<PAGE>
As filed with the Securities and Exchange Commission on June 24, 1999
Registration No. 333-77025
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 5 TO FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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STAMPS.COM INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 5961 77-0454966
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
</TABLE>
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3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405
(310) 581-7200
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------
John M. Payne
President and Chief Executive Officer
STAMPS.COM INC.
3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405
(310) 581-7200
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
<TABLE>
<S> <C>
Bruce R. Hallett, Esq. Alan K. Austin, Esq.
Allen Z. Sussman, Esq. Mark L. Reinstra, Esq.
Sean M. Pence, Esq. James C. Creigh, Esq.
Brobeck, Phleger & Harrison LLP Brian M. McDaniel, Esq.
38 Technology Drive Wilson Sonsini Goodrich & Rosati
Irvine, California 92618 650 Page Mill Road
(949) 790-6300 Palo Alto, California 94304
(650) 493-9300
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed
Proposed Maximum Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Share (1) Offering Price Fee(2)
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value................. 5,750,000 $11.00 $63,250,000 $17,583.50
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration
fee pursuant to Rule 457(c) under the Securities Act of 1933.
(2) $15,985 of the registration fee was previously paid by the registrant in
connection with the filing of the Registration Statement on April 26,
1999. $1,598.50 was previously paid by the registrant in connection with
the filing of Amendment No. 2 on June 7, 1999.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The Information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 24, 1999
[LOGO OF STAMPS.COM]
5,000,000 Shares
Common Stock
This is our initial public offering and no public market currently exists
for our shares. We anticipate that the initial public offering price will be
between $9.00 and $11.00 per share. Our common stock has been approved for
quotation on the Nasdaq National Market under the symbol "STMP."
---------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 6.
---------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Stamps.com...................................... $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We have granted the underwriters a 30-day option to purchase up to an
additional 750,000 shares of common stock to cover any over-allotments. If the
underwriters exercise the right in full, the public offering price will total
$ , the underwriting discounts and commissions will total $ , and our
proceeds will total $ .
We have requested that the underwriters reserve up to ten percent of the
shares of common stock for sale at the initial public offering price to
directors, officers, employees and other individuals designated by Stamps.com.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common
stock on , 1999.
---------------
BancBoston Robertson Stephens
Thomas Weisel Partners LLC
Volpe Brown Whelan & Company
Wit Capital Corporation
The date of this Prospectus is , 1999.
<PAGE>
[DESCRIPTION OF ARTWORK]
Images of the different screens from Stamps.com.
INSIDE FRONT COVER
The inside front cover of the prospectus has the three steps a consumer
will use to obtain postage with Stamps.com. The following are the steps to be
taken:
1. Download Software and Sign-up: Start printing postage in a matter of
minutes. Simply download the free software from our web site, www.stamps.com,
register and you're ready to go.
2. Select your Address: Type in a new address or select from an existing
address book and Stamps.com corrects and formats your addresses online.
Stamps.com also integrates with the most popular contact managers and word
processors.
3. Print Postage: Just click print. Your postage, bar code and address is
printed from your inkjet or laser printer right onto envelopes, labels or
business forms. It's that easy.
INSIDE GATEFOLD (two pages)
The first page is a picture of a printer with an envelope with postage
coming out. Across the top of the page are the words INTERNET POSTAGE. The
picture is green and blue striped.
The second page is a picture of a keyboard with centered text which reads
POSTAGE FROM YOUR PRINTER.(TM) Across the bottom of the page are the following
words:
WE RUN SECURE POSTAGE SERVERS(TM) ON THE INTERNET CONNECTING THE U.S.
POSTAL SERVICE WITH CONSUMERS, SMALL BUSINESSES AND CORPORATE CUSTOMERS
ALLOWING THEIR ORDINARY LASER AND INKJET PRINTERS TO APPLY A NEW FORM OF
DIGITAL POSTAGE CALLED "INDICIUM".
Stamps.com offers a convenient, cost-effective and easy-to-use service for
purchasing and printing postage over the Internet. Our core service is
designed to enable users to print information based indicia, or electronic
stamps, directly onto envelopes, labels, or business documents using
ordinary laser or inkjet printers. No additional hardware is necessary for
a user to purchase and print our Internet Postage; the user's existing PC,
printer and Internet set-up are sufficient.
In the bottom right corner is the Stamps.com logo.
INSIDE BACK COVER
The inside back cover of the prospectus has an envelope with an enlarged
indicia. Each item of the indicia is explained in detail directly in the center
of the page. The explanation is as follows:
There is a vertical barcode called the FIM, or Facing Identification Mark.
The Post Office uses this to sort the mail. There is a postage amount in number
format with human readable information, including the postage value, mail
class, and date. There is a two-dimensional barcode. It contains information to
make this mailpiece unique, such as delivery and routing information, postage
value, and your digital signature. Under the barcode on the left side is the
licensing post office and on the right side is the unique meter number for the
mailpiece.
Across the bottom section of this page is an iconic list of Stamps.com
Current Partnerships which includes Office Depot.com; Quicken.com; America
Online; and Avery.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
Until , 1999, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotment or subscriptions.
---------------------
TABLE OF CONTENTS
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Page
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Summary.................................................................. 4
Risk Factors............................................................. 6
Information Regarding Forward Looking Statements......................... 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Financial Data.................................................. 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 23
Business................................................................. 27
Management............................................................... 39
Related Party Transactions............................................... 51
Principal Stockholders................................................... 52
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 57
Underwriting............................................................. 58
Legal Matters............................................................ 60
Experts.................................................................. 60
Where You Can Find Additional Information................................ 60
Index to Financial Statements............................................ F-1
</TABLE>
Except as otherwise noted, all information in this prospectus:
. reflects the automatic conversion of our outstanding preferred stock
into common stock immediately prior to the closing of this offering;
. reflects a three-for-two common stock dividend to our common
stockholders authorized by the Board of Directors on June 3, 1999; and
. assumes that the underwriters' over-allotment option will not be
exercised.
3
<PAGE>
SUMMARY
You should read the following summary together with the more detailed
information and financial statements and the notes to those statements
appearing elsewhere in this prospectus. This prospectus contains forward
looking statements that involve risks and uncertainties. Our actual results
could differ materially from the results anticipated in these forward looking
statements as a result of the factors set forth under "Risk Factors" and
elsewhere in this prospectus.
Stamps.com Inc.
We offer a convenient, cost effective and easy to use service for
purchasing and printing postage over the Internet. Our core service is designed
to enable users to print information based indicia, or electronic stamps,
directly onto envelopes, labels or business documents using ordinary laser or
inkjet printers. No additional hardware is necessary for a user to purchase and
print our Internet postage; the user's existing PC, printer and Internet set-up
are sufficient. Accessing our service is simple. A user will obtain our free
software either via a download from the Internet or through an install from a
CD-ROM. After installing the software and completing a brief registration
process, the user will connect via the Internet to our secure Postage Server
and purchase postage electronically 24 hours a day, seven days a week. We will
act as an ongoing intermediary between the US Postal Service and users by
offering the ability to purchase postage through our secure Postage Server. Our
technology works within rigorous US Postal Service requirements to provide
secure access to postage. Our Postage Server will be designed to interact with
word processing, contact and address management, accounting and corporate
applications to stamp letters, invoices, statements, checks and other business
documents automatically.
Our Strategy
Our objective is to be the leading provider of convenient, cost effective
and easy to use software-based Internet postage services. To achieve this
objective, our strategy includes the following key elements:
. Enhancing our brand name through a variety of marketing and promotional
techniques;
. Forming strategic partnerships with companies in the Internet,
software, original equipment manufacturer, office supply and media
industries;
. Establishing first-to-market advantages by becoming the first software-
based Internet postage solution approved for commercial release;
. Rapidly growing our customer base by enhancing our brand name, forming
strategic partnerships and establishing first-to-market advantages;
. Utilizing our software-based solution and technology to enhance our
service offering and expand the benefits of secure online transactions;
and
. Pursuing additional revenue opportunities, including postage related
products and insurance, the international Internet postage market, and
authenticated document delivery.
