UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
STAMPS.COM INC.
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(Name of Registrant as Specified In Its Charter)
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[LOGO] STAMPS.COM
Dear Stockholder:
You are cordially invited to attend the 2002 annual meeting of stockholders
of Stamps.com Inc. to be held beginning at 10:00 a.m. Pacific Daylight Saving
Time on Wednesday, June 26, 2002, at the Doubletree Guest Suites, 1707 Fourth
Street, Santa Monica, California 90401.
Your vote at the Annual Meeting is important to us. At the annual meeting,
you will be asked to elect two directors and ratify the selection of our
auditors for 2002. The accompanying notice of 2002 annual meeting of
stockholders and proxy statement describe the matters to be presented at the
annual meeting. These proxy solicitation materials were mailed on or about May
21, 2002 to all stockholders entitled to vote at the Annual Meeting.
The board of directors unanimously recommends that stockholders vote in
favor of the election of the nominated directors and the ratification of our
auditors.
Whether or not you plan to attend the annual meeting, please mark, sign,
date and return your proxy card in the enclosed envelope as soon as possible.
Your stock will be voted in accordance with the instructions you have given in
your proxy card. You may attend the annual meeting and vote in person even if
you have previously returned your proxy card.
Sincerely,
/S/ KEN MCBRIDE
Ken McBride
Chief Executive Officer
[LOGO] STAMPS.COM
3420 Ocean Park Boulevard, Suite 1040
Santa Monica, CA 90405
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 2002
TO THE STOCKHOLDERS OF STAMPS.COM INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Stamps.com
Inc., a Delaware corporation will be held on June 26, 2002, beginning at 10:00
a.m. Pacific Daylight Saving Time at the Doubletree Guest Suites, 1707 Fourth
Street, Santa Monica, California 90401, for the following purposes:
1. To elect two directors to serve for a three-year term ending in the year
2005 or until their successors are duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent auditors
of the Company for the fiscal year ending December 31, 2002; and
3. To transact other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The foregoing matters are described in more detail in the enclosed proxy
statement. The board of directors has fixed the close of business on May 1,
2002 as the record date for the determination of our stockholders entitled to
notice of, and to vote at, the annual meeting and any postponement or
adjournment of the meeting. Only those stockholders of record as of the close
of business on that date are entitled to notice of and to vote at the annual
meeting. Our stock transfer books will remain open between the record date and
the date of the meeting. A list of stockholders entitled to vote at the annual
meeting will be available for inspection at our executive offices.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to assure that
all your shares will be voted. You may revoke your proxy at any time before the
annual meeting. If you attend the annual meeting and vote by ballot, your proxy
will be revoked automatically and only your vote at the annual meeting will be
counted.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ SETH WEISBERG
Seth Weisberg
General Counsel
and Secretary
Santa Monica, California
May 16, 2002
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 2002
GENERAL INFORMATION ABOUT VOTING
General
The enclosed proxy is solicited on behalf of the board of directors of
Stamps.com Inc., for use at the annual meeting of stockholders to be held on
June 26, 2002. The Annual Meeting will begin at 10:00 a.m. Pacific Daylight
Saving Time at the Doubletree Guest Suites, 1707 Fourth Street, Santa Monica,
California 90401.
Voting
On April 24, 2002, 50,934,056 shares of our common stock were issued and
outstanding. As of that date we had no outstanding preferred stock. Each share
of common stock is entitled to one vote at the annual meeting.
The nominees for election to our board of directors who receive the greatest
number of votes cast for the election of directors by the shares present at the
annual meeting, in person or by proxy, will be elected directors. You may not
cumulate votes in the election of directors. The adoption of the proposal to
ratify the appointment of our independent auditors requires the affirmative
vote of a majority of shares present at the annual meeting, in person or by
proxy.
A majority of the outstanding shares of our common stock present in person
or represented by proxy constitutes a quorum for the transaction of business at
the annual meeting. All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes. Abstentions and broker
non-votes are counted as present for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions will be
counted towards the tabulations of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes, whereas broker
non-votes will not be counted for purposes of determining whether a proposal
has been approved. In the election of directors, an abstention or broker
non-vote will have no effect on the outcome.
Proxies
If you properly sign and return the enclosed form of proxy, your shares
represented will be voted at the annual meeting in accordance with your
instructions specified. If you do not specify how your shares are to be voted,
your share will be voted FOR the election of the directors proposed by the
board unless the authority to vote for the election of that director is
withheld and, if no contrary instructions are given, the proxy will be voted
FOR the ratification of our independent accountants. You may revoke or change
your proxy at any time before the annual meeting by filing with your Secretary
at 3420 Ocean Park Blvd., Suite 1040, Santa Monica, California 90405, a notice
of revocation or another signed proxy with a later date. You may also revoke
your proxy by attending the annual meeting and voting in person.
Solicitation
We will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this proxy statement, the proxy and any
additional solicitation materials furnished to our stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, we may reimburse such persons for their costs in forwarding the
solicitation materials to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by a solicitation by telephone, telegram or
other means by our directors, officers or employees. No additional compensation
will be paid to these individuals for soliciting. Except as described above, we
do not presently intend to solicit proxies other than by mail.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders that are intended to be presented by such
stockholders at our 2003 annual meeting must be received no later than January
12, 2003, in order that they may be included in the proxy statement and form of
proxy relating to that meeting. In addition, the proxy solicited by our board
of directors for the 2003 annual meeting will confer discretionary authority to
vote on any stockholder proposal presented at that meeting, unless the Company
receives notice of the proposal not later than April 9, 2003.
2
MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE: ELECTION OF DIRECTORS
General
Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors with staggered three-year
terms, with each class consisting, as nearly as possible, of one-third of the
total number of directors. Our board currently consists of five members.
The five member Board is currently divided into two Class I directors, one
Class II director and two Class III directors. On September 5, 2002, the Board
appointed Ken McBride as a director to fill the vacancy created by the
resignation of Bruce Coleman in August 2001. On April 18, 2002, the Board
designated Mr. McBride as a Class III director and appointed Lloyd I. Miller as
a Class I director.
The class whose term of office expires at the annual meeting currently
consists of two directors. Each director elected to this class will serve for a
term of three years, expiring at the 2005 annual meeting of stockholders or
until his successor has been duly elected and qualified. The nominees listed
below are currently directors of the Company.
The nominees for election have agreed to serve if elected, and management
has no reason to believe that the nominees will be unavailable to serve. If a
nominee is unable or declines to serve as a director at the time of the annual
meeting, the proxies will be voted for any substitute nominee who may be
designated by our board of directors to fill the vacancy.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the nominees named below.
Set forth below is certain information concerning the nominees and the other
incumbent directors:
Nominees for Term Ending Upon the 2005 Annual Meeting
Jeffrey J. Brown, 41, has been a Director since February 1998. In June 1993,
Mr. Brown founded and, since that time, he has been a director, executive
officer and shareholder of Forrest Binkley & Brown Venture Co., the general
partner of Forrest Binkley & Brown L.P., and the Managing Partner of SBIC
Partners. Mr. Brown is also a founder, director, executive officer and
shareholder of Forrest Binkley & Brown Venture Advisor Co., an affiliate of
SBIC Partners. From 1987 to 1992, Mr. Brown served in various executive
capacities at Security Pacific Venture Capital Group. From April 1992 until
June 1993, Mr. Brown acted as Senior Vice President of BankAmerica Venture
Capital Group. Mr. Brown is Chairman of the Board of Golden State Vintners,
Inc., a supplier of premium bulk wines and wine processing services, and serves
on the boards of a number of private companies. Mr. Brown received his B.S. in
Mathematics from Willamette University and his M.B.A. from Stanford University.
