OF THE PARTIES.................................. 13 8.1 Aid to Buyer by Seller.................................... 13 8.2 Aid to Buyer by Inventors................................. 13 8.3 Buyer's Representation by Seller's Intellectual Property Counsel................................................... 13 8.4 No Interference with Domain Names......................... 13 SECTION 9. CONDITIONS TO CLOSING..................................... 14 9.1 Conditions to Obligations of Buyer........................ 14 (a) Representations and Warranties........................ 14 (b) Performance........................................... 14 (c) No Injunctions or Regulatory Restraints; Illegality... 14 (d) Third Party Consents.................................. 14 (e) No Material Adverse Change............................ 14 -ii- TABLE OF CONTENTS (continued) Page (f) Seller IP Assets...................................... 14 (g) Assignment of Intellectual Property................... 14 9.2 Conditions to Obligations of Seller....................... 15 (a) Representations and Warranties........................ 15 (b) Performance........................................... 15 (c) No Injunctions or Regulatory Restraints; Illegality... 15 SECTION 10 THE CLOSING............................................... 15 10.1 The Closing............................................... 15 10.2 Seller Deliveries......................................... 15 (a) Assignments........................................... 15 (b) Domain Name Transfers................................. 15 (c) Consents.............................................. 15 (d) Limitation on Documentation........................... 15 10.3 Buyer Delivery............................................ 16 (a) Consideration......................................... 16 SECTION 11 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.................................. 16 SECTION 12 INDEMNIFICATION........................................... 16 12.1 Agreements to Indemnify................................... 16 (a) Seller Indemnity...................................... 16 (b) Buyer Indemnity....................................... 17 (c) Indemnification Threshold............................. 17 (d) Subrogation........................................... 17 12.2 Conditions of Indemnification............................. 17 (a) Notice................................................ 17 (b) Failure to Assume Defense............................. 18 (c) Claim Adverse to Indemnifying Party................... 18 (d) Cooperation........................................... 18 (e) Nonassignability...................................... 18 12.3 Remedies.................................................. 18 SECTION 13 ADDITIONAL AGREEMENTS..................................... 18 -iii- TABLE OF CONTENTS (continued) Page 13.1 Confidentiality........................................... 18 13.2 Press Release............................................. 19 13.3 Lahoti Litigation......................................... 20 13.4 Payment of Expenses....................................... 20 13.5 Sales, Transfer and Use Taxes............................. 20 13.6 Information Relating to Taxes............................. 20 13.7 Further Assurances........................................ 20 13.8 No Default................................................ 21 SECTION 14 TERM AND TERMINATION...................................... 21 14.1 Termination of the Agreement.............................. 21 14.2 Insolvency................................................ 21 14.3 Effect of Termination of the Agreement.................... 22 SECTION 15 GENERAL PROVISIONS........................................ 22 15.1 Amendment and Waiver...................................... 22 15.2 Delays or Omissions....................................... 22 15.3 Assignment: Binding Upon Successors and Assigns........... 22 15.4 Limitation of Liabilities................................. 23 15.5 Notices................................................... 23 15.6 Incorporation of Schedules and Exhibits................... 24 15.7 Affiliates................................................ 24 15.8 Independent Contractors................................... 24 15.9 Captions.................................................. 24 15.10 Severability.............................................. 24 15.11 Governing Law; Exclusive Jurisdiction and Venue........... 24 15.12 Counterparts.............................................. 25 15.13 Attorneys' Fees........................................... 25 15.14 Joint Work Product........................................ 25 15.15 No Third Party Beneficiaries.............................. 25 15.16 Further Assurances........................................ 25 15.17 Entire Agreement.......................................... 25 15.18 Delivery by Facsimile..................................... 25 -iv- TABLE OF CONTENTS (continued) Page SCHEDULE A Domain Names.............................................. 28 SCHEDULE B IBIP Venders.............................................. 30 SCHEDULE C Patent Portfolio.......................................... 31 SCHEDULE D Trademarks................................................ 36 Exhibit A-1 TRADEMARK ASSIGNMENT...................................... 1 Exhibit A-2 PATENT ASSIGNMENT......................................... 3 Exhibit A-3 DOMAIN NAME ASSIGNMENT.................................... 7 Exhibit A-4 DEED OF ASSIGNMENT........................................ 10 Exhibit A-5 CANADIAN DESIGN REGISTRATION ASSIGNMENT................... 12 Exhibit A-6 UBERTRAGUNGSERKLARUNG - DECLARATION OF ASSIGNMENT......... 13 Exhibit A-7 ASSIGNMENT................................................ 15 Exhibit A-8 JAPANESE PATENT ASSIGNMENT................................ 16 Exhibit A-9 MEXICAN PATENT ASSIGNMENT................................. 17 Exhibit A-10 [***]*.................................................... 19 - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -v- ASSET PURCHASE AGREEMENT ------------------------ THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of April 27, 2001, by and among E-Stamp Corporation, a Delaware corporation with its principal place of business at 2051 Stierlin Court, Mountain View, California 94043 as seller and assignor ("Seller"), in favor of Stamps.com Inc., a Delaware corporation with its principal place of business at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405, as buyer and assignee ("Buyer"). R E C I T A L S --------------- 1. Seller has been engaged in, among other things, the business of developing and marketing Internet postage products and services and has announced its intention to withdraw from such business (the "Internet Postage Business") in order to concentrate on Seller's Shipping and Logistics Business (defined below), among other things; 2. Buyer is engaged in, among other things, the Internet Postage Business and desires to acquire Seller's IP Assets (as defined below) related to the Internet Postage Business on the terms and conditions provided herein and Seller desires to sell and wholly assign the IP Assets to Buyer on the terms and conditions provided herein. Accordingly, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller agree as follows: A G R E E M E N T ----------------- SECTION 1. DEFINITIONS. ----------- (a) "Affiliate" means any person, partnership, joint venture, corporation or other form of enterprise, domestic or foreign, including but not limited to parents and subsidiaries, which now or in the future directly or indirectly controls, is controlled by, or is under common control with, the subject Party. (b) "Associate" means, with regard to a particular Party, each of such Party's present and former directors, officers, employees, agents and representatives. (c) "Confidential Information" means any information disclosed by a Party hereto (the "Disclosing Party") to the other Party (the "Receiving Party"), either directly or indirectly, in writing, orally or by inspection of tangible objects (including without limitation documents, prototypes, samples and equipment), which is designated as "Confidential," "Proprietary" or some similar designation within five (5) days of its disclosure to the Recipient; provided, however, that any information that constitutes or relates to the IP Assets, or that relates to either Party's product and business plans and strategies, including, without limitation, proposed orders and pricing, shall be deemed to be Confidential Information, whether or not so designated. Information communicated orally shall be considered Confidential Information if such information is designated, in writing, as being confidential or proprietary within five (5) days after the initial disclosure and, in any event, is reduced to or summarized in writing and confirmed to Receiving Party as being Confidential Information within five (5) days of the initial disclosure (except that any information relating to the IP Assets, or either Party's product and business plans and strategies, shall be deemed to be Confidential Information whether or not so reduced to or summarized in writing); provided however that Confidential Information shall be limited by the provisions of Section 13.1 herein. (d) "Closing" has the meaning set forth in Section 10.1 hereof. (e) "Closing Date" has the meaning set forth in Section 10.1 hereof. (f) "Domain Names" means all Internet domain names registered to Seller that include the sequential letters "stamp," "post" and/or "mail," including, without limitation, those domain names listed on Schedule A attached ---------- hereto and also including any and all domain names at issue in the Lahoti Litigation. "Domain Names" shall also be deemed to include (i) all goodwill associated therewith and inhering therein, (ii) originals of all files, correspondence and other records relating to or reflecting Seller's registration of the Domain Names or any and all right and interest therein, (iii) all claims of Seller against any third parties relating to the Domain Names and all documentation and records relating to such claims, (iv) any and all intellectual property and any other proprietary rights associated therewith existing at any time under the laws of any jurisdiction anywhere in the world, including, without limitation, any trademark, service mark, trade name, brand name and/or copyright rights relating thereto, all registration and pending applications to register such rights, together with all such rights inhering in or protecting names and marks derivative of or similar to the Domain Names and the right to register any of the foregoing anywhere in the world, and (v) any and all rights of Seller pertaining to the Domain Names arising under its agreements with any and all domain name registrars, including without limitation Network Solutions, Inc. (g) "E-Stamp Internet Postage Technology" means Seller's Internet- based IBIP Open Metering System known as "PC Postage(TM)" as it existed on December 31, 2000 (the "Current E-Stamp System") and each derivative work of the Current E-Stamp system, created after the Closing Date, that (i) constitute IBIP Open Metering Systems; and (ii) have substantially similar functionality to the Current E-Stamp System, including, without limitation, the use of a secure hardware device, external to a PC, for the storage of postage value. (h) "IBIP" means the United States Postal Service ("USPS") Information-Based Indicia Program. (i) "IBIP Open Metering System" means any metering system approved by the USPS that utilizes a general-purpose computer and a general-purpose printer which are not dedicated solely to the printing of indicia indicating postage value. (j) "IBIP Vendors" means those entities listed on Schedule B, ---------- hereto and any other entities that as of the Closing Date of this Agreement have sought or received USPS regulatory approval to offer products or services under IBIP. (k) "IP Assets" has the meaning set forth in Section 2 hereof. -2- (l) "Knowledge," "known to" and similar phrases mean with regard to a Party the actual knowledge of the current directors and executive officers of the Party with regard to the referenced subject matter. (m) "Lahoti Litigation" means the action styled E-Stamp ------- Corporation vs. Dave Lahoti, Case No. CV-99-9287 (GAF)(MANx) pending in the - --------------------------- United States District Court for the Central District of California, including any and all appeals thereof. (n) "Loss" or "Losses" means with regard to a particular subject matter any and all claims, liens, demands, causes of action, obligations, damages, liabilities, attorneys' fees, costs and expenses, known or unknown or of any claim, default or assessment. (o) "Material Adverse Change" and "Material Adverse Effect" mean with regard to the IP Assets any changes that create a material adverse change in the right, title, value or enforceability of the IP Assets, taken as a whole, provided, however, that none of the following shall, alone or together, constitute Material Adverse Changes to or have a Material Adverse Effect on the IP Assets: (i) non-final office actions by relevant governmental authorities in applications for US or foreign patents rejecting or objecting to the substance or form of the application for such patent; and (ii) non-final office actions by relevant governmental authorities in registration for trademarks rejecting or objecting to the registration of the marks covered by such applications or registrations based upon form or substance. (p) "Party" or "Parties" means Seller or Buyer, or both, as the case may be. (q) "Patent Portfolio" means all pending or issued patents or patent applications of Seller pertaining to the Internet Postage Business, including without limitation all patents and patent applications listed on Schedule C hereto, all patents issuing thereon and all continuations, - ---------- continuations-in-part, divisionals, continuing prosecution applications, reexaminations, reissues, extensions or foreign counterparts of any of the foregoing. The "Patent Portfolio" shall further include, without limitation (i) the right to all causes of action (either in law or in equity) and the right to sue, counterclaim, and recover for past, present and future infringement of, the entire Patent Portfolio and any portion thereof, in the United States and throughout the world, subject to Section 5 below; and (ii) the right to claim priority to any patent or application in the Patent Portfolio to the maximum extent permitted by law; (iii) those inventions of Seller pertaining to the Internet Postage Business which were disclosed to Fulbright & Jaworski L.L.P. or any other patent counsel to Seller on or before the Closing Date; and (iv) any file histories, research documentation, inventors' notebooks, and invention disclosure statements related to the patents, patent applications and inventions set forth in this Section 1(q). (r) "Seller's Shipping and Logistics Business" means Seller's past, current and future activities in the areas of supply chain management, multi-carrier shipping and internal receiving and distribution, including, without limitation, the following products of Seller: e-Warehouse(TM), DigitalShipper(TM) Enterprise and e-Receive(TM) Internal Delivery System; provided, however that Seller's Shipping and Logistics Business expressly excludes any products, services, and/or technology contained within the Current E-Stamp System. -3- (s) "Solvent" means with regard to a Party and on a particular date that, at fair valuation, the Party's assets are equal to or greater than the sum of all of the Party's debts on such date, and that the Party is generally paying such Party's debts as such debts become due unless such debts are the subject of a bona fide dispute, and "Insolvent" shall mean that the foregoing is not true with regard to a Party on the particular date. (t) "Trademarks" means the trademarks, service marks, trade names, brand names, logos, slogans and trade references, in each case whether registered, under application or otherwise, owned by Seller that include the sequential letters "stamp," "post" and/or "mail," including without limitation those described on Schedule D attached hereto, together with (i) any licenses ---------- with respect thereto; (ii) the goodwill and the business appurtenant