Corporate Information
In September 1996, our founders began to investigate the feasibility of
entering into the US Postal Service's Information Based Indicia Program and
initiated the certification process. In January 1998, we were incorporated in
Delaware as StampMaster, Inc. and changed our name to Stamps.com Inc. in
December 1998. Our executive offices are located at 3420 Ocean Park Boulevard,
Suite 1040, Santa Monica, California 90405, and our telephone number is (310)
581-7200. Information contained on our Web site does not constitute part of
this prospectus.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered....................... 5,000,000 shares
Common stock to be outstanding after this
offering................................. 34,771,454 shares
Use of proceeds............................ To expand marketing and
distribution partnerships, for
further development our
technology and for working
capital and other general
corporate purposes.
Nasdaq National Market symbol.............. STMP
</TABLE>
The number of shares outstanding after this offering excludes, as of the
date of this prospectus:
. 1,915,041 shares of common stock that may, but have not yet been issued
under our stock option and stock purchase plans; and
. options and warrants to purchase a total of 5,382,009 shares of common
stock at a weighted average exercise price of $0.84 per share. See
"Capitalization."
Summary Financial Data
(in thousands, except share and per share data)
The following table should be read with the financial statements and notes
to those statements appearing elsewhere in this prospectus. The pro forma
calculations give effect to the conversion of all outstanding shares of our
preferred stock into common stock upon the closing of this offering as if the
conversion occurred at inception, or the date of original issuance, if later.
Our as adjusted column reflects the sale of 5,000,000 shares of common stock
offered by this prospectus at an assumed initial public offering price of
$10.00 per share after deducting underwriter discounts and commissions and
estimated expenses payable by us.
<TABLE>
<CAPTION>
January 9, 1998 January 9, 1998
(inception) (inception) Three Months
through through Ended
December 31, 1998 March 31, 1998 March 31, 1999
----------------- --------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Net revenues................. $ -- $ -- $ --
Loss from operations......... (4,180) (363) (3,688)
Net loss..................... (4,195) (363) (3,686)
----------- ---------- -----------
Basic and diluted net loss
per share.................. $ (0.85) $ (0.09) $ (0.53)
Pro forma basic and diluted
net loss per share......... $ (0.36) $ (0.05) $ (0.15)
Weighted shares outstanding
used in basic and diluted
net loss per share
calculations............... 4,955,913 4,240,518 6,900,975
Weighted shares outstanding
used in pro forma basic and
diluted net loss per share
calculation................ 11,593,380 6,863,917 25,057,782
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1999
Actual As Adjusted
---------- ------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................. $ 28,524 $74,374
Working capital....................................... 26,090 71,940
Total assets.......................................... 29,872 75,722
Line of credit and capital lease obligations.......... 1,425 1,425
Redeemable preferred stock............................ 34,278 --
Total stockholders' equity (deficit).................. (7,227) 72,901
</TABLE>
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected, the value of our stock could decline, and you may lose all or part of
your investment.
We face risks associated with our operations
If our service is not approved for commercial release, our business will fail.
Our service for purchasing postage over the Internet has not been approved
by the US Postal Service. We depend entirely on US Postal Service approval of
our Internet postage service. We are currently in the pre-approval testing
stage of the US Postal Service's Information Based Indicia Program. We cannot
be certain that our service will successfully emerge from this testing phase or
that the US Postal Service will ever approve our service for commercial
release.
We believe that US Postal Service approval of our software-based service,
prior to approval of our competitors' software-based products, is critical to
our success. If we don't receive the required regulatory approval in a timely
manner, our business and ability to compete in the Internet postage market will
suffer dramatically.
Intellectual property infringement claims, including a June 1999 claim against
us by Pitney Bowes, could delay our development and harm our results of
operations.
We face substantial uncertainty regarding the impact that other parties'
intellectual property positions will have on the Internet postage market. For
example, on at least three occasions, Pitney Bowes sent formal comments to the
US Postal Service asserting that intellectual property of Pitney Bowes related
to postage metering products and systems would be infringed by products meeting
the Information Based Indicia Program requirements. Specifically, in a number
of letters, Pitney Bowes identified a total of 19 US patents and four US patent
applications that it contends would be infringed by postage metering systems
that meet the requirements of the Information Based Indicia Program. Our
Internet postage service is designed to meet these requirements, which has led
Pitney Bowes to sue us for alleged patent infringement.
Specifically, on June 16, 1999, Pitney Bowes filed a patent infringement
lawsuit against us. The suit alleges 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. 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. If Pitney Bowes successfully asserts its claims against us and E-
Stamp, then we and E-Stamp may be prevented or hindered in competing in the
Internet postage market. We are currently investigating the claims against us
and have not responded to the suit. In addition, the litigation could result in
significant expenses and diversion of management time and other resources.
Further, if Pitney Bowes successfully asserts an infringement claim against us,
our operations would be impacted severely. The Pitney Bowes suit 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.
Any injunction could eliminate our ability to market critical products or
services.
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 intends to engage in discussions with other marketers of
6
<PAGE>
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
successfully assert claims against us and if we do not enter into a license
relationship with Pitney Bowes, our business could be impacted severely. As
described above, Pitney Bowes could obtain monetary and injunctive relief
against us.
As is customary with technology companies, we may receive or become aware
of 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 regardless of the validity of
these claims. We may not have adequate resources to defend these claims, and
any associated costs and distractions could have a material adverse effect on
our business, financial condition and results of operations. As an alternative
to litigation, we may seek licenses for other parties' intellectual property
rights. We may not be successful in obtaining all of the necessary licenses on
commercially reasonable terms, if at all.
We rely on a combination of patent, trade secret, copyright and trademark
laws and contractual restrictions to establish and protect our rights in our
products, services, know-how and information. We have three issued US patents
and have filed four patent applications in the United States. We have also
applied for several trademarks and service marks. We plan to apply for other
patents 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, any of our patents might be held
invalid or unenforceable by a court. If our patents fail to protect our
technology, our competitive position could be harmed. Even if our patents are
upheld or are not challenged, third parties may develop alternative
technologies or products without infringing our patents. We 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.
Ongoing US Postal Service regulation may cause disruptions or the
discontinuance of our business.
If we achieve US Postal Service approval of our Internet postage service,
we will remain subject to continued US Postal Service scrutiny and other
government regulations. For example, US Postal Service regulations may require
that our personnel with access to postal information or resources receive a
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.
The US Postal Service could change its certification requirements or
specifications for Internet postage or revoke the approval of our service. 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 amend its requirements to make
certification easier to obtain, which could lead to more competition from third
parties. See "--If we are unable to compete successfully, our revenues and
operating results will suffer."
The Internet postage market is new and uncertain and our business may not
develop.
The market for Internet postage has not developed, and its development is
subject to substantial uncertainty. We cannot assure you that the Internet
postage market will develop. We depend on the commercial
7
<PAGE>
acceptance of our service for purchasing postage over the Internet. We do not
know if our target customers will transition to the Internet as a means of
purchasing postage. If potential users choose the Internet to purchase postage,
we cannot be certain that these users will adopt our system. Additionally,
uncertainty surrounding intellectual property claims, such as those asserted by
Pitney Bowes against us and E-Stamp, could severely impact the development of
the Internet postage market and our business.
We have a history of losses and expect to incur losses in the future, and we
may never achieve profitability.