Kenneth McBride, 34, was appointed as our chief executive officer and to the
board of directors on September 5, 2001, to fill the vacancy created by the
resignation of Bruce Coleman. Mr. McBride has also served as our chief
financial officer since October 2000, and prior to his appointment as chief
financial officer was our Senior Director of Finance from April 1999. From 1997
to 1999, Mr. McBride served as a research analyst at Salomon Smith Barney,
where he focused on the computer hardware and technical software industries.
From 1992 to 1995 Mr. McBride was a data communications engineer with Micro
Linear Corporation. Mr. McBride received his B.S. and M.S. in Electrical
Engineering and his M.B.A. from Stanford University.
Continuing Directors Whose Terms Expire in 2003
G. Bradford Jones, 47, has been a Director since October 1998. Mr. Jones is
currently a General Partner at Brentwood Venture Capital, which he joined in
1981, and a Managing Director of Redpoint Ventures, a firm he co-founded in
October 1999. Mr. Jones also currently serves on the board of directors of Onyx
Acceptance
3
Corporation, a specialized consumer finance company, Digital Island, an
Internet content management and distribution company, and several
privately-held companies. Mr. Jones received his B.A. in Chemistry from Harvard
University, his M.A. in Physics from Harvard University and his J.D./M.B.A.
from Stanford University.
Lloyd I. Miller, 47, has been a Director since April 2002. Mr. Miller is an
independent investor and has served on numerous corporate boards including
Vulcan International, and American Controlled Industries, among others. Mr.
Miller currently serves as a director of Advantica Restaurant Group,
Spartanburg, SC., Aldila, Inc., Poway, CA, and Anacomp, Inc., Poway, CA. He is
a member of the Chicago Board of Trade and the Chicago Stock Exchange, and
traded actively on the floor of the CBOT from 1977 to 1992. He is a Registered
Investment Advisor. Mr. Miller received his B.A. from Brown University.
Continuing Directors Whose Terms Expire in 2004
Mohan P. Ananda, 56, has been a director since January 1998. Mr. Ananda is a
founder and currently serves as the chief executive officer and chairman of the
board of AmazingHitz.com, Inc., an Internet-based entertainment company. From
January 1997 to October 1998, Mr. Ananda served as our chief executive officer.
From June 1986 to December 1996, Mr. Ananda was a partner of Ananda & Krause, a
law firm. Mr. Ananda also serves on the Board of Directors of JAB Holdings Ltd.
and several privately-held companies. Mr. Ananda received his B.S. in
Mechanical Engineering from Coimbature Institute of Technology in India, his
M.S. in Aeronautics from the California Institute of Technology, his Ph.D. in
Astrodynamics and Control from UCLA, and his J.D. from the University of West
Los Angeles.
Board Committees and Meetings
Our board of directors held ten meetings and acted by unanimous written
consent on four separate occasions during the fiscal year ended December 31,
2001. Each director attended or participated in 75% or more of the aggregate of
(a) the total number of meetings of our board of directors and (b) the total
number of meetings held by all committees of our board on which such director
served during the fiscal year ended December 31, 2001. Our board of directors
has an audit committee, a compensation committee and an executive committee.
Audit Committee. Our audit committee currently consists of three directors,
Messrs. Brown, Jones and Miller, and is primarily responsible for approving the
services performed by our independent auditors and reviewing their reports
regarding our accounting practices and systems of internal accounting controls.
Our audit committee held one meeting during the fiscal year ended December 31,
2001.
The Board adopted and approved a charter for our Audit Committee in June
2000. Our board has determined that all members of the Audit Committee are
"independent" as that term is defined in Rule 4200 of the listings standards of
the National Association of Securities Dealers.
Compensation Committee. Our compensation committee consisted of three
directors, Messrs. Brown, Jones and Ananda until April 2002. Our compensation
committee is primarily responsible for reviewing and approving our general
compensation policies and setting compensation levels for our executive
officers. Our compensation committee also has the authority to administer our
employee stock purchase plan and our stock incentive plan and to make option
grants under our stock incentive plan. Our compensation committee held one
meeting and acted by unanimous written consent on eight separate occasions
during the fiscal year ended December 31, 2001. In April 2002, Mr. Jones
resigned from our compensation committee and was replaced by Mr. Miller.
Executive Committee. Our executive committee had the authority to take all
actions that can be taken by the board, except for the approval of any actions
that also require approval of our stockholders or any amendment to our bylaws.
As of January 1, 2002, our executive committee is no longer active. Our
executive committee held no meetings during the fiscal year ended December 31,
2001.
4
Compensation Committee Interlocks and Insider Participation. During the
fiscal year ended December 31, 2001, the compensation committee consisted of
three directors, Messrs. Brown, Jones and Ananda. Neither Messrs. Brown or
Jones was one of our officers or employees at any time during the fiscal year
ended December 31, 2001 or at any other time. From January 1997 to October
1998, Mr. Ananda served as the Company's Chief Executive Officer. None of our
current executive officers has ever served as a member of the board of
directors or compensation committee of any other entity that has or has had one
or more executive officers serving as a member of our board of directors or
compensation committee.
Director Compensation
As of December 6, 2001, each non-employee director receives $1,000 for each
board meeting attended in person and $500 for each board meeting attended
telephonically. Prior to December 6, 2001, directors received no cash
compensation for serving on our board of directors or on any board committee.
Directors are reimbursed for all reasonable expenses incurred by them in
attending Board and Committee meetings. In addition, directors who are also
employees are eligible to receive options and be issued shares of common stock
directly under our stock incentive plan.
Under the automatic option grant program in effect under our stock incentive
plan, each individual who joined our board as a non-employee director at any
time after June 24, 1999 received or will receive, at the time of their initial
election or appointment, an automatic option grant, to purchase 10,000 shares
of our common stock, so long as that person has not previously been one of our
employees. In addition, on the date of each annual stockholders meeting,
beginning with the 2002 annual meeting, each individual who is to continue to
serve as a non-employee board member, whether or not that individual is
standing for re-election at that particular annual meeting, will be granted an
option to purchase 10,000 shares of our common stock. Each grant under our
automatic option grant program will have an exercise price per share equal to
the fair market value per share of our common stock on the grant date, and will
have a maximum term of ten years, subject to earlier termination should
optionee cease to serve as a directors.
All directors except for Mr. McBride received automatic option grants on
June 14, 2001 for 2,500 shares each of our common stock at an exercise price
per share of $3.05, the fair market value per share of our common stock on the
grant date. Each option is immediately exercisable for all the option shares,
but any shares purchased under the option will be subject to our right to
repurchase, at the exercise price paid per share, upon the optionee's cessation
of board service prior to vesting in those shares. The shares subject to each
option grant will vest in a series of thirty-six successive equal monthly
installments upon the optionee's completion of each successive thirty-six month
period of board service over the thirty-six month period measured from the
grant date.