thereto; (iii) any rights, claims or chose in action, related to or deriving from any of the foregoing; and (iv) any file histories, correspondence, application documents, search reports, documents concerning the prosecution history, enforcement or maintenance of rights, or restrictions on use, with respect to the trademarks, service marks, trade names, brand names, logos, slogans and trade references set forth in this Section 1(t), including without limitation any such documents with respect to applications or registrations abandoned on or before the Closing Date. SECTION 2. SALE OF ASSETS. -------------- Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined below), Seller shall sell, convey, assign, grant, transfer, set over and deliver to Buyer, free and clear of all liens, mortgages, pledges, security interests, restrictions on title, prior assignments and claims of ownership or property interest of every kind, nature or character ("Liens"), and Buyer shall purchase, acquire and receive from Seller, Seller's entire right, title and interest, in and to the Patent Portfolio, Trademarks and Domain Names (collectively, the "IP Assets"). SECTION 3. CONSIDERATION FOR TRANSFER AND ASSIGNMENT OF THE IP ASSETS. ---------------------------------------------------------- 3.1 Purchase Price. Upon the Closing, in full consideration of the -------------- transfer and assignment of the IP Assets, Buyer shall pay to Seller a one-time amount of seven million five hundred thousand U.S. dollars ($7,500,000) at Closing (defined below). Upon such payment to Buyer, Seller shall be deemed to have irrevocably assigned all IP Assets to Buyer. Except as expressly provided in this Agreement, Buyer shall have no obligation to pay Seller any further amounts, royalties or other proceeds or payments in connection with the ownership, use and exploitation of the IP Assets by Buyer, its Affiliates, assigns, licensees, customers or any other parties. (a) Notwithstanding anything else in this Agreement to the contrary, Buyer shall not assume, pay, perform, or discharge, and Seller shall solely retain, pay, perform and discharge, all obligations and liabilities of Seller relating to all Seller's businesses, including but not limited to Seller's Internet Postage Business, whether disclosed, undisclosed, direct, indirect, fixed or contingent, known or unknown, incurred in the ordinary course of business or otherwise. The foregoing shall not affect the obligations of Buyer pursuant to this Agreement, including but not limited to Buyer's obligations under Section 13.3. -4- SECTION 4. TRANSITION PERIODS; LICENSES BACK TO SELLER. -------------------------------------------- 4.1 Domain Names IP Addresses. The Parties acknowledge that Seller may -------------------------- require a certain transition period after the Closing Date during which the Seller will require the continued use of the Domain Names "e-stamp.com" and "estamp.com" currently used by Seller at the time of the Closing and transferred and assigned to Buyer pursuant to this Agreement. Accordingly, Buyer will retain for Seller the existing server IP-addresses (or such other server IP-addresses as Seller shall specify) for the Domain Names "e-stamp.com" and "estamp.com" and administrative control thereof, solely for the purposes of allowing Seller to withdraw from the Internet Postage Business, through [***]*. The IP-address --- retention granted to Seller in this Section 4.1 shall expire automatically, without need for action by either Party, on [***]*. The IP-address retention --- granted herein shall not be assignable or transferable in any manner, including by operation of law. 4.2 IP License Back. Further, the Parties also acknowledge that Seller --------------- may require a certain, longer transition period after the Closing Date during which Seller may desire the continued use of the IP Assets, excluding the Domain Names, currently used by Seller at the time of the Closing and sold and assigned to Buyer pursuant to this Agreement. Accordingly, effective upon the Closing Buyer grants to Seller a worldwide, non-exclusive, royalty-free, fully-paid and limited right and license, with no right of sublicense, in and to the IP Assets, but excluding the Domain Names, solely for the purposes of allowing Seller to withdraw from the Internet Postage Business. The license granted in this Section 4.2 shall expire automatically, without need for action by either Party, on [***]*. For the avoidance of doubt, the Parties acknowledge that the license --- granted herein shall not apply to any products developed by Seller after the Closing Date. The license granted herein shall not be assignable or transferable in any manner, including by operation of law. Notwithstanding the preceding to the contrary, (i) Seller shall have the right to use solely for legal and financial reporting purposes the name E-Stamp Corporation until such time as Seller obtains the consent of its stockholders to amend Seller's certificate of incorporation to change its corporate name, provided that Seller shall seek such stockholder approval when Seller next requests stockholder consideration of any other proposal, but in no event later than ninety (90) days after the Closing, and provided, further, that Seller discontinues all use of the Trademark "E- Stamp" for purposes of marketing and selling Seller's products and services (other than in connection with the Internet Postage Business as permitted under this Section 4.2). 4.3 Patent Portfolio License Back. Further, for the sole benefit of a ----------------------------- purchaser of substantially all of the E-Stamp Internet Postage Technology, upon the express condition that such purchaser is not an IBIP Vendor, effective upon the Closing Date, Buyer grants to Seller a worldwide, non-exclusive, royalty- free, fully-paid and limited right and license, with the right of sublicense but only to end-user purchasers of postage or other services from such purchaser of substantially all of the E-Stamp Internet Postage Technology and only to the extent necessary to enable such end-users to utilize the portions of the E-Stamp Internet Postage Technology required to obtain postage and utilize such services provided by such purchaser of substantially all of the E-Stamp Internet Postage Technology, under the patents - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -5- and patent applications included within the Patent Portfolio to make, have made, use, sell, offer to sell and import E-Stamp Internet Postage Technology solely for the benefit of such purchaser. The license granted in this Section 4.3 shall expire automatically, without need for action by any party, on [***]*. The --- license granted herein shall not be assignable or transferable in any manner, including by operation of law, except, as provided above, to a purchaser of substantially all of the E-Stamp Internet Postage Technology that is not an IBIP Vendor. SECTION 5. MUTUAL RELEASES; COVENANTS NOT TO SUE. ------------------------------------- 5.1 Mutual Releases. Upon the Closing and subject to the limitations --------------- set forth in this Section 5.1: (a) Buyer hereby waives, releases and forever discharges Seller and each of Seller's Affiliates and Associates from any Losses that Buyer had, has or may hereafter have related to any act or omission occurring on or before the Closing Date which relate to any of the IP Assets or any action of Seller, Seller's Affiliates or Seller's Associates, or any of them, concerning the operation of the Internet Postage Business, including without limitation any claim of infringement of any intellectual property right of Buyer. (b) Seller hereby waives, releases and forever discharges Buyer and each of Buyer's Affiliates and Associates from any Losses that Seller had, has or may hereafter have related to any act or omission occurring on or before the Closing Date which relate to any of the IP Assets or any action of Buyer, Buyer's Affiliates or Buyer's Associates, or any of them, concerning Buyer's business operations similar to the Internet Postage Business, including without limitation any claim of infringement of any intellectual property right of Seller. (c) Buyer and Seller each waive the provisions of California Civil Code Section 1542, set forth below, in connection with this Agreement and acknowledge that the provisions of Section 1542 do not apply to the releases in this Section 5.1: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. (d) The releases contained in this Section 5.1 shall not apply to any Losses that Buyer or Seller had, have or hereafter may have which arise from any other activities except those expressly released in Sections 5.1(a), 5.1(b) or 5.1(c) and shall not affect the rights and obligations of the Parties under this Agreement or under any Ancillary Agreement. - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -6- 5.2 Seller's Covenant Not to Sue Buyer. ---------------------------------- (a) Seller hereby covenants and agrees that, effective upon the Closing until the fourth (4th) anniversary of the Closing Date of this Agreement, it will not sue Buyer for infringement of any patent now or hereafter owned or controlled by Seller. (b) The covenant not to sue under Section 5.2(a) shall terminate immediately, without further action by any Party, if: prior to the expiration of the covenant made in Section 5.2(a) Buyer initiates, voluntarily joins or supports any claim raised in any suit, action or proceeding against Seller, in any forum, that asserts infringement by Seller (or by any other party based on that party's making, sale, offer for sale, use or importation of Seller's then products or services) of any patents then owned or controlled by Buyer, provided, however, (i) that if Buyer is joined involuntarily to such suit, action or proceeding and defends itself in connection with such joinder, or (ii) to the extent that Buyer responds to third-party discovery requests promulgated in such suit, action or proceeding between other litigants, then Buyer shall not thereby be deemed to have taken action which terminates Seller's covenant not to sue under Section 5.2(a). 5.3 Buyer's Covenants Not to Sue Seller. ----------------------------------- (a) Buyer hereby covenants and agrees that, effective upon the Closing until the fourth (4th) anniversary of the Closing Date of this Agreement, it will not sue Seller for infringement of any patent now or hereafter owned or controlled by Buyer. (b) Buyer further covenants and agrees that effective upon the Closing until the last expiration date of any patent or patent application contained within the Patent Portfolio, that it will not sue Seller for infringement of any of such patents or patent applications in connection with (i) Seller's Shipping and Logistics Business, or (ii) acts of Seller in connection with the Internet Postage Business through the Closing Date, or (iii) acts of Seller authorized by Sections 4.1, 4.2 or 4.3 of this Agreement. (c) The covenants not to sue under Sections 5.3(a) and (b) shall terminate immediately, without further action by any Party, if: within the effective time period of the relevant covenant made in Section 5.3(a) or (b) Seller initiates, voluntarily joins or supports any claim raised in any suit, action or proceeding against Buyer, in any forum (including opposition, reexamination, protest or similar proceedings in any patent office), that asserts infringement by Buyer (or by any other party based on that party's making, sale, offer for sale, use or importation of Buyer's then products or services) of any patents owned or controlled by Seller, or contests the validity, enforceability or infringement of any patent or patent application contained within the Patent Portfolio, provided, however, (i) that if Seller is joined involuntarily to a suit, action or proceeding and defends itself in connection with such joinder or (ii) to the extent that Seller responds to third-party discovery requests promulgated in a suit, action or proceeding between other litigants, then Seller shall not thereby be deemed to have taken action which terminates Buyer's covenant not to sue under Section 5.3(a) or (b). 5.4 Covenants Not Assignable; Termination of Covenants. -------------------------------------------------- (a) The covenants contained in Section 5 are personal and shall not be assignable or transferable in any manner, including by operation of law; provided, however, -7- that the covenant granted to Seller in Section 5.3(b) shall be assignable in the event of an acquisition, merger reorganization, or sale of all or substantially all assets (each a "Change of Control") of Seller to any successor in interest of Seller that is not an IBIP Vendor at any time prior to or contemporaneous with such Change of Control. (b) Except for the agreements in Section 5.1, no covenant contained in Section 5 shall survive a dissolution, winding up, liquidation, assignment for the benefit of creditors, a filing seeking reorganization, the appointment of a receiver or bankruptcy of the recipient of the covenant. SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER. ----------------------------------------- Seller hereby represents and warrants to Buyer, subject to such exceptions as are specifically disclosed with respect to specific numbered and lettered sections and subsections of this Section 6 in the disclosure schedule and schedule of exceptions (the "Seller Disclosure Schedule") delivered herewith and dated as of the date hereof, and numbered with corresponding numbered and lettered sections and subsections, as follows: 6.1 Organization and Qualification. Seller is a corporation duly ------------------------------ organized, validly existing and in good standing under the laws of the state of its incorporation, and has full corporate power and authority to conduct its business as now conducted and to own, use, license and lease its assets and properties including the IP Assets. Seller is duly qualified, licensed or admitted to do business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, use, licensing or leasing of its assets and properties including the IP Assets, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly qualified, licensed or admitted and in good standing that could not reasonably be expected to have a material adverse effect on Seller, taken as a whole, or the IP Assets. 6.2 Authority Relative to this Agreement. Seller has full corporate power ------------------------------------ and authority to execute and deliver this Agreement and the other agreements which are attached (or forms of which are attached) as exhibits hereto (the "Ancillary Agreements") to which Seller is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and the Ancillary Agreements to which Seller is a party and the consummation by Seller of the transactions contemplated hereby and thereby, and the performance by Seller of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action by the board of directors of Seller, and no other action on the part of the board of directors of Seller is required to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which Seller is a party and the consummation by Seller of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which Seller is a party have been or will be, as applicable, duly and validly executed and delivered by Seller and, assuming the due authorization, execution and delivery hereof (and, in the case of the Ancillary Agreements to which Buyer is a party, thereof) by Buyer, each constitutes or will constitute, as applicable, a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general principles of equity. -8- 6.3 No Conflicts. The execution and delivery by Seller of this Agreement ------------ and any other agreements, instruments and documents to be executed and delivered by Seller pursuant hereto do not, and the performance and consummation by Seller of the transactions contemplated hereby and thereby will not, conflict with or result in any breach or violation of or default, termination, forfeiture or Lien under (or upon the failure to give notice or the lapse of time, or both, result in any conflict with, breach or violation of or default, termination, forfeiture or Lien under) any terms or provisions of Seller' charter documents, each as amended, or any statute, rule, regulation, judicial or governmental decree, order or judgment, to which Seller is a party or to which Seller or the IP Assets are subject. 