As of March 31, 1999, we had not generated any revenues and had a deficit
accumulated during the development stage of $7.9 million. Our lack of revenues
can be attributed primarily to the fact that Internet postage has not been
approved for commercial release. In the course of our pre-commercial
development activities, we have not achieved profitability and expect to
continue to incur net losses for at least the next several quarters. Due to the
need to establish our brand and service, we expect to incur increasing sales
and marketing, product development and administrative expenses. As a result, we
will need to generate significant revenues to achieve and maintain
profitability. In this regard, you should disregard our gross margin
projections of 85% contained in an online article published by a third party in
December 1998 and linked to our Web site. Our gross margins are very uncertain
given that our Internet postage service may never receive US Postal Service
approval, attain commercial acceptance or develop into a significant source of
revenues for us. We have additional uncertainty related to the lack of a proven
pricing model in the untested Internet postage market. It is likely that our
gross margins and pricing strategies will vary in the short and long term. In
addition, projections published by market analysts regarding our margins may
differ from our actual results.
Our ability to generate gross margins generally assumes that if a market
for Internet postage develops, we must generate significant revenues from a
large base of active consumers. Even if we are able to establish any sizable
base of users, we may still not generate significant gross margins. For
instance, you should not rely on published statements that indicate our
intention to generate revenues from a 10% convenience fee. One of our initial
service plans does contemplate a 10% service fee. See "Management Discussion
and Analysis of Financial Condition and Results of Operations--Overview."
However, given the current limited beta use of our service and the lack of a
commercial market for Internet postage, we cannot be sure that a percentage fee
will be our ultimate pricing approach or that a percentage fee would generate
significant customer use of our service. We continue to evaluate many different
pricing and fee structures, none of which have been tested on a commercial
basis. As a result, we cannot predict whether any contemplated pricing or fee
structure, including a percentage convenience fee, will ever generate revenues
or profits for us. Overall, you should not base your decision as to whether to
invest in shares of our common stock on any other published article or any
calculation of our gross margins, if any, or pricing strategies. Any projection
or other forward looking statements are subject to a great deal of uncertainty
and change. You should be aware that our future revenue and operating results
will be affected by a number of factors, including those discussed in this
section.
We must effectively manage our commercial release to achieve acceptance of our
service.
If we receive US Postal Service approval of our Internet postage service,
we will face numerous risks coincident with the introduction of our services.
We will be initially subject to a limited launch of 10,000 customers after our
commercial release. We intend to conduct a controlled national launch of our
service; however, we have very limited experience conducting marketing
campaigns, and we may fail to generate significant interest. On the other hand,
if we experience extensive interest in our services, we may fail to meet the
expectations of customers due to the strains this demand will place on our Web
site, network infrastructure and our systems.
Our ability to obtain and retain customers depends on our customer service
capabilities. We cannot predict whether the quantity or quality of our customer
service will be sufficient to address our customers' needs. If we are unable at
any time during and after our controlled national launch to appropriately
address customer service issues or provide a satisfactory customer experience
for current or potential customers, our business and reputation may be damaged.
8
<PAGE>
If we cannot effectively manage our growth, our ability to provide services
will suffer.
Our reputation and our ability to attract, retain and serve our customers
depend upon the reliable performance of our Web site, network infrastructure
and systems. We have a limited basis upon which to evaluate the capability of
our systems to handle controlled or full commercial availability of our
Internet postage service. We have recently expanded our operations
significantly, and further expansion will be required to address the
anticipated growth in our user base and market opportunities. To manage the
expected growth of operations and personnel, we will need to improve existing
and implement new systems, procedures and controls. In addition, we will need
to expand, train and manage an increasing employee base. We will also need to
expand our finance, administrative and operations staff. We may not be able to
effectively manage this growth. Our current expansion has placed and we expect
our future expansion to continue to place a significant strain on our
managerial, operational and financial resources. Our current and planned
personnel, systems, procedures and controls may be inadequate to support our
future operations. If we are unable to manage growth effectively or experience
disruptions during our expansion, our business will suffer and our financial
condition and results of operations will be seriously affected.
We have a limited operating history and cannot predict our ability to
successfully launch and maintain our Internet postage service.
In September 1996, our founders began to investigate the feasibility of
entering into the US Postal Service's Information Based Indicia Program and
initiated the certification process. In January 1998, we were incorporated in
Delaware and accordingly, we have a very limited operating history. As of March
31, 1999, we had generated no revenues and do not expect to generate any
significant revenues until the US Postal Service approves our Internet postage
service for commercial release. You should consider our prospects in light of
the risks and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets. These risks include, among other things, our:
. ability to meet and maintain government specifications for our service,
specifically US Postal Service requirements;
. complete dependence on a service that currently has no market
acceptance;
. need to expand our sales and support organizations;
. ability to establish and expand our brand name;
. ability to expand our operations to meet the commercial demand for our
service;
. development of and reliance on strategic and distribution
relationships;
. ability to prevent and respond quickly to service interruptions;
. ability to minimize fraud and other security risks; and
. competition from competitors with greater capital resources and brand
awareness.
If we are unable to maintain and develop our strategic relationships and
distribution arrangements, our Internet postage service may not achieve
commercial acceptance.
We have established strategic relationships with a very limited number of
third parties. If we receive US Postal Service approval, our strategic
relationships will generally involve the promotion and distribution of our
service through our partners' Web sites. Additionally, some of our
relationships provide for the inclusion of our logo or promotional offers for
our service in packaging and marketing materials utilized by our partners. In
return for promoting our service, our partners may receive revenue sharing
opportunities. In order to achieve wide distribution of our service, we believe
we must establish additional similar relationships to effectively market our
service. We have limited experience in establishing and maintaining these
strategic relationships and we may fail in our efforts to establish and
maintain our strategic relationships. In addition to establishing
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and maintaining these relationships, our distribution agreements are dependent
upon US Postal Service approval of our Internet postage service. For example,
we regard our marketing and distribution agreement with America Online as one
of our most significant strategic relationships and it is subject to
termination at the option America Online if we do not receive US Postal Service
approval for our service by August 15, 1999.
None of our current strategic relationships have resulted in revenues,
primarily because the US Postal Service has not approved our Internet postage
service for commercial release. 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 strategic
relationships may not be successful.
If our Internet postage service does not achieve commercial acceptance, our
operating results will suffer.
Assuming we receive US Postal Service approval, we will rely on a single
service for our revenues for the foreseeable future. As a result, our ability
to gain commercial acceptance of our Internet postage service is critical to
our success. Any failure to successfully gain commercial acceptance of our
Internet postage service would not only have a material adverse effect on our
business and results of operations but also on our ability to seek any
additional revenue opportunities.
System and online security failures could harm our business and operating
results.
Our Internet postage service depends 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. For example, all of our
Internet postage processing hardware is located in our facility in Southern
California, a seismically active region. Our servers are also vulnerable to
computer viruses, physical 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 not presently have a formal disaster recovery
plan in effect. We are currently evaluating our business interruption insurance
to determine whether we have sufficient coverage to compensate us for losses
that may occur after our commercial launch.
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
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 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, it could seriously harm our reputation, business, financial condition
and results of operations. 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.
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If we do not expand our product and service offerings, our business may not
grow.
We may 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. At present, we have no commitments or agreements and
are not currently engaged in discussions for any material acquisitions or
investments. 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
services. 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 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 incurrence 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 expect that fluctuations in our operating results could cause our stock
price to fall.
As of March 31, 1999, we had not generated any revenues from our
operations. Accordingly, we have a limited basis upon which to predict future
operating results. We expect that our revenues, margins and operating results
will fluctuate significantly due to a variety of factors, many of which are
outside of our control. These factors include:
. timing of the commercial release of our Internet postage service;
. the costs to defend ourselves against intellectual property claims;
. the costs of our marketing programs to establish the Stamps.com brand
name;
. demand for our Internet postage service;
. our ability to develop and maintain strategic and distribution
relationships;
. the number, timing and significance of new products or services
introduced by both us and our competitors;
. our ability to develop, market and introduce new and enhanced services
on a timely basis;
. the level of service and price competition;
. changes in our operating expenses as we expand operations; and
. 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 service. 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 because a relatively small amount of our
costs and expenses varies with our revenues in the short term.