Grants to directors in the year ending December 31, 2001 for services
provided as directors:
Grant Number Option
Director Date of Options Price
-------- -------- ---------- -------
Mohan Ananda.... 06/14/01 2,500 $3.0500
Jeffrey Brown... 06/14/01 2,500 $3.0500
Bradford Jones.. 06/14/01 2,500 $3.0500
Vote Required
Directors are elected by a plurality of the votes of the shares present at
the annual meeting in person or represented by proxy and entitled to vote on
the election of directors.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote "FOR" the
election of the nominees listed above.
5
PROPOSAL TWO: RATIFICATION OF INDEPENDENT AUDITORS
General
Our board of directors has appointed the firm of Arthur Andersen LLP, our
independent auditors during the fiscal year ended December 31, 2001, to serve
in the same capacity for the year ending December 31, 2002, and is asking you
to ratify this appointment. Stockholder ratification of the appointment is not
required by our bylaws or by any other applicable legal requirement. However,
our board of directors is submitting the appointment of Arthur Andersen LLP to
you for ratification as a matter of good corporate practice.
If you fail to ratify the appointment, our audit committee and our board of
directors will reconsider whether or not to retain Arthur Andersen LLP. Even if
the appointment is ratified, our board of directors in its discretion may
direct the appointment of a different independent auditing firm at any time
during the year if our board of directors believes that such a change would be
in the best interests of our company and our stockholders.
A representative of Arthur Andersen LLP is expected to be present at the
annual meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
Unless marked to the contrary, proxies received will be voted FOR
ratification of the appointment of Arthur Andersen LLP as the independent
auditors for the current year.
Fees Billed to the Company by Arthur Andersen LLP during Fiscal Year 2001
During the fiscal year ended December 31, 2001, Arthur Andersen LLP provided
various audit, audit related and non-audit services to the Company as follows:
Audit Fees
Aggregate fees billed to us by Arthur Andersen LLP for professional services
rendered for the audit of our annual financial statements, and review of
financial statements included in our company's quarterly reports on Form 10-Q,
for the fiscal year ended December 31, 2001 totaled approximately $110,000.
All Other Fees
Fees billed to us by Arthur Andersen LLP for all other non-audit
professional services rendered to us during the fiscal year ended December 31,
2001 totaled approximately $75,000 for tax return preparation and consulting.
Determination of Independence
Our audit committee and board of directors have determined that the fees
received by Arthur Andersen LLP for the non-audit related professional services
listed above are compatible with maintaining Arthur Andersen LLP's independence.
Vote Required
The ratification of the appointment of Arthur Andersen LLP as our
independent auditors for the fiscal year ending December 31, 2002 requires the
affirmative vote of the holders of a majority of the shares of common stock
present at the annual meeting in person or by proxy and entitled to vote.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote "FOR" the
ratification of the appointment of Arthur Andersen LLP to serve as the
Company's independent auditors for the fiscal year ending December 31, 2002.
6
OTHER MATTERS
We know of no other matters that will be presented for consideration at the
annual meeting. If any other matters properly come before the annual meeting,
it is the intention of the persons named in the enclosed form of proxy to vote
the shares they represent as the board of directors may recommend.
Discretionary authority with respect to other matters is granted by the
execution of the enclosed proxy, unless you specifically withhold that power.
7
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding our executive
officers and directors as of March 31, 2002:
Name Age Position
---- --- --------
Kyle Huebner........... 31 Vice President, Marketing and Strategy
Kenneth McBride........ 34 Chief Executive Officer and Director
Craig Ogg.............. 36 Vice President, Development
Richard Wetherill...... 46 Vice President, Operations
Seth Weisberg.......... 33 Vice President, General Counsel and Secretary
Mohan P. Ananda (2).... 56 Director
Jeffrey J. Brown (1)(2) 41 Director
G. Bradford Jones (1).. 47 Director
Lloyd I. Miller (1)(2). 47 Director
--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Ken McBride. See "Proposal No. 1: Election of Directors" for Mr. McBride's
biography.
Kyle Huebner. Mr. Huebner has been Vice President of Marketing and Strategy
since October 2001. Mr. Huebner was Vice President of Corporate Strategy and
Development from January 2000 to October 2001, and was Senior Director of
Corporate Strategy and Development from January 1999 to 2000. Prior to joining
the Company, from 1996 to 1999, Mr. Huebner was a consultant at Bain & Co., a
management consulting firm. From 1992 to 1995, Mr. Huebner served as a Research
Analyst for J.P. Morgan, Inc. Prior to 1992, Mr. Huebner held various
management positions with Melville Corporation. Mr. Huebner received his B.A.
in Mathematics from Dartmouth College and his M.B.A. from Harvard University.
Craig Ogg. Mr. Ogg has been Vice President of Development since February
2001, Chief Technologist since December 1999, and the Architect of the
Company's printing technology since September 1998. Mr. Ogg served as the
Senior Architect and Development Manager of the Oil Change Internet Service at
Cybermedia from 1997 to 1998. From March 1997 to June 1997, Mr. Ogg served as
Director of Engineering of PeopleLink, Inc., a software company. From December
1994 to March 1997, Mr. Ogg co-founded Spinoza Limited, a development tools
software company.
Seth Weisberg. Mr. Weisberg has been General Counsel since March 2001, and
intellectual property counsel since March 1999. Mr. Weisberg was an associate
at the law firm of Irell & Manella LLP from 1997 to 1999. Mr. Weisberg holds a
law degree from Columbia Law School, a master's degree in History from Harvard,
a bachelor's degree in Physics and Astronomy from Harvard and a General Course
Certificate from the London School of Economics.
Richard Wetherill. Mr. Wetherill has been Vice President of Operations
since June 2001. Prior to joining the Company, from 1998 to 2001, Mr. Wetherill
was a financial advisor with Prudential Securities. Mr. Wetherill served as
Vice President of MMG Direct, a marketing company from 1997 to 1998. From 1995
to 1997, Mr. Wetherill served as Director of Customer Care for Canon Computer
Systems, Inc., a subsidiary of Canon U.S.A. Mr. Wetherill received his B.S. in
Biology from the Virginia Military Institute and his M.B.A. from the University
of Phoenix.
Mohan P. Ananda. See "Proposal No. 1: Election of Directors" for Mr.
Ananda's biography.
8
Jeffrey J. Brown. See "Proposal No. 1: Election of Directors" for Mr.
Brown's biography.
G. Bradford Jones. See "Proposal No. 1: Election of Directors" for Mr.
Jones' biography.
Lloyd I. Miller. See "Proposal No. 1: Election of Directors" for Mr.
Miller's biography.
9
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Summary of Cash and Certain Other Compensation
The following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended December 31, 2001, December
31, 2000, and December 31, 1999, respectively, by our chief executive officers
and each of our other four highest compensated executive officers (determined
on the basis of their salary and bonus for the fiscal year ended December 31,
2001) whose total compensation exceeded or would have exceeded $100,000 during
2001 had those officers provided services to us for the entire fiscal year. The
listed individuals are referred to in this proxy statement as the named
executive officers.