6.4 IP Assets. --------- (a) Section 6.4(a)of the Seller Disclosure Schedule lists any proceedings or actions pending as of the date hereof before any court or tribunal (including the United States Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the world) related to any of the IP Assets. (b) Except as set forth in Section 6.4(b)(i) of the Seller Disclosure Schedule, each patent and patent application included in the IP Assets is owned exclusively by the Seller. Except as set forth in Section 6.4(b)(ii) of the Seller Disclosure Schedule, each trademark application and registration included in the IP Assets is owned by Seller, although Seller does not warrant that it has the exclusive right as against any other users of the same or similar terms comprising each mark either individually or in their entirety for any or all purposes. Except as set forth in Section 6.4(b)(iii) of the Seller Disclosure Schedule, all Domain Names are registered to Seller. In each case, except as set forth in Section 6.4(b)(iv) of the Seller Disclosure Schedule, such IP Assets are free and clear of all Liens. Seller has no knowledge of any third-party asserting common law rights or any other rights to use in any of the Trademarks. (c) With respect to inventions within the Patent Portfolio that are not, as of the Closing Date, the subject of pending patent applications or issued patents, Seller has not sold, offered for sale or publicly disclosed such inventions. Except as set forth in Section 6.4(c) of the Seller Disclosure Schedule, with regard to any IP Assets that are registered with or for which an application for registration has been filed with any governmental entity or domain name registrar as of the Closing Date, all necessary registration fees, maintenance fees, renewal fees, annuity fees and taxes due as of the Closing Date in connection with such IP Assets have been paid and all necessary documents and certificates in connection with such IP Assets have been filed with the relevant patent, copyright, trademark, domain name registrars or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting and/or maintaining the registration or application for registration of such IP Assets. (d) Section 6.4(d) of the Seller Disclosure Schedule contains a true and complete list of all contracts and licenses (including all inbound licenses) in effect as of the Closing Date to which the Seller is a party with respect to any of the IP Assets ("the Contracts") (true and complete copies of which, or, if none exist, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been provided to Buyer prior to the execution of this Agreement). Except as set forth in Section 6.4(d) of the Seller Disclosure Schedule, there are no Contracts granting any rights to any third party with respect to any of -9- the IP Assets. To Seller's knowledge, there are no Contracts under which there is any dispute, or facts that may reasonably lead to a dispute, regarding the scope of such Contract or performance thereunder, including with respect to any payments to be made or received by the Seller thereunder. (e) Except pursuant to the claims described in Section 6.4(e) of the Seller Disclosure Schedule, Seller has not received notice from any person claiming that any of the IP Assets infringe or misappropriate the intellectual property of any person or constitutes unfair competition or trade practices under any law, including notice of third party patent or other intellectual property rights from a potential licensor of such rights. (f) To Seller's knowledge, each patent disclosed in the Patent Portfolio is valid and enforceable, and, to Seller's knowledge, Seller and Seller's attorneys have not committed inequitable conduct or otherwise violated the rule of any patent office during the prosecution of any of the patents or patent applications contained within the Patent Portfolio. (g) Neither this Agreement nor any transactions contemplated by this Agreement will result in Buyer's granting any rights or licenses with respect to the intellectual property of Buyer to any person pursuant to any contract to which the Seller is a party or by which any of its IP Assets are bound. (h) Except for [***]*, the Seller has secured written assignments --- from all founders, consultants and employees who are named as inventors on patents and patent applications in the Patent Portfolio. Except for [***]*, the --- Seller has secured written agreements (true and complete copies of which have been provided to Buyer prior to the execution of this Agreement) from each founder, consultant and employee who is named as an inventor on the patents in the Patent Portfolio obligating such person to assist in the prosecution of such Patents. 6.5 No Consent Required. Except as set forth on Section 6.5 of the Seller ------------------- Disclosure Schedule, no consent, authorization, approval, order, license, certificate or permit or act of or from, or declaration or filing with, any foreign, federal, state, local or other governmental authority or regulatory body or any court or other tribunal to which Seller or the IP Assets are subject is required for the execution, delivery or performance by Seller of this Agreement or any of the other agreements, instruments and documents being or to be executed and delivered hereunder or in connection herewith or for the consummation of the transactions contemplated hereby or thereby, other than governmental filings with US and foreign authorities which are necessary to effect the recordation of transfer as provided for herein of the IP Assets. 6.6 Solvency. -------- (a) Seller is and will be Solvent as of the Closing Date and the transactions contemplated by this Agreement will not render Seller Insolvent; - ----------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -10- (b) As of the Closing Date, Seller is not engaged in business or transactions, and is not about to engage in business or transactions, for which any property remaining with Seller immediately after the Closing is an unreasonably small capital to engage in such business or transactions; (c) By entering into the transactions contemplated by this Agreement Seller does not intend to incur, and does not believe that it will incur, debts that will be beyond Seller's ability to pay as such debts mature; and (d) Seller is not entering into the transactions contemplated by this Agreement or incurring any obligation pursuant to this Agreement with the intent to hinder, delay, or defraud any creditor to which Seller is indebted on the Closing Date or any creditor to which Seller may become indebted after the Closing Date. 6.7 Release of Lien. As of the Closing, Seller shall have taken all --------------- actions necessary to secure the release of any and all IP Assets from the TransAmerica Lien (as described in Section 6.4(b)(iv) of the Seller Disclosure Schedule), including without limitation the filing of all necessary forms and documents with the California Secretary of State and the United States Patent and Trademark Office. 6.8 No Losses. Seller agrees that Buyer shall not incur, and that --------- pursuant to Section 12.1 hereof Seller shall indemnify Buyer for, any Losses resulting from any claim by or on behalf of Francotyp Postalia or its successors or assigns in connection with the matters set forth in Section 6.4(d) of the Seller Disclosure Schedule. 6.9 Neopost Agreement. Seller and Neopost have entered into that certain ----------------- [***]* Agreement, dated as of [***]*, referenced in Section 6.4(d) of the Seller --- --- Disclosure Schedule ("Neopost Agreement"). Due to confidentiality obligations imposed upon Seller, Seller has provided Buyer with a redacted version of the Neopost Agreement. The redacted portions of the Neopost Agreement do not have any material effect on the IP Assets or the transactions contemplated by this Agreement. 6.10 Disclaimer of Warranties. Except as set forth in this Section 6, ------------------------ Seller hereby disclaims any express or implied warranties with any assigned rights hereunder. SECTION 7. REPRESENTATIONS AND WARRANTIES OF BUYER. --------------------------------------- Buyer hereby represents and warrants to Seller, as follows: 7.1 Organization and Qualification. Buyer is a corporation duly ------------------------------ organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has full corporate power and authority to conduct its business as now conducted and to own, use and lease its assets and properties. Buyer is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use, licensing or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so duly - ----------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -11- qualified, licensed or admitted and in good standing that could not reasonably be expected to have a material adverse effect on the business or condition of Buyer or on the IP Assets. 7.2 Authority Relative to this Agreement. Buyer has full corporate power ------------------------------------ and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and the Ancillary Agreements to which it is a party and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action by the board of directors of Buyer, and no other action on the part of the board of directors of Buyer is required to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party and the consummation by Buyer of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which Buyer is a party have been or will be, as applicable, duly and validly executed and delivered by Buyer and, assuming the due authorization, execution and delivery hereof by the Seller and/or the other parties thereto, constitutes or will constitute, as applicable, a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to the enforcement of creditors' rights generally and by general principles of equity. 7.3 No Conflict. The execution and delivery by Buyer of this Agreement ----------- and any other agreements, instruments and documents to be executed and delivered by Buyer pursuant hereto do not, and the performance and consummation by Buyer of the transactions contemplated hereby and thereby will not, conflict with or result in any breach or violation of or default, termination, forfeiture or Lien under (or upon the failure to give notice or the lapse of time, or both, result in any conflict with, breach or violation of or default, termination, forfeiture or Lien under) any terms or provisions of (i) Buyer's charter documents, each as amended, or (ii) any statute, rule, regulation, judicial or governmental decree, order or judgment, or (iii) any agreement, lease or other instrument to which Buyer is a party or to which Buyer or its assets are subject that, in the case of clauses (ii) or (iii), has or is likely to have a material adverse effect on the business, assets, operations or financial condition of Buyer. 7.4 No Consent Required. No consent, authorization, approval, order, ------------------- license, certificate or permit or act of or from, or declaration or filing with, any foreign, federal, state, local or other governmental authority or regulatory body or any court or other tribunal or any party to any contract, agreement, instrument, lease or license to which Buyer is a party or to which Buyer or its assets are subject that has or is likely to have a material adverse effect on the business, assets, operations or financial condition of Buyer, is required for the execution, delivery or performance by Buyer of this Agreement or any of the other agreements, instruments and documents being or to be executed and delivered hereunder or in connection herewith or for the consummation of the transactions contemplated hereby. SECTION 8. COVENANTS OF THE PARTIES. ------------------------- 8.1 Aid to Buyer by Seller. Seller covenants and agrees that, at Buyer's ---------------------- request, Seller shall instruct its then current officers, employees and other individuals under its direction or control, without further consideration, to communicate to Buyer any facts -12- known to it respecting the IP Assets, and shall authorize and request by a separate short-form document executed by Seller that the Commissioner of Patents and Trademarks of the United States and any official of any foreign country whose duty it is to issue patents on applications as described above, to issue all Letters Patent for the Patent Portfolio to Buyer, in accordance with the terms of this Agreement. Seller further covenants and agrees that, at Buyer's request, it shall instruct its then current officers, employees and other individuals under its direction and control to testify in any and all legal proceedings, sign all lawful papers when called upon to do so, execute and deliver any and all papers that may be necessary or desirable to prosecute, defend and perfect the title to the IP Assets in said Buyer, execute all continuation and reissue applications, make all rightful oaths and generally do everything reasonably possible to aid Buyer to obtain and enforce proper protection for the IP Assets in the United States and any foreign country; provided, however that any expense incident to the execution of the foregoing shall be borne by Buyer. For the avoidance of doubt, from and after the Closing Date, Buyer shall be solely responsible for all expenses generally related to (i) prosecuting or defending any claims or matters before the PTO and any governmental agency or entity which is a domain name registrar regarding the application, extension or continuation for any patent, trademark, domain name or other IP Asset to be transferred to Buyer hereunder; and (ii) maintenance fees, patent fees, trademark fees, registration fees, taxes, annuities and similar fees with regard to any of the IP Assets. 8.2 Aid to Buyer by Inventors. Seller further covenants and agrees that ------------------------- it will, at Buyer's written request, enforce such rights as Seller may have under written agreements with individuals listed as inventors of any invention disclosed in the Patent Portfolio (with the sole exception of [***]*) for --- purposes of causing such inventors to assist in the prosecution and enforcement of the IP Assets pursuant to the terms of such written agreements, provided that Buyer indemnifies Seller against all Losses incurred by Seller in connection therewith. 8.3 [***]* --- 8.4 No Interference with Domain Names. Seller further covenants and --------------------------------- agrees that it will not interfere with or obstruct in any manner whatsoever Buyer's change of the IP-addresses, or any other use of or changes to the technical or other information pertaining to the Domain Names "estamp.com" and "e-stamp.com" after [***]*. --- SECTION 9. CONDITIONS TO CLOSING. ---------------------- 9.1 Conditions to Obligations of Buyer. The obligations of Buyer to ---------------------------------- consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Buyer: - ----------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -13- (a) Representations and Warranties. Each of the representations and ------------------------------ warranties made by Seller in this Agreement shall be true and correct in all material respects (if not qualified by materiality) and in all respects (if qualified by materiality) when made and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date. (b) Performance. Seller shall have performed and complied with in all ----------- material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Seller at or before the Closing. (c) No Injunctions or Regulatory Restraints; Illegality. No court of --------------------------------------------------- competent jurisdiction shall have issued any temporary restraining order, preliminary or permanent injunction or other order blocking the Closing or the transactions contemplated hereby, nor shall any governmental or regulatory authority have taken any similar action; nor shall there be by any governmental authority any action taken, or any law or order enacted, entered, enforced or deemed applicable to the transactions contemplated by the terms of this Agreement. (d) Third Party Consents. Buyer shall have been furnished with evidence -------------------- reasonably satisfactory to it that Seller has obtained any approvals and waivers and all other consents reasonably deemed necessary by Buyer to effect transfer of title to the IP Assets and record such transfer (except for such consents, approvals and waivers the failure of which to receive individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect on Buyer). (e) No Material Adverse Change. There shall have occurred no Material -------------------------- Adverse Change in the IP Assets since the date hereof. (f) Seller IP Assets. Subject to the provisions of Section 6.4(e) of ---------------- the Seller Disclosure Schedule, no person shall have (i) commenced, or shall have notified either Party to this Agreement that it intends to commence, any action or proceeding or (ii) provided Seller with notice, in either case which allege(s) that any of the IP Assets infringe or otherwise violate the intellectual property rights of such person, is available for licensing from a potential licensor providing the notice or otherwise alleges that Seller does not otherwise own or have the right to exploit the IP Assets, unless such person shall have withdrawn such notice and abandoned any such action or proceeding prior to the time which otherwise would have been the Closing Date. (g) Assignment of Intellectual Property. Buyer shall have received ----------------------------------- evidence reasonably satisfactory of transfer to Buyer of the IP Assets as provided in Sections 10.2(a) and 10.2(b). 