Due to the foregoing factors and the other risks discussed in this
prospectus, you should not rely on period-to-period comparisons of our results
of operations as an indication of future performance. It is possible that in
some future periods our results of operations will be below the expectations of
public market analysts and investors. In this event, the market price of our
common stock is likely to fall.
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If we do not achieve brand recognition necessary to succeed in the Internet
postage market, our business will suffer.
We must quickly build our Stamps.com brand to gain market acceptance for
our service. We believe it is imperative to our long term success that we
obtain significant market share for our services before other competitors enter
the Internet postage market. 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 service. If we fail to gain market acceptance for
our service, our business will suffer dramatically.
If we are unable to compete successfully, particularly against large,
traditional providers of postage products such as Pitney Bowes who enter the
online postage market, our revenues and operating results will suffer.
The market for Internet postage products and services is new and we expect
it to be intensely competitive. At present, three other vendors seeking
certification through the Information Based Indicia Program have hardware
products available for beta testing. One of the hardware vendors also has a
software-based product in beta testing. Another of these hardware vendors,
Pitney Bowes, has made formal comments to the US Postal Service asserting that
it holds several patents and has patent applications pending which are
infringed by the product specifications that Information Based Indicia Program
participants are required to follow. To that end, Pitney Bowes filed two
separate lawsuits in June 1999 against us and E-Stamp alleging infringement of
Pitney Bowes patents. See "--Intellectual property infringement claims,
including a June 1999 claim against us by Pitney Bowes, could delay our
development and harm our results of operations." Given Pitney Bowes'
assertions, they may have the technology available to duplicate the products
and services offered by other Internet postage providers, including Stamps.com.
In a May 1999 press release, Pitney Bowes announced its intention to
demonstrate both a hardware and software-based Internet postage solution. If
any of our competitors, including Pitney Bowes, could provide the same or
similar service as us, our operations could be adversely impacted. Based on
current participants in the Information Based Indicia Program, we expect that
our competitors will initially include:
. traditional providers of postage products and services, including
Pitney Bowes and Neopost Industrie;
. potential providers of Internet postage products and services,
including Pitney Bowes, E-Stamp and Neopost;
Internet postage may not be adopted by postage consumers. These consumers
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 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
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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. See "Business--Our
Competition."
We rely on a relatively new management team and need additional personnel to
grow our business.
Our management team is relatively new and we intend to continue to hire key
management personnel, including a Chief Operating Officer. For example, our
Chief Executive Officer was hired in October 1998 and our Chief Financial
Officer was hired in September 1998. There can be no assurance that we will
successfully assimilate our recently hired managers or that we can successfully
locate, hire, assimilate and retain qualified key management personnel. Our
business is largely dependent on the personal efforts and abilities of our
senior management, including Mr. Payne, our Chief Executive Officer, Mr.
LaValle, our Chief Financial Officer, and other key personnel. Any of our
officers or employees can terminate his or her employment relationship at any
time. The loss of these key employees or our inability to attract or retain
other qualified employees could have a material adverse effect on our results
of operations and financial condition.
Our future success depends on our ability to attract, retain and motivate
highly skilled technical, managerial, editorial, merchandising, marketing and
customer service personnel. We plan to hire additional personnel in all areas
of our business. Competition for qualified personnel is intense, particularly
in the Internet and high technology industries. 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
technical personnel. The failure to retain and attract the necessary personnel
could seriously harm our business, financial condition and results of
operations.
If we do not respond effectively to technological change, our service could
become obsolete and our business will suffer.
The development of our service 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 market 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 service;
. develop new services 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 successfully use new technologies
effectively or adapt 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.
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If we market our Internet postage service internationally, foreign governments'
regulation could disrupt our operations.
One element of our strategy is to provide our service in international
markets. Our ability to provide our 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 service cannot currently be used for international mail because foreign
postal authorities do not currently recognize information based indicia
postage. If foreign postal authorities in the future accept postage generated
by our service and if we obtain the necessary foreign certification or
approvals, we would likely be subject to ongoing regulation by international
governments and agencies. To date, efforts to create a certification process in
Europe and other foreign markets are in a very preliminary stage and these
markets may not prove to be a viable opportunity for us. As a result, we cannot
predict when, or if, international markets will become a viable source of
revenues for a postage service similar to ours.
If we achieve significant international acceptance of our service, 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.
If the internal and third-party equipment and software that we use are not Year
2000 compliant, our operating results, brand and reputation could be impaired
and we could lose users.
Many existing computer systems and software products are coded to accept
only two digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. If not corrected, there could be system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with these "Year 2000"
requirements.
We use and depend on third-party equipment and software that may not be
Year 2000 compliant. If Year 2000 issues prevent our users from accessing the
Internet or our service, purchasing postage or using their credit cards, our
business and operations will suffer. Any failure of our third-party equipment
or software to operate properly could result in system and online security
failures and require us to incur unanticipated expenses, resulting in serious
harm to our business, operating results and financial condition. For example,
we rely on the US Postal Service's secure postage accounting vault to purchase
postage credit for our customers. If the US Postal Service systems are not Year
2000 compliant, users of our service may not be able to purchase additional
postage.
Our failure to make our service Year 2000 compliant could result in:
. a decrease in sales of our service;
. an increase in the allocation of resources to address Year 2000
problems of our users without additional revenue commensurate with the
dedication of our resources; and
. an increase in litigation costs relating to losses suffered by our
users due to Year 2000 problems.
Furthermore, the purchasing patterns of users or potential users may be
affected by Year 2000 issues as companies expend significant resources to
correct their current systems. These expenditures may result in reduced funds
available to purchase our service, which could seriously harm our business,
operating results and financial condition. We have conducted a preliminary
review of our internal computer systems to identify the systems that could be
affected by the Year 2000 issue. Based on this preliminary review, we believe
that our internal software systems are Year 2000 compliant. However, we
continually evaluate our systems and intend
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to develop a contingency plan to address any Year 2000 issues we discover. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our growth and operating results could be impaired if we are unable to meet our
future capital requirements.
We believe that our current cash balances together with the net proceeds of
this offering will allow us to fund our operations for at least the next 12
months. However, we may require substantial working capital to fund our
business and we may need to raise additional capital. We cannot be certain that
additional funds will be available on satisfactory terms when needed, if at
all. Our future capital needs depend on many factors, including:
. the timing of our development efforts and US Postal Service approval of
our service;
. market acceptance of Internet postage;
. the level of promotion and advertising required to launch our service;
and
. changes in technology.
The various elements of our business and growth strategies, including our
plans to support fully the commercial release of our service, our introduction
of new products and services and our investments in infrastructure will require
additional capital. If we are unable to raise additional necessary capital in
the future, we may be required to curtail our operations significantly or
obtain funding through the relinquishment of significant technology or markets.
Also, raising additional equity capital would have a dilutive effect on
existing stockholders.
We face risks related to the Internet industry
The success of our business will depend on the continued growth of the Internet
and the acceptance by consumers of the Internet as a means for purchasing
postage.
Our success depends in part on widespread acceptance and use of the
Internet as a way to purchase postage. This practice is at an early stage of
development, and market acceptance of Internet postage is uncertain. We cannot
predict the extent to which users will be willing to shift their purchasing
habits from traditional to online postage purchasing. To be successful, our
users 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 Internet
postage;
. 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 become subject to burdensome
government regulation and legal uncertainties.
With the exception of US Postal Service 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
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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; and
. characteristics and quality of products and services.
The adoption of any additional laws or regulations may decrease 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 plan to offer our service over the Internet in multiple states and
foreign countries. 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 Internet postage
service 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.