Summary Compensation Table for Fiscal Years 2001, 2000, and 1999
Annual Long Term
Compensation (1) Compensation
------------------ ------------
Securities
Underlying All Other
Name and Principal Positions Year Salary($) Bonus($) Options (#) Compensation($)
---------------------------- ---- --------- -------- ------------ ---------------
Bruce Coleman (2).............................. 2001 300,192 -- 425,000 --
Chief Executive Officer 2000 78,077 -- --
(October 2000 to August 2001) 1999 -- -- --
David Duckwitz (3)............................. 2001 33,434 146,833 115,646(4)(5)
SVP and GM, Enterprise Business Unit 2000 143,750 190,000 -- 2,013(5)
(April 2000 to February 2001) 1999 -- -- --
Ken McBride.................................... 2001 187,763 63,541 40,000 1,518(5)
Chief Executive Officer 2000 125,992 40,000 1,634(5)
(April 1999 to present) 1999 71,696 -- 1,075(5)
Rick Wetherill................................. 2001 180,294 60,900 80,000 3,958(5)
Vice President, Operations 2000 99,417 25,000 1,378(5)
(June 2000 to present) 1999 -- -- --
Seth Weisberg.................................. 2001 178,788 52,500 60,000 1,442(5)
Vice President, General Counsel, and Secretary 2000 136,832 10,000 2,250(5)
(June 1999 to present) 1999 52,777 5,000 867(5)
Kyle Huebner................................... 2001 154,678 70,891 40,000 354(5)
Vice President, Marketing and Strategy 2000 141,250 75,000 2,929(5)
(January 1999 to present) 1999 87,041 -- 796(5)
Craig Ogg...................................... 2001 156,794 35,000 65,000 3,567(5)
Vice President, Research and Development 2000 135,220 -- 1,102(5)
(September 1998 to present) 1999 112,969 -- 1,695(5)
--------
(1) Excludes other compensation in the form of perquisites and other personal
benefits that constitute the lesser of $50,000 or 10% of the total annual
salary and bonus of each of the named executive officers.
(2) Mr. Coleman's employment ended in August 2001. His annualized salary for
2001 was $420,000.
(3) Mr. Duckwitz's employment ended in February 2001. His annualized salary for
2001 was $230,000.
(4) Includes payments made to Mr. Duckwitz in connection with his departure.
(5) Includes contributions to our 401(k) plan that we made on behalf of the
named executive officer to match a portion of his elective deferred
contributions to the plan.
10
Stock Options and Stock Appreciation Rights
The following table sets forth information regarding option grants to each
of the named executive officers during the fiscal year ended December 31, 2001.
All the grants were made under our 1999 stock incentive plan. During the fiscal
year ended December 31, 2001, we granted options to purchase 1,557,434 shares
of our common stock. All options were granted at an exercise price equal to the
fair market value of our common stock as determined by our board of directors
on the date of grant that is based on the closing price on the Nasdaq National
Market of our common stock on the date of grant. The exercise price may be paid
in cash, check, promissory note, shares of our common stock valued at fair
market value on the exercise date or a cashless exercise procedure involving a
same-day sale of the purchased shares. The following table indicates
information regarding options to purchase common stock granted to our named
executive officers. No stock appreciation rights were granted to the named
executive officers during the fiscal year ended December 31, 2001.
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Securities % of Total Exercise or Options Term at
Underlying Options/SARs Base Price Expiration --------------------
Name Options (#) Granted to ($/Share)(2) Date 5%($) 10%($)
---- ----------- Employee in ------------ ---------- ------- -------
Bruce Coleman. 200,000 12.84% 2.4063 3/29/11 505,323 529,386
David Duckwitz -- 0.00% -- N/A -- --
Ken McBride... 40,000 2.57% 2.4063 3/29/11 101,065 105,877
Rick Wetherill 80,000 5.14% 2.4063 3/29/11 202,129 211,754
Seth Weisberg. 60,000 3.85% 2.4063 3/29/11 151,597 158,816
Kyle Huebner.. 40,000 2.57% 2.4063 3/29/11 101,065 105,877
Craig Ogg..... 65,000 4.17% 2.4063 3/29/11 164,230 172,050
Potential realizable values are net of exercise price, but before the
payment of taxes associated with exercise. Amounts represent hypothetical gains
that could be achieved for the respective options if exercised at the end of
the option term. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission
and do not represent our estimate or projection of our future common stock
prices. There can be no assurance provided to any executive officer or other
holder of the Company's securities that the actual stock price appreciation
over the ten-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of our common stock
appreciates over the option term, no value will be realized from those option
grants that were made with an exercise price equal to the fair market value of
the option shares on the grant date.
The exercise price may be paid in cash or in shares of our common stock
valued at fair market value on the exercise date. Alternatively, the option may
be exercised through a cashless exercise procedure pursuant to which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to us, out of the sale proceeds, an amount equal
to the exercise price plus all applicable withholding taxes. Our compensation
committee may also assist an optionee in the exercise of an option by (i)
authorizing a loan from us in a principal amount not to exceed the aggregate
exercise price plus any tax liability incurred in connection with the exercise
or (ii) permitting the optionee to pay the option price in installments over a
period of years upon terms established by our compensation committee.
Certain option grants will become exercisable for 25% of the shares upon the
optionee's completion of one year of service measured from the grant date and
will become exercisable for the balance of the shares in 36 successive equal
monthly installments. These options will become exercisable on an accelerated
basis upon the optionee's involuntary termination within 18 months following a
change in control. Certain other option grants are immediately exercisable in
full, but we can buy back any shares purchased under those options, at the
exercise price paid per share, to the extent the shares are not vested when the
optionee leaves our employment. In general, this repurchase right lapses as to
25% of the shares after one year of service and as to the remaining
11
shares in equal monthly installments over an additional three-year period. The
repurchase right also will lapse on an accelerated basis upon the optionee's
involuntary termination within 18 months following a change in control.
Aggregated Option Exercises and Year-End Option Values
The following table provides information, with respect to the officers named
in the Summary Compensation Table, concerning the exercise of options during
the fiscal year ended December 31, 2001 and unexercised options held by them as
of the end of that fiscal year.
Number of Unexercised Value of Unexercised
Options/SARs in-the-Money Options/SARs
Shares at FY-End (#) at FY-End ($)
acquired on Value Realized ------------------------- ---------------------------------
Name exercise (#) ($)(1) Exercisable Unexercisable Exercisable (2) Unexercisable (2)
---- ------------ -------------- ----------- ------------- --------------- -----------------
Bruce Coleman. -- -- 425,000 -- 326,000.00 --
David Duckwitz -- -- -- -- -- --
Ken McBride... -- -- 88,180 48,820 60,824.53 42,453.47
Rick Wetherill -- -- 116,874 138,126 66,532.83 70,423.17
Seth Weisberg. -- -- 99,652 80,348 24,653.83 138,699.67
Kyle Huebner.. 31,875.00 10,624.99 40,582 79,293 52,053.50 52,816.50
Craig Ogg..... -- -- 69,523 73,835 132,048.65 102,006.53
--------
(1) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for those shares.
(2) Based upon the market price of $3.58 per share, determined on the basis of
the closing selling price per share of our common stock on the Nasdaq
National Market on the last day of the fiscal year ended December 31, 2001,
less the option exercise price payable per share.