9.2 Conditions to Obligations of Seller. The obligations of Seller to ----------------------------------- consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing Date of each of the following conditions, any of which may be waived, in writing, exclusively by Seller: (a) Representations and Warranties. Each of the representations and ------------------------------ warranties made by Buyer in this Agreement shall be true and correct in all material respects (if not qualified by materiality) and in all respects (if qualified by materiality) when made -14- and on and as of the Closing Date as though such representation or warranty was made on and as of the Closing Date. (b) Performance. Buyer shall have performed and complied with in all ----------- material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Buyer at or before the Closing Date. (c) No Injunctions or Regulatory Restraints; Illegality. No court of --------------------------------------------------- competent jurisdiction shall have issued any temporary restraining order, preliminary or permanent injunction or other order blocking the Closing or the transactions contemplated hereby, nor shall any governmental or regulatory authority have taken any similar action; nor shall there be by any governmental authority any action taken, or any law or order enacted, entered, enforced or deemed applicable to the transactions contemplated by the terms of this Agreement. SECTION 10. THE CLOSING. ----------- 10.1 The Closing. The closing of the transactions contemplated hereby ----------- ("the "Closing") shall be held at the offices of Irell & Manella LLP, Suite 900, 1800 Avenue of the Stars, Los Angeles, California at 11:00 a.m. Pacific Time on April 27, 2001 or such other place, time and date as Buyer and Seller may mutually select. The time and date on which the Closing is actually held is referred to herein as the "Closing Date." 10.2 Seller Deliveries. At the Closing, Seller shall deliver to Buyer the ----------------- following: (a) Assignments. Assignments with respect to the IP Assets in the forms attached as Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9 and -------- --- --- --- --- --- --- --- --- --- other recordable instruments of assignment, transfer and conveyance, in form and substance reasonably satisfactory to Buyer and its counsel, as shall be effective to vest in Buyer all of the right, title and interest of Seller in and to the IP Assets free and clear of all Liens. (b) Domain Name Transfers. Executed domain name transfer and --------------------- assignment agreements relating to the Domain Names (including all necessary Network Solutions, Inc. or any other registrar assignment and transfer forms) in form and substance satisfactory to Buyer and its counsel, as shall be effective to vest in Buyer any and all right and interest of Seller in and to the Domain Names free and clear of all Liens. (c) Consents. The third party consents contemplated by Section -------- 9.1(d). (d) Limitation on Documentation. With regard to the documentation of --------------------------- Seller described in Sections 1(q)(iv) and 1(t)(iv), Seller shall be obligated to deliver to Buyer only that documentation which, at the Closing, remains in Seller's possession or control, and subject to Seller's obligations under Sections 8.1, 8.2 and 13.7 of this Agreement, Seller shall have no obligation to take any measures to recover from any third person, including former employees of or consultants to Seller, any such documentation which may be in such third person's possession either before or after the Closing. 10.3 Buyer Delivery. At the Closing, Buyer shall deliver to Seller the -------------- following: -15- (a) Consideration. The cash consideration contemplated by Section 3, ------------- by wire transfer to an account as specified by Seller; provided that such wire transfer shall be initiated only upon Buyer's receipt of all documents specified in Section 10.2 and as otherwise specified in the Agreement. SECTION 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. ----------------------------------------------------------------- Notwithstanding any waiver by Buyer or Seller of any condition to Closing set forth in Section 9, each Party shall have the right to rely fully upon the representations, warranties, covenants and agreements of the other Party contained in this Agreement or in any instrument delivered pursuant to this Agreement. All of the representations, warranties, covenants and agreements of Buyer and Seller contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Closing for a period of three years, provided, however, that if Buyer, before the third anniversary of the Closing, consummates a Merger with an IBIP Vendor or assigns its rights under this Agreement to an IBIP Vendor, then the representations and warranties of Seller under this Agreement shall expire as of immediately prior to such consummation or assignment. For the purposes of this Agreement, the term "Merger" means (i) any merger, consolidation or business combination of Buyer with any other corporation or business entity after which the stockholders of Buyer immediately before such transaction own, immediately after the consummation of such transaction, less than 50% of the equity interests in the surviving entity; or (ii) any sale of all or substantially all of the assets of Buyer in one or a series of related transactions. The date on which representations and warranties of a Party expire hereunder shall be referred to as that Party's "Claims Bar Date." SECTION 12. INDEMNIFICATION. --------------- 12.1 Agreements to Indemnify. ----------------------- (a) Seller Indemnity. Subject to the terms and conditions of this ---------------- Section 12 and Section 15.4, Seller hereby agrees to indemnify, defend and hold Buyer and Buyer's employees, directors, officers and agents (Buyer and such other persons as indemnitees under Section 12, each an "Indemnified Party") harmless from and against any and all Losses suffered, sustained, incurred or required to be paid at any time by any of them, in each case, to the extent such Loss results from (i) the inaccuracy or breach of any representation, warranty, covenant or agreement of Seller made in this Agreement; (ii) any claim by any third party against Buyer based upon acts or omissions of Seller in connection with the Internet Postage Business; (iii) the TransAmerica Lien (as described in Section 6.4(b)(iv) of the Seller Disclosure Schedule); or (iv) any claim by or on behalf of Francotyp Postalia or its successors or assigns in connection with the matters set forth in Section 6.4(d) of the Seller Disclosure Schedule. Seller, as an indemnitor under this Section 12, shall be referred to as an "Indemnifying Party." (b) Buyer Indemnity. Subject to the terms and conditions of this --------------- Section 12 and Section 15.4, Buyer hereby agrees to indemnify, defend and hold Seller and its employees, directors, officers and agents (Seller and such other persons as indemnitees under Section 12, each an "Indemnified Party") harmless from and against all Losses suffered, sustained, incurred or required to be paid by any of them, in each case, to the extent such Loss results from the inaccuracy or breach of any representation, warranty, -16- covenant or agreement of Buyer made in this Agreement. Buyer, as an indemnitor under this Section 12, shall be referred to as an "Indemnifying Party." (c) Indemnification Threshold. No claim for indemnification will be ------------------------- made by either Party hereunder unless the aggregate of all Losses incurred by such Party otherwise indemnified against hereunder exceeds [***]*, at which such --- time claims may be made for all Losses incurred or sustained. (d) Subrogation. Subject to Section 12.2(e), if the Indemnifying Party ----------- makes any payment under this Section 12 in respect of any Losses, the Indemnifying Party shall be subrogated, to the extent of such payment, to the rights of the Indemnified Party against any insurer or third party with respect to such Losses; provided, however, that the Indemnifying Party shall not have any rights of subrogation with respect to the other Party hereto or any of its Affiliates or any of its Affiliates' officers, directors, agents or employees. In the event that the Indemnifying Party has or acquires subrogation rights under this Section 12.1(d), the Indemnified Party (i) shall assist the Indemnifying Party as reasonably necessary to secure such rights, and (ii) subject to the Indemnified Party's rights under Section 12.2(b) and the Indemnifying Party's rights under Section 12.2(c), in each case, regarding defense and settlement of indemnity claims, shall do nothing to prejudice such subrogation rights. 12.2 Conditions of Indemnification. The respective obligations and ----------------------------- liabilities of the Indemnifying Party to the Indemnified Party under Section 12.1 shall be subject to the following terms and conditions: (a) Notice. Within 15 days after receipt of notice of commencement of ------ any action or the assertion of any claim by a third party (but in any event at least ten days preceding the date on which an answer or other pleading must be served in order to prevent a judgment by default in favor of the party asserting the claim), the Indemnified Party shall give the Indemnifying Party written notice thereof together with a copy of such claim, process or other legal pleading, and the Indemnifying Party shall have the right to undertake the defense thereof by representatives of its own choosing that are reasonably satisfactory to the Indemnified Party. Notwithstanding any other provision of this Agreement, no claim for indemnification under this Agreement may be noticed or first asserted against any Indemnifying Party after the passage of such Indemnifying Party's Claims Bar Date. (b) Failure to Assume Defense. If the Indemnifying Party, by the ------------------------- fifteenth day after receipt of notice of any such claim (or, if earlier, by the fifth day preceding the day on which an answer or other pleading must be served in order to prevent judgment by default in favor of the person asserting such claim), does not elect to defend against such claim, the Indemnified Party will (upon further notice to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the Indemnifying Party; provided, however, that the Indemnified Party shall not settle or compromise such claim without the Indemnifying Party's consent, which consent shall not be unreasonably withheld; and provided further that, - ------------------ * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -17- the Indemnifying Party shall have the right to assume the defense of such claim with counsel of its own choosing at any time prior to settlement, compromise or final determination thereof. (c) Claim Adverse to Indemnifying Party. Notwithstanding anything to ----------------------------------- the contrary in this Section 12.2, if there is a reasonable probability that a claim may materially adversely affect the Indemnifying Party other than as a result of money damages or other money payments, the Indemnifying Party shall have the right, at its own cost and expense, to compromise or settle such claim, but the Indemnifying Party shall not, without the prior written consent of the Indemnified Party which will not be unreasonably withheld, settle or compromise any claim or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such claim. (d) Cooperation. In connection with any such indemnification, the ----------- Indemnified Party will cooperate in all reasonable requests of the Indemnifying Party. (e) Nonassignability. Notwithstanding any other provision of this ---------------- Agreement, no claim for indemnification for Losses under this Section 12 may be assigned by any Indemnified Party hereunder to any IBIP Vendor, whether by sale, assignment or otherwise, whether through voluntary or involuntary transfer or transfer by operation of law or otherwise, and any attempt to sell, assign or transfer such claim for indemnification under this Agreement to any IBIP Vendor shall render such claim null and void and discharge the Indemnifying Parties from any liability to the Indemnified Parties thereon. 12.3 Remedies. Subject to Section 15.4, no remedy conferred on Buyer or -------- Seller by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy, and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. The election of one or more remedies by Buyer or Seller shall not constitute a waiver of the right to pursue other available remedies. SECTION 13. ADDITIONAL AGREEMENTS. --------------------- 13.1 Confidentiality. From the effective date of this Agreement, the --------------- Receiving Party shall hold in confidence and use its reasonable efforts to have all of its employees, agents, representatives and Affiliates hold in confidence this Agreement, all Confidential Information and all related documents and other written material containing information of a confidential nature (including, but not limited to, all intellectual property contained in the IP Assets) of the Disclosing Party, and, except as contemplated by this Agreement, shall not disclose, publish, use or permit others to use the same. Following the Closing, Buyer shall be deemed the Disclosing Party and Seller the Receiving Party, with respect to all Confidential Information contained in and sold to Buyer as part of the IP Assets. Seller shall not disclose, publish, use or permit others to use Confidential Information directly related to the IP Assets that is not contained in and sold to Buyer as part of the IP Assets (the "Retained Confidential Information") without the prior written consent of Buyer, which shall not be unreasonably withheld. Notwithstanding the foregoing and without requiring Buyer's consent, Seller may (i) disclose, publish, use and permit others to use any or all of the Retained Confidential Information solely as reasonably required for Seller to exercise its license rights under Section 4.2 and to sell the E-Stamp Internet Postage Technology to a -18- purchaser as permitted under Section 4.3, and such purchaser may disclose, publish, use and permit others to use any or all of the Retained Confidential Information solely as reasonably required to exercise the license rights granted in Section 4.3 and (ii) sell or assign the source code from its computer software programs [***]* included in the E-Stamp Internet Postage Technology --- free of any confidentiality restrictions and permit the assignee access to all documentation containing Retained Confidential Information which are related specifically to such software. The restrictions set forth in this Section 13.1 shall not apply to any of the foregoing information (and such information shall not be deemed "Confidential Information") which: (a) becomes generally available to the public in any manner or form through no fault of the Receiving Party, or its Associates; (b) is disclosed as required by a court or a governmental agency, the rules and regulations of the securities exchange or trading market on which the Receiving Party's securities are listed or admitted to trading and the rules and regulation of the National Association of Securities Dealers, provided that the Receiving Party shall provide the Disclosing Party with advanced written notice of such disclosure as soon as practicable and with the opportunity to review and challenge such disclosure, and further provided that the Receiving Party shall seek confidential treatment of such disclosure when allowed and shall allow the Disclosing Party to initially select portions of such disclosure for redaction when allowed. (c) Notwithstanding anything to the contrary herein, the Parties acknowledge and agree that Buyer shall file such notices or registration with the United States Patent and Trademark Office and such other offices throughout the world as are necessary to perfect the assignments to the IP Assets granted to Buyer pursuant to this Agreement as Buyer sees fit through a separate short form document. Seller agrees to sign or otherwise execute all such documents. 