We are subject to risks related to the offering
We cannot be certain that an active trading market will develop for our common
stock.
Prior to this offering, there has been no public market for our common
stock and we cannot assure you that an active trading market for the common
stock will develop or continue as a result of this offering. If no active
trading market develops for our common stock, you may have difficulty
purchasing or selling our common stock, which could adversely affect the price
you are able to obtain for our common stock.
The rights of our stockholders could be adversely affected because of the
concentrated control of our stock.
After this offering, our executive officers, directors and 5% stockholders
will control approximately 80% of our voting stock. These stockholders will
have significant influence and ability to control most matters requiring board
and stockholder approval, including a significant corporate transaction like
the sale of our company, a change in control, or the terms of future equity
financings. These stockholders could use their control in ways that may not be
beneficial to our stockholders.
Our stock price could fluctuate dramatically which could result in substantial
losses to investors.
The trading price of our common stock is likely to be volatile and could
fluctuate dramatically in response to the following factors, some of which are
beyond our control:
. changes in expectations of our future financial performance, including
financial estimates by securities analysts and investors;
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. changes in operating and stock price performance of other Internet and
online companies similar to us;
. future sales of our common stock; or
. general economic factors.
Domestic and international stock markets often experience significant price
and volume fluctuations. These fluctuations, as well as general economic and
political conditions unrelated to our performance, may adversely affect the
price of our common stock. In particular, following initial public offerings,
the market prices for stocks of Internet and technology-related companies often
reach levels that bear no relationship to the operating performance of these
companies. These market prices are generally not sustainable and could vary
widely. The market prices of the securities of Internet-related and online
companies have been especially volatile. If our common stock trades to high
levels following this offering, it could eventually experience a significant
decline.
Our offering price does not necessarily relate to any established criteria of
value and our stock price may trade at prices below our offering price.
Through negotiations with the underwriters, we will determine the public
offering price of the shares of our common stock. This price will not
necessarily relate to our book value, assets, past operating results, financial
condition or any other established criteria of value. As a result, the shares
being offered may trade at market prices below the initial public offering
price.
Additional shares held by existing stockholders may be sold into the public
market in the near future, which could cause our stock price to decline.
Sales of substantial amounts of our common stock in the public market after
this offering could adversely affect the prevailing market price of our common
stock. Upon completion of this offering, we will have 34,771,454 shares of
common stock outstanding assuming no exercise of the underwriters over-
allotment option and no exercise of outstanding options after March 31, 1999.
Of those shares, a total of 5,000,000 shares will be freely tradable under the
Securities Act unless purchased or held by our "affiliates," as that term is
defined in Rule 144 under the Securities Act. As part of this offering, our
executive officers, directors and stockholders have agreed with the
underwriters that they will not offer or sell any shares of common stock for a
period of 180 days after the date of this prospectus without the prior written
consent of BancBoston Robertson Stephens Inc., except for options granted under
our stock incentive plan. BancBoston Robertson Stephens Inc. may, in its sole
discretion, at any time and without notice, release all of our portion of the
shares of common stock subject to these agreements. Sales of substantial
amounts of common stock in the public market, or the perception that these
sales could occur, could adversely affect the prevailing market price for our
common stock and could impair our ability to raise capital through a public
offering of equity securities.
Our management has broad discretion over use of the proceeds from this offering
and may not use the proceeds effectively.
The net proceeds of this offering are estimated to be approximately
$45,850,000 at an assumed initial public offering price of $10.00 per share and
after deducting the estimated underwriting discount and estimated offering
expenses. Our management will retain broad discretion as to the allocation of
the proceeds of this offering. See "Use of Proceeds."
Our charter documents could deter a takeover effort, which could inhibit your
ability to receive an acquisition premium for your shares.
Provisions of our Amended and Restated Certificate of Incorporation, Bylaws
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. In addition, we are
subject to the provisions of Section 203 of the Delaware General Corporation
Law. This
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statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to us and, accordingly, may
discourage attempts to acquire us. See "Description of Capital Stock."
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward looking statements that are based on our
current expectations, assumptions, estimates and projections about us and our
industry. When used in this prospectus, the words "expects," "anticipates,"
"estimates," "intends," "believes" and similar expressions are intended to
identify forward looking statements. These statements include, but are not
limited to, statements under the captions "Risk Factors," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus. These forward looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. The cautionary statements
made in this prospectus should be read as being applicable to all related
forward looking statements wherever they appear in this prospectus.
---------------------
Stamps.com(TM) and Postage Server(TM) are our trademarks. This prospectus
also includes trademarks of entities other than Stamps.com.
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USE OF PROCEEDS
Our net proceeds from the sale of the 5,000,000 shares of common stock
offered by this prospectus are estimated to be approximately $45,850,000 based
upon an assumed offering price of $10.00 per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
We currently estimate that the net proceeds of the offering will be used as
follows:
. 60% for expansion of our marketing and distribution partnerships;
. 5% to enhance our server and network infrastructure and the
functionality of our Web site; and
. 35% for working capital and other general corporate purposes.
Pending these uses, the net proceeds of the offering will be invested in
short-term, interest-bearing, investment-grade instruments. As of the date of
this prospectus, we can only estimate the particular uses for the net proceeds
to be received upon completion of the offering. As a result, the above
estimates and our use of proceeds are subject to change at our management's
discretion. The amounts actually expended for each of the purposes listed above
may vary significantly depending upon a number of factors, including the
progress of our marketing programs, capital spending requirements, and
developments in the Internet postage market and Internet commerce.
From time to time, in the ordinary course of business, we may 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. A portion of the net proceeds may be
used to fund acquisitions or investments. We currently have no arrangements,
agreements or understandings, and are not engaged in active negotiations for
any material acquisitions or investments.
DIVIDEND POLICY
We have never declared nor paid cash dividends on our capital stock. We
currently intend to retain all available funds for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Any future determination to pay dividends will be at
the discretion of our Board of Directors and will depend on our results of
operations, financial conditions, contractual and legal restrictions and other
factors it deems relevant.
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CAPITALIZATION
The following table indicates our capitalization as of March 31, 1999 on an
actual basis and on a pro forma as adjusted basis:
. to reflect the automatic conversion of all outstanding shares of
preferred stock into shares of common stock upon the closing of this
offering; and
. to give effect to the receipt of the estimated net proceeds from the
sale of 5,000,000 shares of common stock at an assumed initial public
offering price of $10.00 per share.
<TABLE>
<CAPTION>
March 31, 1999
--------------------
(Unaudited)
Pro Forma
Actual As Adjusted
------- -----------
(in thousands,
except share data)
<S> <C> <C>
Line of credit and capital lease obligations ............. $ 1,425 $ 1,425
------- -------
Redeemable preferred stock, par value $0.001, (Series A, B
and C); 15,500,000 shares authorized; 15,246,986 shares
issued and outstanding, actual; 5,000,000 shares
authorized; no shares issued and outstanding, pro forma
as adjusted............................................. 34,278 --
Stockholders' equity (deficit):
Common stock, par value $0.001; 40,000,000 shares
authorized, 6,900,975 issued and outstanding, actual;
95,000,000 shares authorized, 34,771,454 issued and
outstanding, pro forma as adjusted..................... 7 35
Additional paid-in capital................................ 4,785 84,885
Notes receivable for stock sales.......................... (117) (117)
Deferred compensation..................................... (4,020) (4,020)
Accumulated deficit during development stage.............. (7,882) (7,882)
------- -------
Total stockholders' equity (deficit)..................... (7,227) 72,901
------- -------
Total capitalization.................................... $28,476 $74,326
======= =======
</TABLE>
The number of shares outstanding after this offering is 34,771,454
excluding, as of the date of this prospectus:
. 1,915,041 shares of common stock that may, but have not yet been issued
under our stock option and stock purchase plans; and
. options and warrants to purchase a total of 5,382,009 shares of common
stock at a weighted average exercise price of $0.84 per share.