12
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Bruce Coleman entered into a letter agreement with us, effective as of
October 25, 2000, to serve as our chief executive officer. Under the terms of
the letter agreement, Mr. Coleman received an annual base salary of $420,000
and was eligible to receive a reimbursement of reasonable living expenses
incurred for living in the Los Angeles area in connection with his employment,
and reasonable travel expenses for traveling to and from his residence in New
Mexico. In addition, Mr. Coleman was granted two stock options, one to purchase
100,000 shares of our common stock at an exercise price of $2.6563 per share
(the closing price on Nasdaq of the Company's common stock on Mr. Coleman's
start date) and another to purchase 25,000 shares of our common stock at an
exercise price of $10.00 per share. The stock options vested in six equal
monthly installments for as long as Mr. Coleman provided continuous service.
Kyle Huebner entered into a letter agreement with us, effective as of
January 13, 1999, to serve as Senior Director, Corporate Strategy. He was
subsequently promoted to Vice President, Corporate Strategy in January 2000 and
to Vice President, Marketing and Strategy in October 2001. In 2001, Mr. Huebner
received a base salary of $154,678 and a bonus of $70,891. Under the terms of
the letter agreement, Mr. Huebner was granted stock options to purchase 85,000
shares of our common stock at an exercise price per share equal to the fair
market value on each grant date. The stock options vest 25% on the one year
anniversary of each grant date, and the remaining shares vest monthly for the
following 36 months as long as Mr. Huebner is providing continuous service to
us. The vesting of Mr. Huebner's stock options will accelerate an additional
25% if he is constructively or involuntarily terminated without cause within 12
months after a change in control, if the acquiring company does not assume the
stock option.
John M. Payne previously entered into a letter agreement with us, effective
as of October 29, 1998, to serve as President and Chief Executive Officer. In
October 1999, Mr. Payne was appointed to the offices of Chairman of the Board
and Chief Executive Officer. In 2000, Mr. Payne received a base salary of
$300,000 and a bonus of $150,000. Under the terms of the letter agreement, Mr.
Payne purchased 1,500,000 shares of our common stock at $0.067 per share, the
fair market value on the purchase date, pursuant to a restricted common stock
purchase agreement under which the shares are subject to a right of repurchase
by us that lapses over a period of 48 months. Mr. Payne executed a four-year
promissory note with us in the amount of $99,000 to purchase the stock.
Mr. Payne resigned in October 2000, and from our board of directors in
December 2000. Under the terms of the letter agreement, Mr. Payne was entitled
to receive his monthly base salary plus benefits for nine months after the
termination of his employment, and he received such monthly payments until
February 2001. On December 20, 2000, Mr. Payne entered into a separation letter
agreement with us, that was subsequently amended on February 13, 2001, pursuant
to which Mr. Payne agreed to receive a lump sum payment of $120,807.37 in place
of the remaining monthly salary payments to which he was entitled. In addition,
Mr. Payne's restricted shares continued to vest at a rate of 31,250 shares per
month until June 30, 2001, at which time the Company repurchased all remaining
unvested shares at the original purchase price of $0.067 per share. In
connection with the payments under the separation letter agreement, Mr. Payne
agreed to release us from any further obligations to him and from any
liabilities related to his employment or resignation.
Also in connection with the separation letter agreement, we agreed to repay
on Mr. Payne's behalf a $6,523,690.36 balance due under Mr. Payne's margin
account with Salomon Smith Barney, and Mr. Payne agreed to enter into a
promissory note and security agreement to repay such amount plus interest to us
on or before June 30, 2001, subject to acceleration upon any change in control
or if Mr. Payne breaches any of the terms of his separation. Under the security
agreement, Mr. Payne pledged cash assets and securities, including his shares
of our common stock.
Loren E. Smith previously entered into a letter agreement with us, effective
as of October 20, 1999, to serve as President and Chief Operating Officer. The
letter agreement superseded a consulting agreement entered into
13
between Mr. Smith and the Company in February 1999. In 2000, Mr. Smith received
a base salary of $250,000. Under the terms of the letter agreement, Mr. Smith
was eligible to receive an annual bonus of not less than $100,000, and was
granted a stock option to purchase 300,000 shares of our common stock at an
exercise price of $35.625 per share, the fair market value on the grant date.
The stock option vested 12,500 shares per month beginning on October 20, 1999,
and was to continue to vest until the earlier of October 20, 2001 or the date
on which Mr. Smith's continued employment ended. In addition, under the terms
of the letter agreement, Mr. Smith was permitted to keep the stock options,
granted to him under the earlier consulting agreement, to purchase 135,000
shares of our common stock at an exercise price of $0.33 per share for
consulting services and 108,000 shares of our common stock at an exercise price
of $0.33 per share for services as a member of our board of directors. 45,000
shares of the consulting services stock option vested upon our initial public
offering and the achievement of a 250,000 customer base. The remaining shares
of the consulting services stock option vested ratably each month through
February 2002. The board services stock option vests ratably each month for 36
months starting from February 2000. In April 2002, when Mr. Smith and we agreed
that he would not be renominated, the remainder of his options were made fully
vested.
In September 2000, Mr. Smith resigned from his positions as our President
and Chief Operating Officer. On September 22, 2000, Mr. Smith entered into a
resignation letter agreement pursuant to which we agreed to pay Mr. Smith
$20,833.32 per month through March 31, 2001, including any accrued and unused
vacation time and unpaid reimbursable expenses, as well as a lump sum payment
of $66,000. We also agreed to pay for the shipment of Mr. Smith's personal
effects from California to New Mexico. In addition, Mr. Smith was permitted to
keep for his personal use the cell phone, laptop computer and Palm Pilot that
we provided to him, and was granted an additional stock option to purchase
2,500 shares of our common stock at an exercise price of $3.84 per share (the
closing price of our common stock on Nasdaq on September 29, 2000) that is
exercisable until such time as Mr. Smith ceases to be a member of our board of
directors. In connection with these payments, Mr. Smith agreed to release us
from any further obligations to him and from any liabilities related to his
employment or resignation. The terms of the consulting services and board
services stock options granted to Mr. Smith under the consulting agreement were
not modified by the resignation letter agreement, but the vesting of the
300,000 share stock option grant to Mr. Smith ceased as of September 30, 2000
and Mr. Smith's right to exercise the vested portion of that stock option
terminated on November 30, 2000.
During 2001, we entered into severance agreements with a number of our
officers. These agreements provide for the lump sum payment of six months of
salary if (a) the officer is terminated for any reason other than his failure
to continue to substantially perform his duties or (b) following a change of
control, the officer is either involuntarily terminated or terminates his
employment, for any reason, between 2 months and 9 months following the change
of control.
During 2001, we also adopted a bonus plan for a number of our officers,
including all of our then serving named executive officers. These officers were
not eligible for the continuous service bonus plan we adopted in connection
with our reductions in force. The plan provided the officer with the option to
elect to receive cash payments or stock options at fair market value upon
completion of certain milestones. Our board of directors is continually
evaluating various strategic alternatives. Benefits under this plan would
accrue if specified transactions were completed. A different level of benefits
would also be payable under this plan if the management team was unable to
complete a transaction and other alternatives were pursued. The maximum cash
payment to Ken McBride under this plan would be $100,000. The maximum cash
payment to the remaining executives in aggregate under the plan would be
$195,000.
All of our named executive officers have executed and delivered a copy of
our confidential information and invention assignment agreement in connection
with their employment.