13.2 Press Release. Buyer shall provide Seller with at least one (1) ------------- business day advance notice prior to the issuance of the first press release disclosing the acquisition of the IP Assets ("Press Release") and shall further send to Seller by e-mail an advance copy of such press release at least three hours of such press release being finalized. Seller shall have no objection rights to such press release. Seller may issue a press release of similar nature following the issuance of Buyer's press release, but shall not issue a press release or otherwise notify any person or entity of this Agreement or the transactions contemplated hereby prior to such event. Notwithstanding any other provision of this Agreement, Buyer shall issue the Press Release before the commencement of extended hours trading on Monday May 7, 2001, and if Buyer fails to do so, Seller may announce the execution of this Agreement and the transactions contemplated hereby in any report or registration statement filed with the Securities and Exchange Commission. 13.3 Lahoti Litigation. Seller shall cooperate with Buyer and take all ----------------- actions as reasonably necessary to transfer and assign to Buyer all benefits and burdens inuring to - ----------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -19- Seller pertaining to the Lahoti Litigation, provided that Buyer indemnifies Seller against all Losses incurred by Seller in connection therewith. 13.4 Payment of Expenses. Whether or not the transactions contemplated by ------------------- this Agreement are consummated and, except as otherwise may be expressly provided herein, each Party shall pay its own fees, expenses and disbursements and those of its respective agents, representatives, consultants, accountants and counsel incurred in connection with this Agreement and all other costs and expenses incurred in the performance and compliance with all conditions to be performed by such Party under this Agreement. 13.5 Sales, Transfer and Use Taxes. Seller shall pay all sales, transfer ----------------------------- and use taxes arising out of the transfer of the IP Assets. 13.6 Information Relating to Taxes. Seller shall furnish to Buyer from time ----------------------------- to time after the Closing Date any information reasonably requested by Buyer which is in the possession of or reasonably available to Seller to permit Buyer: (i) to file on a timely basis its federal income tax returns and its estimated federal income tax returns and any other tax returns which may be required by any federal, state, local or foreign tax authority, and (ii) to comply with orders issued by any federal, state, local or foreign governmental authority. 13.7 Further Assurances. Seller agrees to cooperate fully with Buyer and to ------------------ execute such further instruments, documents and agreements and to take such actions as may be reasonably requested by Buyer to evidence and reflect the rights granted herein and contemplated hereby, and to carry into effect the intents and purposes of this Agreement. Specifically, Seller will execute and deliver all documents and instruments and take such other actions as Buyer may deem necessary in order to document, obtain, maintain, assign, record, make or prosecute domestic or foreign applications for patents, trademarks, domain names or other related intellectual property protection of the IP Assets, including without limitation a short-form assignment with respect to any of the IP Assets for recordation with the U.S. Patent and Trademark Office, the necessary Network Solutions, Inc. "Registrant Name Change Agreements" pertaining to the Domain Names (and in the event that Network Solutions, Inc. identifies any error in any Registrant Name Change Agreement, Seller shall promptly notify Buyer of the error and rejection by Network Solutions, Inc., and shall complete, execute, properly notarize and deliver to Seller the corrected Registrant Name Change Agreement(s) to replace the incorrect version(s)). In the event that Seller fails to execute any such aforementioned documents or instruments or to take any such actions within three (3) business days after Buyer's request therefor, Seller hereby irrevocably designates and appoints Buyer as Seller's attorney-in- fact to execute and deliver such documents and instruments and take such actions for and in Seller's behalf and stead and to do all other lawfully permitted acts as reasonably necessary to further the prosecution, issuance, and enforcement of patents, trademarks or other rights or protections including in or related to the IP Assets with the same force and effect as if executed and delivered by Seller, which power is coupled with an interest and is therefore irrevocable. 13.8 No Default. Seller has entered into a merger agreement with ---------- Learn2.com which contemplates the merger of Seller and Learn2.com during the third quarter of 2001. The parties agree that such merger will not cause Seller, by assignment or otherwise, to breach any representation or warranty or default upon any of its covenants or obligations under this Agreement. -20- SECTION 14. TERM AND TERMINATION. -------------------- 14.1 Termination of the Agreement. This Agreement may be terminated at ---------------------------- any time prior to the Closing Date: (a) by mutual agreement of Seller and Buyer; (b) by Buyer or Seller if: (i) the Closing Date has not occurred before 5:00 p.m. (Pacific Time) on April 30, 2001 (provided, however, that the right to terminate this Agreement under this Section 14.1(b)(i) shall not be available to any Party whose failure to fulfill any obligation hereunder has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date); (c) by Buyer if there shall be any action taken, or any law or order enacted, promulgated or issued or deemed applicable to the Agreement, by any governmental or regulatory authority, which would: (i) prohibit Buyer's ownership or use of all or any of the IP Assets or (ii) compel Buyer to dispose of or hold separate all or any material portion of the IP Assets; (d) by Buyer if it is not in material breach of its representations, warranties, covenants and agreements under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Seller such that the condition to the Closing in Section 9.1(a) will not be satisfied as of the time of such breach, and Seller is not using its reasonable efforts to cure such breach, or has not cured such breach within thirty (30) days, after notice of such breach to Seller (provided, however, that, no cure period shall be required for a breach which by its nature cannot be cured); and (e) by Seller if it is not in material breach of its representations, warranties, covenants and agreements under this Agreement and there has been a breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of Buyer such that the condition to the Closing in Section 9.2(a) will not be satisfied as of the time of such breach, and Buyer is not using its reasonable efforts to cure such breach, or has not cured such breach within thirty (30) days, after notice of such breach to Buyer (provided, however, that no cure period shall be required for a breach which by its nature cannot be cured). 14.2 Insolvency. Should Seller: (a) become Insolvent, (b) make an ---------- assignment for the benefit of creditors, (c) file or have filed against it a petition in bankruptcy or seeking reorganization which is not dismissed within sixty (60) days, (d) have a receiver appointed to take possession of all or substantially all of the assets of Seller or of any of the IP Assets, (e) institute any proceedings for liquidation or winding up, then Buyer may, at its option and in addition to other rights and remedies it may have under this Agreement or at law or in equity, (x) if any event in clauses (a) through (e) of this paragraph occurs before the Closing, terminate this Agreement immediately by written notice (with the effect set forth in Section 14.3) and all licenses granted hereunder to Seller shall be deemed immediately terminated upon receipt of such notice, or (y) if any event in clauses (a) through (e) of this paragraph occurs on or after the Closing, give written notice of its election to terminate all licenses granted hereunder to Seller and such licenses shall be deemed immediately terminated upon receipt of such notice. -21- 14.3 Effect of Termination of the Agreement. In the event of a valid -------------------------------------- termination of this Agreement before the Closing, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Buyer or Seller, or their respective officers, directors or stockholders or Affiliates or Associates; provided, however, that each Party shall remain liable for any breaches of this Agreement prior to its termination; and provided further that, the provisions of Sections 13.1, 14.3 and 15 of this Agreement shall remain in full force and effect and survive any termination of this Agreement, in addition to any other provisions that by their terms survive termination and any other provisions of this Agreement to the extent necessary to give meaning and effect to the foregoing Sections. SECTION 15. GENERAL PROVISIONS. ------------------ 15.1 Amendment and Waiver. This Agreement may not be modified, amended or -------------------- supplemented other than by an agreement in writing executed by all Parties hereto. No waiver shall be binding unless executed in writing by the Party making the waiver. No waiver of any provisions, breach or default of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. 15.2 Delays or Omissions. It is agreed that no delay or omission to ------------------- exercise any right, power or remedy accruing to any Party, upon any breach, default or noncompliance by another Party under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character of any breach, default or noncompliance under this Agreement or any waiver of any provisions or conditions of the Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or otherwise afforded to any Party, shall be cumulative and not alternative. 15.3 Assignment: Binding Upon Successors and Assigns. Except as expressly ------------------------------------------------ permitted otherwise in Sections 5.4(a) and 13.8 hereof, Seller may not assign any of its rights or obligations hereunder (i) without the prior written consent of Buyer, which consent shall not be unreasonably withheld unless Seller proposes such an assignment to an IBIP Vendor, in which case Buyer may withhold its consent in its sole and absolute discretion, and (ii) unless, prior to Seller assigning its rights or obligations under this Agreement, any such assignee agrees in writing to assume all of Seller's obligations hereunder. This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective permitted successors and assigns. 15.4 Limitation of Liabilities. In no event shall any Party to this ------------------------- agreement be liable for any indirect, incidental, consequential, special, or punitive damages of any nature or lost profits, whether such liability is asserted on the basis of contract (including, without limitation, the breach or any termination of this Agreement or any Ancillary Agreement), tort (including negligence or strict liability), or otherwise, in connection with the transactions contemplated by this Agreement or any Ancillary Agreement, even if advised in advance of the possibility of any such Loss. In addition, the liability of a Party arising out of or in connection with this Agreement, including without limitation the liability for all Losses -22- for all Indemnified Parties under Section 12 hereof and any Ancillary Agreement shall in no event exceed [***]*. --- 15.5 Notices. All notices, requests, demands and other communications ------- required or permitted under this Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given, made and received (i) on the date when delivered by hand delivery with receipt acknowledged, or (ii) upon the next business day following receipt of telex or telecopy transmission with confirmation of receipt returned to the sender, or (iii) upon the third day after deposit in the United States mail, registered or certified with postage prepaid, return receipt requested, in each case addressed as set forth below: (a) If to Buyer: ----------- Stamps.com Inc. 3420 Ocean Park Boulevard, Suite 1040 Santa Monica, California 90405 Attention: Legal Telephone: (310) 581-7200 Telecopy: (310) 314-8583 With a copy to: -------------- Irell & Manella LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067 Attention: Gary Frischling Telephone: (310) 277-1010 Telecopy: (310) 203-7199 (b) If to Seller: ------------ eStamp Corporation 2051 Stierlin Court Mountain View, California 94043 Telephone: (650) 919-7500 Telecopy: (650) 919-7867 - ------------------ * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -23- With a copy to: -------------- Fenwick & West LLP Two Palo Alto Square Palo Alto, California 94306 Attention: Lawrence Granatelli Telephone: (650) 494-0600 Telecopy: (650) 494-1417 Any Party may alter the addresses to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 15.5 for the giving of notice. 15.6 Incorporation of Schedules and Exhibits. All schedules, exhibits and --------------------------------------- other documents and written information required to be delivered pursuant to this Agreement are incorporated into this Agreement by this reference. 15.7 Affiliates. Seller agrees that it will ensure that all of its ---------- Affiliates are subject to the restrictions to which Seller is subject under this Agreement with respect to the treatment and use of Buyer's Confidential Information, regardless of how such Affiliate acquires such Confidential Information. 15.8 Independent Contractors. The relationship of the Parties established ----------------------- by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either Party the power to direct and control the day-to-day activities of the other, (ii) constitute the Parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking, or (iii) allow either Party to create or assume any obligation on behalf of the other Party for any purpose whatsoever. 15.9 Captions. The captions contained in this Agreement are for -------- convenience and reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement. 15.10 Severability. If any provision of this Agreement, or the application ------------ thereof, will for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties hereto. The Parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the greatest extent possible, the economic, business and other purposes of the void or unenforceable provision. 15.11 Governing Law; Exclusive Jurisdiction and Venue. This Agreement ----------------------------------------------- shall be governed by and construed under the laws of the State of California, without reference to conflict of laws principles. Any proceeding arising out of or relating to this Agreement shall be brought and heard only in an appropriate state or federal court located in the County of Los Angeles, California. The Parties hereto waive any and all objections that they may have as to personal jurisdiction or venue in any of the above courts. 15.12 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and all of which shall together -24- constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof shall bear the signatures of all of the Parties indicated as the signatories hereto. 