20
<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 1999 was
approximately $26,974,784, or $0.91 per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma total
tangible assets less pro forma total liabilities divided by the pro forma
number of shares of common stock outstanding as of March 31, 1999. Without
taking into account any other changes in pro forma net tangible book value,
other than to give effect to our sale of the 5,000,000 shares of common stock
in this offering and the receipt and application of the net proceeds from this
offering, the pro forma net tangible book value of as of March 31, 1999 would
have been approximately $72,824,784, or $2.09 per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $1.18
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $7.91 per share to investors purchasing common stock in
this offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $10.00
Pro forma net tangible book value per share as of March 31,
1999....................................................... $ 0.91
Increase per share attributable to new investors............. 1.18
------
Pro forma net tangible book value per share after this
offering.................................................... 2.09
------
Dilution per share to new investors........................... $ 7.91
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1999,
the difference between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by new investors, assuming an initial public offering price of
$10.00 per share and before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 29,771,454 85.6% $36,214,788 42.0% $ 1.22
New investors.............. 5,000,000 14.4 50,000,000 58.0 $10.00
---------- ----- ----------- -----
Total.................... 34,771,454 100.0% $86,214,788 100.0%
========== ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of the underwriters' over-allotment
option or shares underlying outstanding options and warrants. As of May 31,
1999, options and warrants to purchase 5,382,009 shares of common stock were
outstanding at a weighted average exercise price of $0.84 per share. To the
extent that these options are exercised, new investors will experience further
dilution.
21
<PAGE>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
The following selected financial data should be read with our financial
statements and the notes to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus. The statement of operations data for the period from
inception through December 31, 1998 and the balance sheet data at December 31,
1998, are derived from our financial statements which have been audited by
Arthur Andersen LLP, our independent public accountants, and are included
elsewhere in this prospectus. The statements of operations data for the period
January 9, 1998 (inception) through March 31, 1998 and the three month period
ended March 31, 1999, and the balance sheet data at March 31, 1999, are derived
from our unaudited interim financial statements included elsewhere in this
prospectus. Our unaudited financial statements have been prepared on
substantially the same basis as the audited consolidated financial statements
and, in the opinion of our management, include all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the results
of operations for these periods. Please be advised that historical results are
not necessarily indicative of the results to be expected in the future, and
results of interim periods are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
January 9, 1998 January 9, 1998
(inception) through (inception) through Three Months Ended
December 31, 1998 March 31, 1998 March 31, 1999
------------------- ------------------- ------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ -- $ -- $ --
Costs and expenses:
Research and
development.......... 1,532 83 1,160
General and
administrative....... 2,648 280 2,528
----------- ---------- -----------
Total costs and
expenses............ 4,180 363 3,688
----------- ---------- -----------
Loss from operations.... (4,180) (363) (3,688)
Interest expense, net... (16) -- 2
----------- ---------- -----------
Net loss................ $ (4,196) $ (363) $ (3,686)
=========== ========== ===========
Basic and diluted net
loss per share........ $ (0.85) $ (0.09) $ (0.53)
=========== ========== ===========
Pro forma basic and
diluted net loss per
share................. $ (0.36) $ (0.05) $ (0.15)
=========== ========== ===========
Weighted average shares
outstanding used in
basic and diluted net
loss per share
calculation........... 4,955,913 4,240,518 6,900,975
Weighted average shares
outstanding used in
pro forma basic and
diluted net loss per
share calculation..... 11,593,380 6,863,917 25,057,782
</TABLE>
<TABLE>
<CAPTION>
As of As of
December 31, 1998 March 31, 1999
----------------- --------------
(unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........... $3,470 $28,524
Working capital..................... 1,385 26,090
Total assets........................ 4,426 29,872
Line of credit and capital lease
obligations....................... 1,473 1,425
Redeemable preferred stock......... 5,978 34,278
Total stockholders'
equity (deficit).................. (3,951) (7,227)
</TABLE>
Our statement of operations data for the period from inception through
December 31, 1998 includes approximately $35,000 of expenses incurred prior to
incorporation. Prior to incorporation, the founders primarily investigated the
feasibility of entering into the US Postal Service's Information Based Indicia
Program and initiated the certification process.
All expenses other than those related to research and development are
classified as general and administrative until we recognize revenue from our
principal business activities. In addition, the provision for income taxes
which consist solely of minimum state taxes is classified as general and
administrative.
Please refer to note 1 of the notes to our financial statements for a
description of the method used to compute basic and diluted loss per share and
pro forma basic and diluted loss per share. Our pro forma calculations give
effect to the conversion of all outstanding shares of our preferred stock into
common stock upon closing of this offering as if the conversion occurred on
January 9, 1998, or the date of original issuance, if later.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This prospectus contains forward looking statements that involve risks and
uncertainties. Actual events or results may differ materially from those
projected in these forward looking statements. See "Information Regarding
Forward Looking Statements." The following discussion of our financial
condition and results of operations also should be read in conjunction with the
financial statements and notes to those statements included elsewhere in this
prospectus.
Overview
We offer a convenient, cost effective and easy to use service for
purchasing and printing postage over the Internet. Beginning in September 1996,
our founders investigated the feasability of entering into the US Postal
Service Information Based Indicia Program and initiated the certification
process. We had no revenues and immaterial expenses prior to our incorporation
in Delaware on January 9, 1998. In February 1998, we raised $1.5 million in a
private placement transaction and commenced development of our Internet postage
service within the US Postal Service framework of specification and performance
requirements.
In August 1998, we received US Postal Service approval for Phase I beta
testing. Also in August 1998, we raised an additional $0.6 million in private
placements and commenced hiring key executives. In September 1998, we hired a
core technology team to continue development of our Internet postage service
and in October and November 1998, we closed another private placement
transaction for $3.9 million.
In December 1998, we changed our name from StampMaster, Inc. to Stamps.com
Inc. and received US Postal Service approval for Phase II beta testing, which
resulted in an increase to our user base for our service from 25 to 500 users.
From the end of December 1998 to the end of March 1999, we grew from 34
employees to 77 employees, including key executive hires. In February and March
1999, we also completed a private placement transaction that raised $30.0
million. We had deferred compensation of $6.7 million and we will amortize that
amount over four years.
To date, we have not recognized any revenue and do not expect to recognize
any revenues until after we receive US Postal Service approval for our Internet
postage service. If we receive US Postal Service approval for our service, we
intend to offer promotional programs to build our brand recognition and attract
a customer base. For example, as a part of several distributor agreements, we
plan to provide a promotional offer that allows our distributors to offer a
limited amount of free postage to their customers who purchase a set amount of
postage from our Internet postage service. The promotional offer can be
terminated at any time at our sole discretion. Costs associated with any "free
postage" promotion will be classified as sales and marketing expenses. We
cannot at this time predict whether the "free postage" promotional offer or any
other promotional offer will have a material impact on our results of
operations.