In April 1999, we amended our 1998 stock plan to adopt a change in control
provision. As a result of this provision, should any optionee have his or her
service involuntarily terminated within 18 months following a change in control
in which his or her options are assumed by the successor corporation and do not
otherwise
14
accelerate at that time, then those options will accelerate and become fully
exercisable for all of the option shares as fully-vested shares of common stock
upon an involuntary termination. A "change in control" under the 1998 stock
plan is defined as a merger or consolidation in which securities possessing
more than 50% of the total combined voting power of our outstanding securities
are transferred to a person or persons different from those who held those
securities immediately prior to the transaction, or the sale, transfer or other
disposition of all or substantially all of our assets in complete liquidation
or dissolution. "Involuntary Termination" is defined under the 1998 stock plan
as the optionee's involuntary dismissal or discharge by us for reasons other
than misconduct, or the optionee's voluntary resignation following:
. a change in his or her position with us which materially reduces his or
her responsibilities;
. a reduction in his or her level of compensation by more than 15%; or
. a relocation of the optionee's place of employment by more than 50 miles,
and this change, reduction or relocation is effected by us without the
optionee's consent.
Our 1999 stock incentive plan is a successor plan to our 1998 stock plan,
and includes change in control provisions which may result in the accelerated
vesting of outstanding option grants and stock issuances.
15
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of our common stock as of March 31, 2002,
by (a) all persons who are beneficial owners of 5% or more of our common stock,
(ii) each director and nominee for director, (iii) the named executive officers
and (iv) all current directors and executive officers as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws, where applicable. Unless otherwise indicated, the address of
each beneficial owner listed below is c/o Corporate Secretary, Stamps.com Inc.,
3420 Ocean Park Boulevard, Suite 1040, Santa Monica, California 90405.
Percentage of ownership is based on 50,902,181 shares of common stock issued
and outstanding on March 31, 2002. Shares of common stock subject to stock
options which are currently exercisable or will become exercisable within 60
days after March 31, 2002 are deemed outstanding for computing the percentage
of the person or group holding such options, but are not deemed outstanding for
computing the percentage of any other person or group.
Number of Shares Percentages of Shares
Name of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------ ------------------ ---------------------
Bruce Coleman(10)....................................... 425,000 *
David Duckwitz.......................................... -- *
Ken McBride(1).......................................... 104,821 *
Rick Wetherill(2)....................................... 116,874 *
Seth Weisberg(3)........................................ 120,723 *
Kyle Huebner(4)......................................... 180,702 *
Craig Ogg(5)............................................ 103,288 *
Mohan Ananda(6)......................................... 1,557,596 3.06%
Jeff Brown(7)........................................... 4,073,449 8.00%
Brad Jones(8)........................................... 3,081,774 6.05%
Other 5% Stockholders:
Lloyd I. Miller
4550 Gordon Drive
Naples, FL 34102....................................... 6,570,900 12.91%
SBIC Partners, L.P.
201 Main Street, Suite 2302
Fort Worth, TX 76201................................... 4,073,449 8.00%
Steel Partners, L.L.C.
150 East 52nd Street
New York, NY 10022..................................... 3,199,200 6.28%
Brentwood Venture Capital(9)
11150 Santa Monica Boulevard, Suite 1200
Los Angeles, CA 90025.................................. 3,081,774 6.05%
All directors and executive offers as a group (9 people) 9,299,016 18.27%
--------
* Represents beneficial ownership of less than 1% of the outstanding shares of
common stock.
(1) Includes 99,306 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 2002.
(2) Includes 76,663 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 2002.
(3) Includes 114,929 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 2002.
16
(4) Includes 50,917 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 2002.
(5) Includes 95,703 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 2002.
(6) Includes 240,000 shares held in trust for the benefit of Mr. Ananda's
family. Also includes 40,000 shares held in the Ananda Foundation.
(7) Includes 4,073,449 shares held by SBIC Partners, L.P. Jeffrey J. Brown is
a director and executive officer of Forrest Binkley & Brown Venture Co.,
the general partner of Forrest Binkley & Brown L.P., the Managing Partner
of SBIC Partners. Mr. Brown disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein.
(8) Includes 2,908,928 shares held by Brentwood Associates VIII, L.P. and
120,258 shares held by Brentwood Affiliates Fund, L.P. G. Bradford Jones
is a Managing Member of Brentwood VIII Ventures LLC, which is the General
Partner of Brentwood Associates VIII, L.P. Mr. Jones also is the General
Partner of Brentwood VII Ventures, L.P., which is the General Partner of
Brentwood Affiliates Fund, L.P. Mr. Jones disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest therein.
(9) Includes 3,404,590 shares held by Brentwood Associates VIII, L.P. and
141,858 shares held by Brentwood Affiliates Fund, L.P.
(10) Includes 425,000 shares subject to option, all of which are presently
exercisable.
17
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The information contained in this section shall not be deemed to be "soliciting
material" or "filed" or incorporated by reference in future filings with the
Securities and Exchange Commission, or subject to the liabilities of Section 18
of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as
amended.
Compensation Committee Report
It is the duty of the Compensation Committee to review and determine the
salaries and bonuses of executive officers of the Company, including the Chief
Executive Officer, and to establish the general compensation policies for such
individuals. The Compensation Committee also has the sole and exclusive
authority to make discretionary option grants to the Company's executive
officers under the Company's Stock Incentive Plan.
Compensation Philosophy and Objectives
The Compensation Committee believes that the compensation programs for the
Company's executive officers should reflect the Company's performance and the
value created for the Company's stockholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values
of the Company and should reward individual contribution to the Company's
success. The Company is engaged in a very competitive industry, and the
Company's success depends upon its ability to attract and retain qualified
executives through the competitive compensation packages it offers to such
individuals.
Compensation Components and Process
General Compensation Policy. The Compensation Committee's policy is to
provide the Company's executive officers with compensation opportunities which
are based upon their personal performance, the financial performance of the
Company and their contribution to that performance and which are competitive
enough to attract and retain highly skilled individuals. Each executive
officer's compensation package is comprised of three elements:
. base salary that is competitive with the market and reflects individual
performance,
. annual variable performance awards payable in cash and tied to the
Company's achievement of annual financial and other performance goals, and
. long-term stock-based incentive awards designed to strengthen the
mutuality of interests between the executive officers and the Company's
stockholders.
As an officer's level of responsibility increases, a greater proportion of his
or her total compensation will be dependent upon the Company's financial
performance and stock price appreciation rather than base salary.
The Company utilizes the services of an independent compensation consulting
firm to advise the Committee as to how the Company's executive compensation
levels compare to those of companies within and outside of the industry.
Factors. The principal factors that were taken into account in establishing
each executive officer's compensation package for the fiscal year ended
December 31, 2000 are described below. However, the Compensation Committee may
in its discretion apply entirely different factors, such as different measures
of financial performance, for future fiscal years.
Base Salary. In setting base salaries, the Compensation Committee reviewed
published compensation survey data for its industry. The base salary for each
officer reflects the salary levels for comparable positions in
18
the published surveys and the comparative group of companies, as well as the
individual's personal performance and internal alignment considerations. The
relative weight given to each factor varies with each individual in the sole
discretion of the Compensation Committee. Each executive officer's base salary
is adjusted each year on the basis of (a) the Compensation Committee's
evaluation of the officer's personal performance for the year and (b) the
competitive marketplace for persons in comparable positions. The Company's
performance and profitability may also be a factor in determining the base
salaries of executive officers.