15.13 Attorneys' Fees. In the event that any action or proceeding --------------- (including proceedings in bankruptcy) is brought by either Party to enforce or interpret any provision, covenant or condition contained in this Agreement, the prevailing Party in such action or proceeding (whether after trial or appeal) shall be entitled to recover from the Party not prevailing its expenses therein, including reasonable attorneys' fees and allowable costs. 15.14 Joint Work Product. This Agreement is the joint work product of the ------------------ Parties hereto; accordingly, in its interpretation, no inferences will be drawn against either Party based upon its drafting of the provision(s) at issue. 15.15 No Third Party Beneficiaries. Unless otherwise expressly provided, ---------------------------- no provisions of this Agreement are intended or shall be construed to confer upon or give to any person or entity other than Seller and Buyer any rights, remedies or other benefits under or by reason of this Agreement. 15.16 Further Assurances. Each of the Parties hereto covenants, without ------------------ the need for additional consideration, that it and its Affiliates will take such further actions and execute upon request any further documents as may be reasonably required to fully effectuate the terms, conditions and intent of this Agreement and to more fully vest in the other Party and its Affiliates the rights, licenses and other benefits provided to such other Party and its Affiliates hereunder. 15.17 Entire Agreement. This Agreement, including the schedules and ---------------- exhibits hereto, and all Ancillary Agreements contain the entire understanding among the Parties hereto and with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, representations, inducements or conditions, express or implied, oral or written, except as set forth herein and therein. The express terms hereof and thereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. 15.18 Delivery by Facsimile. This Agreement, the agreements referred to --------------------- herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the enforceability of a contract and each such party forever waives any such defense. [Remainder of page intentionally left blank] -25- IN WITNESS WHEREOF, the Parties hereto have executed this Asset Purchase Agreement as of the date first above written. BUYER: STAMPS.COM INC. By: ___________________________ Bruce Coleman Chief Executive Officer SELLER: E-STAMP CORPORATION By: ____________________________ Edward Malysz Vice President, General Counsel and acting Chief Financial Officer -26- Confidential Disclosure Schedule Stamps.com, Inc. agrees to furnish supplementally a copy of the foregoing schedule to the SEC upon request. -27- SCHEDULE A ---------- Domain Names 1. EPOSTAGESTAMPS.COM 2. ESTAMP.COM 3. E-STAMP.COM 4. E--STAMP.COM 5. ESTAMP.NET 6. E-STAMP.NET 7. ESTAMP.ORG 8. E-STAMP.ORG 9. ESTAMPMETER.COM 10. ESTAMPNOW.COM 11. ESTAMPONLINE.COM 12. ESTAMPS.COM 13. E-STAMPS.NET 14. ESTAMPS.ORG 15. E-STAMPS.ORG 16. ESTAMPS2000.COM 17. E-STAMPS2000.COM 18. ESTAMPSBYEMAIL.COM 19. ESTAMPSBYMAIL.COM 20. ESTAMPSMAIL.COM 21. ESTAMPSNOW.COM 22. E-STAMPSNOW.COM 23. ESTAMPSONLINE.COM -28- (SCHEDULE A, continued) ---------- 24. MYESTAMPS.COM 25. ONLINESTAMP.COM 26. ONLINESTAMPS.COM 27. PCPOSTAGESTAMPS.COM 28. WEBESTAMP.COM -29- SCHEDULE B ---------- IBIP Venders Pitney Bowes, Inc. Ascom Mailing Systems Envelope Manager Software Francotyp-Postalia AG KARA Technology Neopost Online, Inc. PSI Systems, Inc. -30- SCHEDULE C ---------- Patent Portfolio UNITED STATES ISSUED PATENTS ----------------------------
Title Patent No. - -------------------------------------------------------------------------------- System and Method for Automatically Printing Postage on Mail 5,510,992 - -------------------------------------------------------------------------------- System and Method for Storing Postage in a Computer System 5,682,318 - -------------------------------------------------------------------------------- System and Method for Automatically Printing Postage on Mail 5,774,886 - -------------------------------------------------------------------------------- System and Method for Storing, Retrieving and Automatically 5,606,507 Printing Postage on Mail - -------------------------------------------------------------------------------- System and Method for Storing, Retrieving and Automatically 5,666,284 Printing Postage on Mail - -------------------------------------------------------------------------------- System and Method for Registration Using Indicia 5,825,893 - -------------------------------------------------------------------------------- System and Method for Controlling the Dispensing of an 5,778,076 Authenticating Indicia - -------------------------------------------------------------------------------- System and Method for Controlling the Dispensing of an 5,796,834 Authenticating Indicia - -------------------------------------------------------------------------------- System and Method for Controlling the Storage of Data Within a 5,801,364 Portable Memory - -------------------------------------------------------------------------------- System and Method for Retrieving Postage Credit Controlled 5,812,991 with a Portable memory on a Computer Network - -------------------------------------------------------------------------------- System and Method for Generating Personalized Postage Indicia 5,819,240 - -------------------------------------------------------------------------------- System and Method for Printing Personalized Postage Indicia 5,717,597 on Greeting Cards - -------------------------------------------------------------------------------- System and Method for Printing Postage Indicia Directly on 5,801,944 Documents - -------------------------------------------------------------------------------- Method and System for Electronic Document Certification 5,982,506 - -------------------------------------------------------------------------------- Method and System for Electronic Document Certification 6,158,003 - --------------------------------------------------------------------------------
-31- (SCHEDULE C continued) ---------- - -------------------------------------------------------------------------------- Memorabilia Display Case 5,603,410 - -------------------------------------------------------------------------------- System and Method Remote Postage Metering 5,822,739 - -------------------------------------------------------------------------------- System and Method for Automatic Determination of Postal Item 5,983,209 Weight by Context - -------------------------------------------------------------------------------- System and Method for Providing Fault Tolerant Transactions Over 6,199,055 an Unsecured Communication Channel - -------------------------------------------------------------------------------- System and Method for Printing Multiple Postage Indicia 6,208,980 - -------------------------------------------------------------------------------- Stampless Envelope--Design D384,098 - -------------------------------------------------------------------------------- Stampless Envelope with Enlarged Window--Design D380,007 - -------------------------------------------------------------------------------- Display Box--Design D376,710 - -------------------------------------------------------------------------------- Stampless Envelope--Design D395,333 - -------------------------------------------------------------------------------- Stampless Envelope--Design D414,511 - -------------------------------------------------------------------------------- Front Surface of a Stampless Envelope--Design D421,048 - -------------------------------------------------------------------------------- Front Surface of a Stampless Envelope--Design D434,438 - -------------------------------------------------------------------------------- Stampless Envelope--Design D386,783 - -------------------------------------------------------------------------------- Stampless Envelope--Design D386,204 - -------------------------------------------------------------------------------- Window Portion of a Stampless Envelope--Design D405,111 - -------------------------------------------------------------------------------- Window Portion of a Stampless Envelope--Design D405,112 - --------------------------------------------------------------------------------
-32- (SCHEDULE C, continued) ---------- UNITED STATES PENDING PATENT APPLICATIONS ----------------------------------------- [***]* --- - --------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -33- (SCHEDULE C, continued) ---------- FOREIGN ISSUED PATENTS ---------------------- - -------------------------------------------------------------------------------- Country No. Title - -------------------------------------------------------------------------------- Australia 707840 System and Method for Retrieving, Selecting and Printing Postage Indicia on Documents - -------------------------------------------------------------------------------- Canada 77242 Stampless Envelope--Design-Canada - -------------------------------------------------------------------------------- Canada 77243 Stampless Envelope--Design-Canada - -------------------------------------------------------------------------------- Canada 77244 Stampless Envelope--Design-Canada - -------------------------------------------------------------------------------- Germany M9408938.8 Stampless Envelope--Design-Germany - -------------------------------------------------------------------------------- Great Britain 2300151 Storing, Retrieving and Automatically Printing Postage on Mail - -------------------------------------------------------------------------------- Great Britain 2316362 Storing, Retrieving and Automatically Printing Postage on Mail - -------------------------------------------------------------------------------- Great Britain 2043298 Stampless Envelope--Design-Great Britain - -------------------------------------------------------------------------------- Great Britain 2049990 Stampless Envelope--Design-Great Britain - -------------------------------------------------------------------------------- Great Britain 2049989 Stampless Envelope--Design-Great Britain - -------------------------------------------------------------------------------- -34- (SCHEDULE C, continued) ---------- FOREIGN PENDING PATENT APPLICATIONS ----------------------------------- - --------------- [***]* - --------------- - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -35- SCHEDULE D ---------- Trademarks - -------------------------------------------------------------------------------- UNITED STATES - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 75/257,017 2,279,750 - -------------------------------------------------------------------------------- E & Design 75/602,096 - -------------------------------------------------------------------------------- E-STAMP 74/475,757 2,152,671 - -------------------------------------------------------------------------------- E-STAMP 75/602,095 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 75/603,999 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 75/408,910 - -------------------------------------------------------------------------------- E-STAMP.COM 75/563,137 - -------------------------------------------------------------------------------- E-STAMP.COM 75/602,097 - -------------------------------------------------------------------------------- THE INTERNET POSTAGE COMPANY 75/602,094 - -------------------------------------------------------------------------------- THE INTERNET POSTAGE COMPANY 75/602,092 - -------------------------------------------------------------------------------- CALIFORNIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP.COM N/A 51010 - -------------------------------------------------------------------------------- E-STAMP.COM N/A 104948 - -------------------------------------------------------------------------------- ARGENTINA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 2023438 1707082 - -------------------------------------------------------------------------------- AUSTRALIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 735561 735561 - -------------------------------------------------------------------------------- E & Design 796828 796828 - -------------------------------------------------------------------------------- E-STAMP 796827 - -------------------------------------------------------------------------------- E-STAMP 703164 703164 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 764571 764571 - -------------------------------------------------------------------------------- ESTAMP 759833 759833 - -------------------------------------------------------------------------------- ESTAMP ELECTRONIC POSTAGE & 711341 711341 Design - -------------------------------------------------------------------------------- BRAZIL - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 819977357 - -------------------------------------------------------------------------------- E-STAMP 819314854 819314854 - -------------------------------------------------------------------------------- CANADA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 1018445 - -------------------------------------------------------------------------------- E & Design 844618 - -------------------------------------------------------------------------------- E-STAMP 1018444 - -------------------------------------------------------------------------------- -36- (SCHEDULE D, continued) - -------------------------------------------------------------------------------- E-STAMP 805206 - -------------------------------------------------------------------------------- E-STAMP.COM 1010964 - -------------------------------------------------------------------------------- ESTAMP 875,256 - -------------------------------------------------------------------------------- CHILE - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 337669 478442 - -------------------------------------------------------------------------------- CHINA - -------------------------------------------------------------------------------- E & Design 970050612 1209087 - -------------------------------------------------------------------------------- E-STAMP 960036782 1348722 - -------------------------------------------------------------------------------- ESTAMP ELECTRONIC 960087879 1108507 POSTAGE & Design - -------------------------------------------------------------------------------- CZECH REPUBLIC - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP O-108909-96 202.989 - -------------------------------------------------------------------------------- EUROPEAN COMMUNITY - -------------------------------------------------------------------------------- E & Design 517987 517987 - -------------------------------------------------------------------------------- E-STAMP 33530 33530 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 848457 848457 - -------------------------------------------------------------------------------- E-STAMP.COM 1127687 - -------------------------------------------------------------------------------- HONG KONG - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 2420/96 5966/97 - -------------------------------------------------------------------------------- HUNGARY - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP M 96 00749 146309 - -------------------------------------------------------------------------------- INDONESIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP D96/5566 375767 - -------------------------------------------------------------------------------- ISRAEL - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 103711 103711 - -------------------------------------------------------------------------------- INDIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 700573 - -------------------------------------------------------------------------------- JAPAN - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 115,998/97 4,332,078 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 49,167/98 4,366,488 - -------------------------------------------------------------------------------- MEXICO - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 