In late June 1999, we launched our new Web site which contains proposed
pricing plans upon our commercial release. We are currently contemplating
offering two different service plans to our users: a Business Plan and a
Personal Plan. Under each plan, a user purchases postage at cost and is charged
a monthly convenience fee based on how much postage he or she uses during the
month. The Business Plan, which is targeted at high volume users of mail such
as home offices and small offices and businesses, assesses a convenience fee
equal to 10% of the postage used during the month. This plan has a monthly
minimum fee of $3.99 and a monthly maximum fee of $19.99. The Personal Plan,
which is targeted at light volume personal users of mail, charges a flat rate
monthly convenience fee of $1.99 that allows a customer to use up to $25 of
postage per month. If a Personal Plan customer uses more than $25 postage in
any given month, a 15% convenience fee on the amount of additional postage used
over $25 will be added to the $1.99 flat rate. The maximum charge under the
Personal Plan is $19.99. The Personal Plan offers customers the ability to
pre-pay one year's worth of $1.99 fees at a discounted rate of $19.99 with all
other terms of the Personal Plan the same as described. Under both plans,
convenience fees are calculated and charged at the end of a monthly
23
<PAGE>
billing cycle. Although we have established these initial pricing programs, the
current limited beta use of our service and the lack of a commercial market for
Internet postage may cause us to reconsider these plans. We cannot be sure that
these proposed fees will be our ultimate pricing approach or that these fees
will generate significant customer use of our service. As a result, we cannot
predict whether any contemplated pricing or fee structure will ever generate
revenues or profits for us. See "Risk Factors--We have a history of losses and
expect to incur losses in the future, and we may never achieve profitability."
Our Results of Operations
Revenues. We have recognized no revenues to date and we do not expect to
recognize revenues until after our Internet postage service is approved by the
US Postal Service for commercial release. If the US Postal Service approves our
Internet postage service for commercial release, we will offer service plans
that provide access to our Internet Postage Server and, as described above, we
plan to assess a convenience fee based on the customer's postage use.
Cost of Revenues. We currently have no cost of revenues because we have not
recognized any revenues to date. Once we begin to charge convenience fees, cost
of revenues will primarily consist of costs related to customer service
activities and server and network operations and, to a lesser extent, bank
processing charges for customer fees paid by credit card, Internet connection
charges, depreciation of server and network equipment and allocation of
overhead.
Sales and Marketing Expenses. Costs related to our sales and marketing
efforts, which to date have not been significant, are currently classified as
general and administrative expenses until we commence charging convenience
fees. Our sales and marketing expenses will consist of compensation for sales
and marketing personnel, advertising, creative development and promotional
costs and commissions. The majority of these costs will be directed to programs
designed to build brand name recognition, attract a customer base and retain
the anticipated customer base.
Research and Development Expenses. Our research and development expenses
principally consist of compensation for personnel involved in the development
effort of our Internet postage service, which includes our Web site and
systems, and expenditures for consulting services, third-party software and
other costs related to development. Our research and development expenses for
the year ended December 31, 1998 were $1.5 million. Our research and
development expenses increased to $1.2 million for the quarter ended March 31,
1999 from approximately $83,000 for the quarter ended March 31, 1998. The
increase is due to our expanded development efforts in the latest quarter,
including increased personnel and consulting costs. We believe that significant
investments in research and development are required to remain competitive. We
expect that we will continue to incur significant research and development
expenses.
General and Administrative Expenses. Our general and administrative
expenses consist primarily of salaries and related costs for general corporate
functions, including finance, accounting, facilities and fees for legal and
other professional services. Our general and administrative expenses for the
year ended December 31, 1998 were $2.6 million. Our general and administrative
expenses increased to $2.5 million for the quarter ended March 31, 1999 from
approximately $280,000 for the quarter ended March 31, 1998. The increase is
principally due to increase in personnel, facility costs, professional service
fees and the amortization of deferred compensation.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
private placement of equity securities, raising $36.0 million through March 31,
1999. At March 31, 1999, we had $28.5 million, in cash and cash equivalents,
and at March 31, 1998, we had $1.0 million in cash and cash equivalents. We
have had significant negative cash flows from operating activities in each
fiscal and quarterly period to date.
24
<PAGE>
In December 1998, we entered into a distribution and marketing agreement
with America Online that will require payments by us of $2.3 million through
February 2000. In May 1999, we entered into a facility lease agreement for our
corporate headquarters with minimum lease payments of approximately $4.8
million through May 2004. Also in May 1999, we entered into an agreement with
Intuit which requires payments by us of $3.3 million through 2000.
On June 16, 1999, Pitney Bowes filed a patent infringement lawsuit against
us. The suit seeks treble damages, a preliminary and permanent injunction from
further alleged infringement, attorneys' fees and other unspecified damages. If
Pitney Bowes successfully asserts an infringement claim against us or if we are
unable to obtain a license from Pitney Bowes, our business and operations would
be severely impacted. See "Risk Factors--Intellectual property infringement
claims, including a June 1999 claim against us by Pitney Bowes, could delay our
development and harm our results of operations" and "Business--Legal
Proceedings."
Net cash used in our operating activities was $2.9 million for the quarter
ended March 31, 1999, $0.3 million for the quarter ended March 31, 1998 and
$3.1 million for the year ended December 31, 1998. Cash used in operating
activities consisted primarily of net operating losses and increases in prepaid
expenses, which were partially offset by increases in accrued expenses and
accounts payable.
Net cash used in our investing activities was $0.3 million for the quarter
ended March 31, 1999, $0.1 million for the quarter ended March 31, 1998 and
$0.4 million for the year ended December 31, 1998. Net cash used in investing
activities in these periods consisted primarily of capital expenditures for
computer equipment, purchased software and office equipment.
Net cash provided by our financing activities was $28.3 million for the
quarter ended March 31, 1999, $1.5 million for the quarter ended March 31, 1998
and $6.9 million for the year ended December 31, 1998. Net cash provided by
financing activities was principally attributable to the private sale of
preferred stock and, to a lesser extent, to the proceeds from a line of credit.
We believe that our current cash balances together with the net proceeds of
this offering will allow us to fund our operations for at least the next 12
months. However, we may require substantial working capital to fund our
business and we may need to raise additional capital. We cannot be certain that
additional funds will be available on satisfactory terms when needed, if at
all. See "Risk Factors--Our growth and operating results could be impaired if
we are unable to meet our future capital requirements."
Year 2000
Many existing computer systems and software products are coded to accept
only two digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. If not corrected, there could be system
failures or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with these "Year 2000"
requirements.
The US Postal Service requires participants in the Information Based
Indicia Program to maintain Year 2000 compliant systems and software. As a
result, we have reviewed the Year 2000 compliance of our systems. This review
has included testing to determine how our systems will function at and beyond
the Year 2000. Since inception, we have internally developed substantially all
of the systems for the operation of our Internet postage service. These systems
include the software used to provide customer interaction and transactional and
distribution functions to our service, as well as monitoring and back-up
capabilities. Based upon our assessment to date, we believe that our systems
are Year 2000 compliant and have submitted Year 2000 readiness disclosure
statements to the US Postal Service to indicate our Year 2000 compliance.
However, we cannot be sure how our software will integrate with other vendor-
provided software.
25
<PAGE>
We use and depend on third-party equipment and software, including systems
operated by the US Postal Service, that may not be Year 2000 compliant.
Consequently, our ability to address Year 2000 issues is, to a large extent,
dependent upon the Year 2000 readiness of these third parties' hardware and
software products. We are currently assessing the Year 2000 readiness of other
third-party supplied software, computer technology and other services and of
our vendors. We have initiated communications or obtained information from our
vendors and suppliers of third-party equipment and software to validate that
their products and systems are Year 2000 compliant. Based on the
representations that we have received and obtained from our third party vendors
and suppliers, we believe that their systems are Year 2000 compliant. We will
develop and implement, if necessary, a remediation plan with respect to third-
party software, third-party vendors and computer technology and service that
may fail to be Year 2000 compliant.
To date, the expenses associated with the assessment of our Year 2000
compliance have not been material and our potential remediation costs and
potential remediation plan cannot be determined at this time. If Year 2000
issues prevent our users from accessing the Internet or our service, purchasing
postage or using their credit cards, our business and operations will suffer.
Any failure of our third-party equipment or software to operate properly could
require us to incur unanticipated expenses, which could seriously harm our
business, operating results and financial condition. For example, we rely on
the US Postal Service's secure postage accounting vault to purchase postage
credit for our customers. If the US Postal Service systems are not Year 2000
compliant, users of our service may not be able to purchase additional postage.