Annual Incentives. Annual incentive bonuses for executive officers will be
based upon management incentive plans. The bonuses will be based substantially
on the Company's financial performance, including achievement of revenue and
customer acquisition goals and meeting cost objectives. Additional
consideration may be given for attainment of individual goals.
Long Term Incentives. Generally, stock option grants will be considered
annually by the Compensation Committee for each of the Company's executive
officers, as appropriate. Each grant made is designed to align the interests of
the executive officer with those of the stockholders and provide each
individual with a significant incentive to manage the Company from the
perspective of an owner with an equity stake in the business. Each grant allows
the officer to acquire shares of the Company's Common Stock at a fixed price
per share (the market price on the grant date) over a specified period of time
(up to ten years). Each option becomes exercisable in a series of installments
over a 1 to 4-year period, contingent upon the officer's continued employment
with the Company. Accordingly, the option will provide a return to the
executive officer only if he or she remains employed by the Company during the
vesting period, and then only if the market price of the shares appreciates
over the option term.
The size of the option grant to each executive officer, including the Chief
Executive Officer, is set by the Compensation Committee at a level that is
intended to create a meaningful opportunity for stock ownership based upon the
individual's current position with the Company, the individual's personal
performance in recent periods and his or her potential for future
responsibility and promotion over the option term. The Compensation Committee
also takes into account the number of unvested options held by the executive
officer in order to maintain an appropriate level of equity incentive for that
individual. The relevant weight given to each of these factors varies from
individual to individual. The Compensation Committee has established certain
guidelines with respect to the option grants made to the executive officers,
but has the flexibility to make adjustments to those guidelines at its
discretion.
CEO Compensation. In setting the total compensation payable to the
Company's Chief Executive Officer, the Compensation Committee sought to make
that compensation competitive with the compensation paid to the chief executive
officers of the companies in the same industry, while at the same time assuring
that a significant percentage of compensation was tied to Company performance
and stock price appreciation.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code disallows a tax deduction to publicly held companies for
compensation paid to certain of their executive officers, to the extent that
compensation exceeds $1 million per covered officer in any fiscal year. The
limitation applies only to compensation which is not considered to be
performance-based. Non-performance based compensation paid to the Company's
executive officers for the fiscal year ended December 31, 2001 did not exceed
the $1 million limit per officer, and the Compensation Committee does not
anticipate that the non-performance based compensation to be paid to the
Company's executive officers for fiscal 2001 will exceed that limit. The
Company's 1999 Stock Incentive Plan has been structured so that any
compensation deemed paid in connection with the exercise of option grants made
under that plan with an exercise price equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
which will not be subject to the $1 million limitation. Because it is unlikely
that the cash compensation payable to any of the Company's executive officers
in the foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the Company's
executive officers. The Compensation Committee will reconsider this decision
should the individual cash compensation of any executive officer ever approach
the $1 million level.
19
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration
program to properly align the Company's performance and the interests of the
Company's stockholders through the use of competitive and equitable executive
compensation in a balanced and reasonable manner, for both the short and
long-term.
Submitted by the Compensation Committee of the Company's Board of Directors:
Mohan P. Ananda
Jeffrey J. Brown
G. Bradford Jones
20
AUDIT COMMITTEE REPORT
The information contained in this section shall not be deemed to be "soliciting
material" or "filed" or incorporated by reference in future filings with the
Securities and Exchange Commission, or subject to the liabilities of Section 18
of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as
amended.
The following is the report of the audit committee with respect to our
audited financial statements for the fiscal year ended December 31, 2001,
included in our annual report on Form 10-K for that year.
Review with Management
The audit committee has reviewed and discussed these audited financial
statements with our management team.
Review and Discussions with Independent Auditors
The audit committee has discussed with our independent auditors, Arthur
Andersen LLP, the matters required to be discussed by Statement of Auditing
Standards No. 61, as amended, which includes, among other items, matters
related to the conduct of the audit of our financial statements.
The audit committee has received the written disclosures and the letter from
Arthur Andersen LLP required by Independence Standards Board Standard No. 1
("Independence Discussions with Audit Committees"), as amended, and has
discussed with Arthur Andersen LLP its independence with respect to our company.
Conclusion
Based on the review and discussions referred to above in this report, the
audit committee recommended to our board of directors that the audited
financial statements be included in our annual report on Form 10-K for the year
ended December 31, 2001 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
of the Board of Directors
Jeffrey J. Brown
G. Bradford Jones
21
STOCK PERFORMANCE GRAPH
The information contained in this section shall not be deemed to be "soliciting
material" or "filed" or incorporated by reference in future filings with the
Securities and Exchange Commission, or subject to the liabilities of Section 18
of the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate it by reference into a document filed under the
Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as
amended.
The following line graph compares the cumulative total return to
stockholders of our Common Stock from June 25, 1999 (the date of our initial
public offering) to December 31, 2001 to the cumulative total return over such
period of (a) Nasdaq US Index and (b) a peer issuer, Pitney Bowes, a postage
and business services provider that has a product line that competes directly
with our products. The graph assumes that $100 was invested on June 25, 1999 in
our common stock at its initial public offering price of $11.00 per share and
in each of the other two indices and the reinvestment of all dividends, if any.
The graph is presented in accordance with SEC requirements. Stockholders are
cautioned against drawing any conclusions from this data, as past results are
not necessarily indicative of future performance.
[CHART]
Stamps.com, Inc. Peer Issuer Nasdaq
June-99 100.00 100.00 100.00
Sept-99 315.91 98.39 107.58
Dec-99 378.41 91.85 159.42
Mar-00 175.57 53.41 179.14
June-00 66.48 36.68 155.37
Sept-00 34.94 34.16 143.88
Dec-00 25.28 27.58 96.78
Mar-01 27.27 54.94 72.09
June-01 34.09 66.59 84.64
Sept-01 22.64 60.40 58.72
Dec-01 32.55 59.46 76.41
Quarters Ending
Base --------------------------------------------------------------------------
June 25 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31 Mar 31 June 30 Sept 30 Dec 31
Company/Index 1999 1999 1999 2000 2000 2000 2000 2001 2001 2001 2001
------------- ------- ------- ------ ------ ------- ------- ------ ------ ------- ------- ------
Stamps.com Inc. 100.00 315.91 378.41 175.57 66.48 34.94 25.28 27.27 34.09 22.64 32.55
Peer Issuer.... 100.00 96.35 76.38 70.66 63.24 62.36 52.38 54.94 66.59 60.40 59.46
Nasdaq......... 100.00 107.58 159.42 179.14 155.37 143.88 96.78 72.09 84.64 58.72 76.41
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Mr. Payne
In February 2000, Mr. Payne purchased 187,000 shares of our 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 our common stock held by Mr. Payne, of which
approximately 593,750 shares are subject to our right of repurchase.
In April 2000, we agreed to guarantee Mr. Payne's margin account if the
value of the shares pledged was insufficient collateral to secure the
indebtedness outstanding under the margin account. The guarantee was in the
form of a single-purpose line of credit extended to Mr. Payne which had a
balance due to us to the extent the value of the pledged shares is insufficient
collateral to secure indebtedness outstanding under the margin account. This
line of credit was secured by all of Mr. Payne's assets.