294945 557169 - -------------------------------------------------------------------------------- -37- (SCHEDULE D, continued) - -------------------------------------------------------------------------------- E-STAMP 256013 657290 - -------------------------------------------------------------------------------- ESTAMP ELECTRONIC POSTAGE & Design 266596 534428 - -------------------------------------------------------------------------------- MALAYSIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 96/02841 96002841 - -------------------------------------------------------------------------------- NORWAY - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 961361 182157 - -------------------------------------------------------------------------------- NEW ZEALAND - -------------------------------------------------------------------------------- E & Design 310890 310890 - -------------------------------------------------------------------------------- E & Design 310889 310889 - -------------------------------------------------------------------------------- E-STAMP 310888 310888 - -------------------------------------------------------------------------------- E-STAMP 259265 259265 - -------------------------------------------------------------------------------- E-STAMP.COM 307426 307426 - -------------------------------------------------------------------------------- E-STAMP.COM 307425 307425 - -------------------------------------------------------------------------------- ESTAMP ELECTRONIC POSTAGE & Design 263866 B263866 - -------------------------------------------------------------------------------- PHILIPPINES - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 107543 - -------------------------------------------------------------------------------- POLAND - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP Z-156938 106839 - -------------------------------------------------------------------------------- ROMANIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 38721 27559 - -------------------------------------------------------------------------------- RUSSIAN FEDERATION - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 97707375 167515 - -------------------------------------------------------------------------------- E-STAMP 96702706 154827 - -------------------------------------------------------------------------------- ESTAMP ELECTRONIC POSTAGE & Design 96708428 159387 - -------------------------------------------------------------------------------- SAUDI ARABIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 34155 409/87 - -------------------------------------------------------------------------------- SINGAPORE - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 5522/97 T97/05522E - -------------------------------------------------------------------------------- E-STAMP 1837/96 T96/01837G - -------------------------------------------------------------------------------- SOUTH AFRICA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 96/02518 96/02518 - -------------------------------------------------------------------------------- SOUTH KOREA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- -38- (SCHEDULE D, continued) - -------------------------------------------------------------------------------- E & Design 97-21481 414681 - -------------------------------------------------------------------------------- E-STAMP 96-9249 378864 - -------------------------------------------------------------------------------- SWITZERLAND - -------------------------------------------------------------------------------- E & Design 3690/1997 446318 - -------------------------------------------------------------------------------- E-STAMP 1542/1996 437296 - -------------------------------------------------------------------------------- THAILAND - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 304710 KOR59765 - -------------------------------------------------------------------------------- TURKEY - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP 96/4310 182044 - -------------------------------------------------------------------------------- TAIWAN - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 86023515 00855286 - -------------------------------------------------------------------------------- E-STAMP 85-9204 00755569 - -------------------------------------------------------------------------------- YUGOSLAVIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP Z-340/96 41602 - -------------------------------------------------------------------------------- -39- Exhibit A-1 ----------- TRADEMARK ASSIGNMENT -------------------- This TRADEMARK ASSIGNMENT (this "Assignment") is entered into by ESTAMP CORPORATION, a Delaware corporation, having a place of business located at 2051 Stierlin Court, Mountain View, California 94043 ("Assignor"), as assignor, in favor of STAMPS.COM INC., a Delaware corporation having a place of business located at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405 ("Assignee"), as assignee, with reference to the following facts and circumstances: Assignor and Assignee have entered into that certain Asset Purchase Agreement dated _________________ (the "Asset Purchase Agreement"), which, along with the promises contained herein, constitute mutual consideration for the promises herein; Assignor is the owner of the trademark registrations and applications for registration in the United States (the "Trademarks") as shown on the attached Exhibit A. WHEREAS, Assignee desires to acquire all right, title and interest in and to the Trademarks and related rights. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor does hereby assign and transfer unto Assignee all right, title and interest of Assignor in and to the Trademarks, together with the goodwill of the business symbolized by the marks, as well as its entire right, title and interest in and to all State registrations of the marks heretofore granted or applied for, any and all common law rights to the Trademarks in the United States and any state thereof, and any and all claims and demands it may have either at law or in equity arising out of any past infringements. Assignor does hereby expressly agree that Assignee may singly, and without assistance or consent from Assignor, undertake procedures to record the transfer of the Trademarks to Assignee in the United States Patent and Trademark Office. In testimony whereof, Assignor has caused this Assignment to be executed by its officer(s) thereunto duly authorized. ASSIGNOR ESTAMP CORPORATION Dated: ________________ By: _________________________ [Name] [Title] STATE OF ) COUNTY OF ) On _______________________, before me, , Notary Public, personally appeared ________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. _____________________________ Notary Public A-1 EXHIBIT A TO TRADEMARK ASSIGNMENT Trademarks UNITED STATES - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E & Design 75/257,017 2,279,750 - -------------------------------------------------------------------------------- E & Design 75/602,096 - -------------------------------------------------------------------------------- E-STAMP 74/475,757 2,152,671 - -------------------------------------------------------------------------------- E-STAMP 75/602,095 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 75/603,999 - -------------------------------------------------------------------------------- E-STAMP INTERNET POSTAGE 75/408,910 - -------------------------------------------------------------------------------- E-STAMP.COM 75/563,137 - -------------------------------------------------------------------------------- E-STAMP.COM 75/602,097 - -------------------------------------------------------------------------------- THE INTERNET POSTAGE COMPANY 75/602,094 - -------------------------------------------------------------------------------- THE INTERNET POSTAGE COMPANY 75/602,092 - -------------------------------------------------------------------------------- CALIFORNIA - -------------------------------------------------------------------------------- Mark Application No. Registration No. - -------------------------------------------------------------------------------- E-STAMP.COM N/A 51010 - -------------------------------------------------------------------------------- E-STAMP.COM N/A 104948 - -------------------------------------------------------------------------------- A-2 Exhibit A-2 ----------- PATENT ASSIGNMENT ----------------- This PATENT ASSIGNMENT (this "Assignment") is entered into is entered into by eStamp Corporation, a Delaware corporation, having a place of business located at 2051 Stierlin Court, Mountain View, California 94043 ("Assignor"), as assignor, in favor of Stamps.com Inc., a Delaware corporation having a place of business located at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405 ("Assignee"), as assignee, with reference to the following facts and circumstances: Assignor and Assignee have entered into that certain Asset Purchase Agreement dated _________________ (the "Asset Purchase Agreement"), which, along with the promises contained herein, constitute mutual consideration for the promises herein; Assignor is the sole and exclusive owner of the Letters Patents and applications in the United States (hereinafter the "Patents") as shown on the attached Exhibit A. Assignee desires to acquire, and Assignor desires to assign, Assignor's right, title and interest in, to and under the Patents. NOW, THEREFORE, to all whom it may concern, be it known that for good and valuable consideration the receipt and adequacy of which is hereby acknowledged, Assignor has sold, assigned, transferred and set over, and does hereby sell, assign, transfer and set over to Assignee the Patents listed in Exhibit A attached hereto, together with any reissue or reissues of the Patents to the end of the term or terms for which the Patents are granted or may be reissued as fully and entirely as the same would have been held and enjoyed by Assignor if this assignment and sale had not been made; together with all claims for damages by reason of past infringement of the Patents, with the right to sue for, and collect the same for Assignee's own use and benefit and for the use and benefit of Assignee's successors, assigns or other legal representatives. Assignor further warrants that it has not executed, and will not execute, any agreements in conflict with or inconsistent with this assignment. In testimony whereof, Assignor has caused this Assignment to be executed by its officer(s) thereunto duly authorized. ASSIGNOR ESTAMP CORPORATION Dated: ________________ By: _________________________ [Name] [Title] STATE OF ) COUNTY OF ) On _______________________, before me, , Notary Public, personally appeared _______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. ______________________________ Notary Public A-3 EXHIBIT A TO PATENT ASSIGNMENT UNITED STATES ISSUED PATENTS ---------------------------- - -------------------------------------------------------------------------------- Title Patent No. - -------------------------------------------------------------------------------- System and Method for Automatically Printing Postage on 5,510,992 Mail - -------------------------------------------------------------------------------- System and Method for Storing Postage in a Computer System 5,682,318 - -------------------------------------------------------------------------------- System and Method for Automatically Printing Postage on 5,774,886 Mail - -------------------------------------------------------------------------------- System and Method for Storing, Retrieving and 5,606,507 Automatically Printing Postage on Mail - -------------------------------------------------------------------------------- System and Method for Storing, Retrieving and 5,666,284 Automatically Printing Postage on Mail - -------------------------------------------------------------------------------- System and Method for Registration Using Indicia 5,825,893 - -------------------------------------------------------------------------------- System and Method for Controlling the Dispensing of an 5,778,076 Authenticating Indicia - -------------------------------------------------------------------------------- System and Method for Controlling the Dispensing of an 5,796,834 Authenticating Indicia - -------------------------------------------------------------------------------- System and Method for Controlling the Storage of Data 5,801,364 Within a Portable Memory - -------------------------------------------------------------------------------- System and Method for Retrieving Postage Credit 5,812,991 Controlled with a Portable memory on a Computer Network - -------------------------------------------------------------------------------- System and Method for Generating Personalized Postage 5,819,240 Indicia - -------------------------------------------------------------------------------- System and Method for Printing Personalized Postage 5,717,597 Indicia on Greeting Cards - -------------------------------------------------------------------------------- System and Method for Printing Postage Indicia Directly 5,801,944 on Documents - -------------------------------------------------------------------------------- Method and System for Electronic Document Certification 5,982,506 - -------------------------------------------------------------------------------- Method and System for Electronic Document Certification 6,158,003 - -------------------------------------------------------------------------------- Memorabilia Display Case 5,603,410 - -------------------------------------------------------------------------------- System and Method Remote Postage Metering 5,822,739 - -------------------------------------------------------------------------------- System and Method for Automatic Determination of Postal 5,983,209 Item Weight by Context - -------------------------------------------------------------------------------- -4- - -------------------------------------------------------------------------------- Title Patent No. - -------------------------------------------------------------------------------- System and Method for Providing Fault Tolerant 6,199,055 Transactions Over an Unsecured Communication Channel - -------------------------------------------------------------------------------- System and Method for Printing Multiple Postage Indicia 6,208,980 - -------------------------------------------------------------------------------- Stampless Envelope--Design D384,098 - -------------------------------------------------------------------------------- Stampless Envelope with Enlarged Window--Design D380,007 - -------------------------------------------------------------------------------- Display Box--Design D376,710 - -------------------------------------------------------------------------------- Stampless Envelope--Design D395,333 - -------------------------------------------------------------------------------- Stampless Envelope--Design D414,511 - -------------------------------------------------------------------------------- Front Surface of a Stampless Envelope--Design D421,048 - -------------------------------------------------------------------------------- Front Surface of a Stampless Envelope--Design D434,438 - -------------------------------------------------------------------------------- Stampless Envelope--Design D386,783 - -------------------------------------------------------------------------------- Stampless Envelope--Design D386,204 - -------------------------------------------------------------------------------- Window Portion of a Stampless Envelope--Design D405,111 - -------------------------------------------------------------------------------- Window Portion of a Stampless Envelope--Design D405,112 - -------------------------------------------------------------------------------- -5- UNITED STATES PENDING PATENT APPLICATIONS ----------------------------------------- - --------------- [***]* - --------------- - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -6- Exhibit A-3 ----------- DOMAIN NAME ASSIGNMENT ---------------------- This DOMAIN NAME ASSIGNMENT (this "Assignment") is entered into by ESTAMP CORPORATION, a Delaware corporation, having a place of business located at 2051 Stierlin Court, Mountain View, California 94043 ("Assignor"), as assignor, in favor of STAMPS.COM INC., a Delaware corporation having a place of business located at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405 ("Assignee"), as assignee, with reference to the following facts and circumstances: WHEREAS, Assignor and Assignee have entered into that certain Asset Purchase Agreement dated _________________ (the "Asset Purchase Agreement"), which, along with the promises contained herein, constitute mutual consideration for the promises herein; WHEREAS, Assignor is the registrant of the registered Domain Names (the "Domain Names") as shown on the attached Exhibit A. WHEREAS, Assignee desires to acquire any and all right and interest in and to the Domain Names and related rights. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Assignor does hereby assign and transfer unto Assignee any and all right and interest of Assignor in and to the Domain Names, together with the goodwill of the business symbolized by the Domain Names, as well as Assignor's entire right, title and interest in and to all federal and state trade and service mark registrations of the Domain Names heretofore granted or applied for, and any and all common law rights to the Domain Names throughout the world, and any and all claims and demands it may have either at law or in equity arising out of any past infringements and uses of the Domain Names. Assignor does hereby expressly agree that procedures be taken with an appropriate domain name registrar (such as Network Solutions, Inc.) by Assignee, with assistance as necessary from Assignor, to execute the transfer of the Domain Names to Assignee. In testimony whereof, Assignor has caused this Assignment to be executed by its officer(s) thereunto duly authorized. ASSIGNOR ESTAMP CORPORATION Dated: ________________ By: _________________________ [Name] [Title] STATE OF ) ) COUNTY OF ) On _______________________, before me, , Notary Public, personally appeared ________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. _____________________________ Notary Public -7- EXHIBIT A TO DOMAIN NAME ASSIGNMEN Domain Names 1. EPOSTAGESTAMPS.COM 2. ESTAMP.COM 3. E-STAMP.COM 4. E--STAMP.COM 5. ESTAMP.NET 6. E-STAMP.NET 7. ESTAMP.ORG 8. E-STAMP.ORG 9. ESTAMPMETER.COM 10. ESTAMPNOW.COM 11. ESTAMPONLINE.COM 12. ESTAMPS.COM 13. E-STAMPS.NET 14. ESTAMPS.ORG 15. E-STAMPS.ORG 16. ESTAMPS2000.COM 17. E-STAMPS2000.COM 18. ESTAMPSBYEMAIL.COM 19. ESTAMPSBYMAIL.COM 20. ESTAMPSMAIL.COM 21. ESTAMPSNOW.COM 22. E-STAMPSNOW.COM 23. ESTAMPSONLINE.COM 24. MYESTAMPS.COM -8- 25. ONLINESTAMP.COM 26. ONLINESTAMPS.COM 27. PCPOSTAGESTAMPS.COM 28. WEBESTAMP.COM -9- Exhibit A-4 ----------- DEED OF ASSIGNMENT ------------------ THIS DEED OF ASSIGNMENT is made the __ day of _______, 2001 BETWEEN: ESTAMP CORPORATION, a Delaware corporation, having a place of business located at 2051 Stierlin Court, Mountain View, California 94043, United States of America, (hereinafter referred to as "the Assignor") of the first part AND: STAMPS.COM INC., a Delaware corporation, having a place of business located at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405, United States of America, (hereinafter referred to as "the Assignee") of the second part. WHEREAS: A. The Assignor is the owner of Australian patents and applications listed in the Schedule below (hereinafter referred to as "the Patents") and is the owner of inventions which are the subject of the Patents (hereinafter referred to as "the Inventions"). B. The Assignor is desirous of assigning to the Assignee and the Assignee is desirous of acquiring from the Assignor all its right, title and interest in the Patents in the Commonwealth of Australia. NOW THIS DEED WITNESSETH as follows: 1. The Assignor hereby assigns to the Assignee absolutely all its right, title and interest in the Patents in the Commonwealth of Australia, including but not limited to the right, either then existing or at any time in the future, to make application for and obtain patents in the Commonwealth of Australia in respect of the Inventions, specifically including the right to file applications for patents, and claim priority, based on any of the Patents. SCHEDULE: 1. Registration No. 707840 - System and Method for Retrieving, Selecting and Printing Postage Indicia on Documents -10- 2. [***]* --- 3. [***]* --- IN WITNESS WHEREOF the parties have executed this Deed on the day and year first hereinbefore written. By: ____________________________ Name (printed): Position held: Attest: ______________________________ Name (printed): Position held: By: ____________________________ Name (printed): Position held: Attest: ______________________________ Name (printed): Position held: - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -11- Exhibit A-5 ----------- CANADIAN DESIGN REGISTRATION ASSIGNMENT --------------------------------------- The undersigned, ESTAMP CORPORATION, a company incorporated under the laws of the state of Delaware in the United States of America, whose full post office address is 2051 Stierlin Court, Mountain View, California 94043, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby sell, transfer and assign to STAMPS.COM INC., a company incorporated under the laws of the state of Delaware in the United States of America, whose full post office address is 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405, all its entire right, title and interest in and to the following Canadian industrial design applications and registrations: Registration No. Title - ---------------- ----- 77242 Stampless Envelope----Design-Canada 77243 Stampless Envelope----Design-Canada 77244 Stampless Envelope----Design-Canada the same to be held and enjoyed by the said ASSIGNEE to the full end of term thereof for which the said industrial design applications or registrations are granted, as fully and entirely as the same could have been held and enjoyed by it if this assignment and sale had not been made. SIGNED at __________________________ this _____ day of ________________, 2001. ESTAMP CORPORATION By:________________________________ (Signature of Officer) Name:______________________________ Title:_____________________________ DECLARATION OF WITNESS ---------------------- I, __________________________, hereby declare that I was personally present and did see ____________________________ duly sign and execute the foregoing assignment. _____________________________________ (Signature of Witness) Name:__________________________________ Address:_______________________________ _______________________________ -12- Exhibit A-6 ----------- UBERTRAGUNGSERKLARUNG - DECLARATION OF ASSIGNMENT -------------------------------------------------- fur Patente, Gebrauchsmuster, Marken, deren Anmeldungen sowie IR-Marken for Patents, Utility Model Rights, Trademarks, their applications and International Trademarks Der Unterzeichner I/We the undersigned ESTAMP CORPORATION 2051 Stierlin Court Mountain View, California 94043 United States of America Inhaber der deutschen Patente und Patentanmeldungen mit der(n) Nummer(n). owner of the following German patent(s) and patent application(s) no(s): [***]* --- ubertragt hiermit das vorgenannte Schutzrecht mit allen Rechten und Pflichten auf herewith assigns the protective right with all rights and duties to STAMPS.COM INC. 3420 Ocean Park Boulevard Suite 1040 Santa Monica, California 90405 United States of America und erklart sich mit der Umschreibung auf die Erwerberin einverstanden. and agrees that to the recordation of the assignment in the Patent Office. Ort/Datum: Place/Date: Unterschrift der Abtretenden / Signature of the Assignor ________________________________________________________ - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -13- Bitte den Namen des Unterzeichners mit Schreibmaschine wiederholen. Bei juristischen Personen ist die Stellung des Unterschriftsberechtigten innerhalb der Gesellschaft anzugeben. Please type name under signature. In case of legal persons the official capacity of the signer within the company has to be indicated, e.g. "President", "Director", "Company Secretary") -14- Exhibit A-7 ----------- ASSIGNMENT ---------- THIS ASSIGNMENT made the __ day of April 2001 BETWEEN ESTAMP CORPORATION, of 2051 Stierlin Court, Mountain View, California 94043, United States of America, (hereinafter called ESTAMP) and STAMPS.COM INC., of 3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405, United States of America, (hereinafter called STAMPS.COM). WHEREAS: 1. [***]* --- 2. ESTAMP is the registered proprietor of British Patents Nos. 2300151; 2316362; 2043298; 2049990; and 2049989; 3. STAMPS.COM is desirous of acquiring the said British Patent Application and the said British Patents from ESTAMP; and 4. ESTAMP is agreeable to assigning the said British Patent Application and the said British Patents to STAMPS.COM. NOW THEREFORE THIS ASSIGNMENT WITNESSETH THAT for good and valuable consideration paid to ESTAMP by STAMPS.COM, the receipt and adequacy of which is hereby acknowledged, ESTAMP does hereby assign and transfer unto STAMPS.COM all their entire right title and interest in and to [***]* aforesaid and any and all --- patents granted thereon and in and to British Patents Nos. 2300151, 2316362, 2043298, 2049990, and 2049989 aforesaid and all rights of action powers and benefits therein belonging or accrued, including the right to sue for past infringement, TO BE HELD by STAMPS.COM absolutely. IN WITNESS WHEREOF the parties hereto have executed these presents the day and date hereinabove written. ESTAMP Corporation STAMPS.COM Inc. by: ......................... by: ......................... President/Chief Executive President/Chief Executive - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -15- Exhibit A-8 ----------- JAPANESE PATENT ASSIGNMENT -------------------------- Japanese Patent Application Nos.: [***]* --- [***]* --- [***]* --- To all whom it may concern: Be it known that we have assigned the right to obtain patent in the above identified applications. Dated this ___day of April, 2001 Assignor: ESTAMP CORPORATION 2051 Stierlin Court Mountain View, California 94043 United States of America __________________________________________ Sign ( ) Type Assignee: STAMPS.COM INC. 3420 Ocean Park Boulevard Suite 1040 Santa Monica, California 90405 United States of America __________________________________________ Sign ( ) Type - ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -16- Exhibit A-9 ----------- MEXICAN PATENT ASSIGNMENT -------------------------
CESION DE DERECHOS ASSIGNMENT OF RIGHTS Sepan todos por la presente que Be it known by all those present that: ESTAMP CORPORATION domiciliado(s) en: whose address is at: 2051 Stierlin Court Mountain View, California 94043 United States of America de nacionalidad a company incorporated under the laws of the state of Delaware in the United States of America declara(n) que cede(n), vende(n), traspasa(n) en declare(s) that assign(s), sell(s) and transfer(s) toda propiedad y dominio a: in whole ownership and dominion to: STAMPS.COM INC. Domiciliada en: whose address is at: 3420 Ocean Park Boulevard Suite 1040 Santa Monica, California 90405 United States of America por la cantidad de $ moneda mexicana, la for the amount of $ ____________ arriba referida, asi como todos los Mexican currency, [***]* referred to, as well as derechos que a ella correspondan, sin excepcion all the rights there of without any exception at alguna, pudiendo por consiguiente desde hoy all, so that consequently, as of today he (they) considerarse como duena de ella explotarla y can be considered as the sole owner(s) of the same disponer de la misma como mejor conviniere a sus to exploit and dispose of it as deemed best to his intereses, sin que pudiera haber reclamo interests without being entitled to subsequently ulterior de su parte, en ninguna forma ni en filing any claim on his (their) part in no way ningun momento. whatsoever nor at any time. Por su parte, la cesionaria acepta la On his part, the assignee accepts the Assignment transferencia de derechos que se hacen a su of the rights which is made in his favor and favor y por la presente nombra, como sus hereby appoints his Attorneys, __________________, apoderados a los Sres____________________, para so that they can jointly or separately and in his que conjunta o separadamente, y en su nombre y name and behalf, carry on all the necessary representacion, gestionen ante las Autoridades procedures before the acting Mexican Authorities Mexicanas correspondientes el registro de la for the corresponding recording of the ASSIGNMENT TRANSMISION DE DERECHOS correspondiente, y la OF RIGHTS and in order to obtain the corresponding comunicacion respectiva. resolution. Firmado lo anterior en: Signed in (date and place): CESIONARIA (Assignee) CEDENTE (Assignor(s)) -------------------------------- --------------------------------
- ------------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -17- Testigos (Witnesses) ------------------------- -------------------------- The signatures of the assignor and the assignee must be notarized with an apostille. Please include names and domiciles of witnesses under their signatures -18- Exhibit A-10 ------------ [***]* - ----------------- * Confidential treatment has been requested for the bracketed portion. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission. -19- EX-99.32 3 dex9932.txt PRESS RELEASE DATED APRIL 30, 2001 EXHIBIT 99.32 Press Release STAMPS.COM ACQUIRES E-STAMP NAME, PATENTS Stamps.com Acquires Internet-Based Postage Assets and Intellectual Property of Former Competitor SANTA MONICA, Calif., April 30 -- Stamps.com, the leading provider of Internet- based postage and shipping services, announced today that it has acquired a broad set of patents and other intellectual property rights from E-Stamp Corporation, including the E-Stamp name and E-Stamp.com Internet domain. The portfolio of 31 patents and trademarks largely relate to Internet-based postage printing and management, and are part of a broader strategy by Stamps.com to solidify its leadership in mailing and shipping services within the small business and home office markets. "These acquisitions significantly enhance our position in the rapidly growing Internet postage and shipping areas," said Stamps.com Chief Executive Officer Bruce Coleman. "Combined with our existing intellectual property assets, the E- stamp patents and trademarks provide us with a technology portfolio and brand recognition that places the company solidly at the forefront of Internet postage providers." Once a Stamps.com competitor, E-Stamp Corporation announced in November, 2000 that it would exit the Internet-based postage industry to focus on shipping and logistics. Stamps.com plans to use the E-Stamp assets to expand the services available to its customer base and target market of 10 million small business and home offices in the United States. About Stamps.com Stamps.com (Nasdaq: STMP) is the leading provider of Internet-based mailing and shipping services. Its flagship product, Stamps.com Internet Postage(TM), enables customers to print U.S. Postal Service-approved postage via a computer and Internet connection. The company's iShip(TM) service is an Internet-based multi-carrier shipping solution that permits users to manage shipments more efficiently and cost effectively than traditional paper or electronic single carrier systems. Based in Santa Monica, California, Stamps.com serves more than 300,000 customers. For more information contact Kathleen Brush at email: kbrush@stamps.com, tel: (310) 581-7275, or on the web at www.stamps.com. ### "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release may contain forward-looking statements that involve risks and uncertainties. Important factors, including the company's ability to achieve profitability, which could cause actual results to differ materially from those in the forward-looking statements, are detailed in filings with the Securities and Exchange Commission made from time to time by Stamps.com, including its annual report on form 10-K for the fiscal year ended December 31, 2000, and its Current Reports on Form 8-K. Stamps.com undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Stamps.com, E-Stamp, iShip, and the Stamps.com, E-Stamp, and iShip logos are trademarks of Stamps.com Inc. All other brands and names are property of their respective owners. -----END PRIVACY-ENHANCED MESSAGE-----