In addition, we entered into a loan repayment agreement with Mr. Payne and
the brokerage firm where he maintained his margin account. Under the terms of
that agreement, we agreed to guarantee Mr. Payne's margin account. In August
2000, our board of directors amended the loan repayment agreement to require
Mr. Payne to sell 100,000 of his shares of our common stock per calendar
quarter until such time that the loan was repaid. In August and November 2000,
Mr. Payne sold an aggregate of 200,000 of his shares of our common stock in
accordance with that agreement, which resulted in an aggregate repayment of
indebtedness outstanding under the margin account in the amount of
approximately $730,000.
On November 30, 2000, we agreed, at the request of the brokerage firm, to
repay Mr. Payne's total indebtedness under the margin account, which amount
totaled approximately $6.5 million. The amount of indebtedness under the margin
account consisted 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 our common stock during the third and fourth
quarters of 2000.
Mr. Payne agreed to enter into a promissory note and security agreement with
us to repay the amount of indebtedness we paid to the brokerage firm, plus
interest accrued at the prime rate, on or before June 30, 2001, subject to
acceleration upon any change in control of the Company or in the event Mr.
Payne breaches any of the terms of his separation from us. The promissory note
amount also includes the original purchase price of $99,000 plus accrued
interest for the 1,500,000 restricted shares Mr. Payne purchased in October
1998 when he joined our company. Under the terms of the note, Mr. Payne is no
longer required to sell shares on a quarterly basis. The note loan is secured
by all shares of our stock and EncrypTix, Inc. held by Mr. Payne, as well as
all of Mr. Payne's deposit accounts. If this collateral is insufficient to pay
amounts due under the note, we will have full recourse against Mr. Payne for
the payment of the balance due.
We 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 ($2.7813 per share).
Transactions with Mr. Ananda
Under its previous agreements with Mr. Ananda, we own all of the
intellectual property developed by Mr. Ananda during the course of his
employment and all of the intellectual property he developed for us before his
formal employment began. Mr. Ananda resigned as our chief executive officer on
January 1, 1999. In May 1999, we entered into a separation agreement and a
license agreement with Mr. Ananda to formalize his resignation and to redefine
his intellectual property rights. The new license agreement reaffirmed our
ownership of the intellectual property invented by Mr. Ananda prior to and
during his employment. In addition, the license agreement clarified and
narrowed Mr. Ananda's field of use restrictions to limit his license to a few
narrowly defined electronic commerce applications that do not compete with our
Internet postage service.
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Consulting Services
In October 1999, we entered into a three-year consulting agreement with
Marvin Runyon, a director, under which he will provide strategic planning
services. In exchange for these services, we granted Mr. Runyon an option to
purchase 36,000 shares of our common stock. These options were granted at fair
market value and vest ratably over a three-year period. In November 1999, this
agreement was amended to provide that Mr. Runyon receive $2,000 per day in
compensation for any special projects on which we required his services.
EncrypTix Investment
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 its technology in those three specific fields of
use. EncrypTix raised approximately $35 million in private financing. In March
2000, our directors and executive officers, with the exception Mr. Jack Duffy,
who was then a member of our board, and Mr. Jones, purchased an aggregate of
232,884 shares of Series B Preferred Stock of EncrypTix at $7.45 per share, the
same price per share paid by the third-party investors in EncrypTix. All of the
foregoing shares purchased by the individual directors and executive officers
had been paid for in full with cash.
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 because it was not able to secure additional funding.
Indemnification of Directors and Officers
In addition to the indemnification provisions contained in our certificate
of incorporation and bylaws, we entered into separate indemnification
agreements with each of our directors and officers. These agreements require
us, among other things, to indemnify our directors and officer against expenses
(including attorneys' fees), judgments, fines and settlements paid by those
individuals in connection with any action, suit or proceeding arising out of
their status or service as our director or officer (other than liabilities
arising from willful misconduct or conduct that is knowingly fraudulent or
deliberately dishonest) and to advance expenses incurred in connection with any
proceeding against them with respect to which they may be entitled to
indemnification by us.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of our board of directors, our executive officers and persons
who hold more than 10% of our outstanding common stock are subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934
which require them to file reports with respect to their ownership of our
common stock and their transactions in our common stock. Based upon the copies
of Section 16(a) reports which we received for fiscal year 2001 transactions in
our common stock and their common stock holdings, we believe that all reporting
requirements under Section 16(a) for that fiscal year were met in a timely
manner by its directors, executive officers and greater than ten percent
beneficial owners except as set forth below.
OTHER MATTERS
Annual Report
A copy of our annual report for the fiscal year ended December 31, 2001 has
been mailed concurrently with this Proxy Statement to all stockholders entitled
to notice of and to vote at the annual meeting. The annual report is not
incorporated into this proxy statement and is not considered proxy solicitation
material.
Form 10-K
We filed an annual report on Form 10-K with the Securities and Exchange
Commission on March 29, 2002. You may obtain a copy of that report without
charge, by writing to Investor Relations at Stamps.com Inc., 3420 Ocean Park
Boulevard, Suite 1040, Santa Monica, California 90405.
24
STAMPS.COM INC.
PROXY
Annual Meeting of Stockholders, June 26, 2002
This Proxy is Solicited on Behalf of the Board of Directors of
STAMPS.COM INC.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held Wednesday, June 26,
2002 and the Proxy Statement and appoints Kenneth McBride the Proxy of the
undersigned, with full power of substitution, to vote all shares of common
stock of STAMPS.COM INC. (the "Company") which the undersigned is entitled to
vote, either on his or her own behalf or on behalf of any entity or entities,
at the 2002 Annual Meeting of Stockholders of the Company to be held at
Doubletree Guest Suites, 1707 Fourth Street, Santa Monica, California 90401 on
June 26, 2002 at 10:00 a.m. Pacific Daylight Saving Time (the "Annual
Meeting"), and at any adjournment or postponement thereof, with the same force
and effect as the undersigned might or could do if personally present thereat.
The shares represented by this Proxy shall be voted in the manner set forth on
this proxy card.
1.To elect four directors to serve for a three-year term ending in the year 2005 or until their successors are duly elected and
qualified;
WITHHOLD
FOR AUTHORITY TO VOTE
Jeffrey J. Brown ------------------------------------ -----------------
Kenneth McBride ------------------------------------ -----------------
2.To ratify the appointment of Arthur Andersen LLP as independent auditors of the Company for the fiscal FOR AGAINST ABSTAIN
year ending December 31, 2002. [_] [_] [_]
3.In accordance with the discretion of the proxy holders, to act upon all matters incident to the conduct FOR WITHHOLD
of the meeting and upon other matters as may properly come before the meeting. [_] [_]
[GRAPHIC]
Proxy Card Border
The Board of Directors recommends a vote FOR the directors listed above and
a vote FOR each of the listed proposals. This Proxy, when properly executed,
will be voted as specified above. If no specification is made, this Proxy will
be voted FOR the election of the directors listed above and FOR the other
proposals.
Please print the name(s) appearing on each
share certificate(s) over which you have
voting authority: ------------------------------
(Print name(s) on certificate)
Please sign your name: ________________________________ Date: ___________
(Authorized Signature(s))
[GRAPHIC]
Proxy card border
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