The Year 2000 readiness of the general infrastructure necessary to support
our operations is difficult to assess. For instance, we depend on the integrity
and stability of the Internet to provide our services. We also depend on the
Year 2000 compliance of the computer systems and financial services used by
consumers. Thus, the infrastructure necessary to support our operations
consists of a network of computers and telecommunications systems located
throughout the world and operated by numerous unrelated entities and
individuals, none of which has the ability to control or manage the potential
Year 2000 issues that may impact the entire infrastructure. Our ability to
assess the reliability of this infrastructure is limited and relies solely on
generally available news reports, surveys and comparable industry data. Based
on these sources, we believe most entities and individuals that rely
significantly on the Internet are carefully reviewing and attempting to
remediate issues relating to Year 2000 compliance, but it is not possible to
predict whether these efforts will be successful in reducing or eliminating the
potential negative impact of Year 2000 issues. A significant disruption in the
ability of consumers to reliably access the Internet or to use their credit
cards or other electronic payment methods would have an adverse effect on
demand for our services and would harm our results of operations.
At this time, we have not yet developed a contingency plan to address
situations that may result if we or our vendors are unable to achieve Year 2000
compliance. The cost of developing and implementing this plan, if necessary,
could be material. Any failure of our material systems, our vendors' material
systems or the Internet to be Year 2000 compliant could have material adverse
consequences for us. These consequences could include difficulties in operating
our service effectively or conducting other fundamental parts of our business.
Recently Issued Accounting Pronouncements
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use," which provides guidance on
accounting for the costs of computer software developed or obtained for
internal use. Currently, we capitalize costs of computer software obtained for
internal use in our Web design and network operations. These capitalized costs
are amortized based on their estimated useful life. Payroll and related costs
are not capitalized, as the amounts are immaterial and principally relate to
maintenance. Purchased or leased computer software used in research and
development activities are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 2., "Accounting for Research
and Development Costs." Statement of Financial Accounting Standards No. 2
generally requires all research and development costs to be charged to expense
when incurred if no alternative future uses exist. Statement of Position No.
98-1 is effective for financial statements for fiscal years beginning after
December 15, 1998. We do not expect that the adoption of Statement of Position
No. 98-1 will have a material impact on our financial statements.
26
<PAGE>
BUSINESS
This prospectus contains forward looking statements that involve risks and
uncertainties. Actual results and the timing of events could differ materially
from those projected in the forward looking statements due to a number of
factors, including those set forth under "Risk Factors" and elsewhere in this
prospectus.
Our Company
We offer a convenient, cost effective and easy to use service for
purchasing and printing postage over the Internet. Our core service is designed
to enable users to print information based indicia, or electronic stamps,
directly onto envelopes, labels or business documents using ordinary laser or
inkjet printers. No additional hardware is necessary for a user to purchase and
print our Internet postage; the user's existing PC, printer and Internet set-up
are sufficient. Accessing our service is simple. A user will obtain our free
software either via a download from the Internet or through an install from a
CD-ROM. After installing the software and completing a brief registration
process, the user will connect via the Internet to our secure Postage Server
and purchase postage electronically 24 hours a day, seven days a week. We will
act as an ongoing intermediary between the US Postal Service and users by
offering the ability to purchase postage through our secure Postage Server. Our
technology works within rigorous US Postal Service requirements to provide
secure access to postage. Our Postage Server will be designed to interact with
word processing, contact and address management, accounting and corporate
applications to stamp letters, invoices, statements, checks and other business
documents automatically.
Overview of Our Industry
Growth of Internet Commerce
The Internet has emerged as a significant global communications medium,
enabling millions of people to share information and conduct business
electronically. A number of factors have contributed to the growth of the
Internet and its commercial use, including:
. the large and growing usage of personal computers in homes and
businesses;
. improvements in network infrastructure and bandwidth;
. easier and cheaper access to the Internet;
. increased awareness of the Internet among consumer and business users;
and
. the rapidly expanding availability of online content and commerce.
According to International Data Corporation, the number of Web users
worldwide will grow from an estimated 100 million in 1998 to 319 million by
2002. In addition, International Data Corporation estimates that the percentage
of Web users buying goods and services on the Internet will grow from 26% in
December 1997 to 40% in December 2002. International Data Corporation further
estimates that the total value of goods and services purchased over the Web
will increase from approximately $12.4 billion in 1997 to approximately $425.0
billion in 2002. Business-to-business commerce is expected to contribute
significantly to the future growth of Internet commerce. For example,
International Data Corporation estimates that business-to-consumer commerce on
the Internet will grow from approximately $5.0 billion in 1997 to approximately
$95.0 billion in 2002 while business-to-business commerce on the Internet will
grow from approximately $7.3 billion in 1997 to approximately $330.5 billion in
2002.
Rapid Growth in Internet Usage by Small Businesses
The small office/home office and small business markets represent a large
and growing customer segment. According to International Data Corporation,
there were a combined 44.7 million small businesses and home offices in the
United States in 1998, a number which International Data Corporation forecasts
will grow to 57.6 million by 2002. For 1998, International Data Corporation
reported that small businesses with less than 100 employees numbered 7.4
million of which 77% had fewer than 10 employees. In addition, home
27
<PAGE>
offices numbered 37.3 million, of which 22.2 million were income producing home
offices, and the remainder were home offices used for corporate after hours
work or telecommuting.
We believe that small businesses increasingly will rely on the
functionality and pervasiveness of the Internet to reach and serve a large and
global group of end users. The reduced cost of selling and marketing on the
Internet, the ability to build and serve a large base of customers
electronically and the potential for personalized low-cost customer interaction
provide significant economic advantages. These overall benefits, combined with
accessibility, have led to adoption of the Internet by small businesses and
home offices. According to International Data Corporation, there will be 30.2
million US home offices accessing the Internet by 2002. According to Cyber
Dialogue/FindSVP's 1999 US Small Business Internet Survey, 43% of businesses
with fewer than 100 employees are estimated to be online in 1999. Of those
small businesses that are currently online, 63% are already ordering products
online and are spending an average of $171 monthly on postage. The Cyber
Dialogue/FindSVP survey also found that 64% of online small businesses have
employees who are online multiple times a day. This increased use of the
Internet has resulted in small businesses becoming significant participants in
the electronic commerce market. International Data Corporation estimates that
small businesses accounted for $4.4 billion of electronic commerce in 1998 and
will account for approximately $100.4 billion of electronic commerce activity
in 2002.
Traditional Postage Industry and the Emergence of the Internet Postage
The traditional postage industry is large and growing. According to the US
Postal Service Annual Report, the total postage market was $58.0 billion in
1998, of which $38.9 billion was represented by first class, priority and
express mail with the remainder consisting of other classes of mail including
periodicals, bulk and international. In addition, the US Postal Service
processed over 197 billion pieces of mail in 1998 and, despite the growth in
the use of e-mail, the total US postage market increased by 3.1% in 1998 from
1997. Keenan Vision, an independent research firm, estimates that revenues from
first class, priority and express mail will grow to $46.2 billion by 2002.
Despite this consistent growth in the postage market, the US Postal Service has
experienced:
. strong competition from overnight delivery services;
. loss of revenue due to postal fraud; and
. continued public demand for more convenient access to US Postal Service
products and services.
In response to these challenges, in 1995 the US Postal Service announced a
program for its first new postage method since the approval of the postage
meter in 1920. The Information Based Indicia Program is a ten-stage
certification process for commercial release of Information Based Indicia
products, or electronic postage, that can be purchased over the Internet and
printed from a computer using ordinary laser or inkjet printers. Indicia are a
new type of US Postal Service approved postage marks similar to stamps or
metered postage. Information Based Indicia, which are essentially digital
stamps, consist of a two dimensional bar code containing an encrypted digital
signature that make each indicium unique. Through the Information Based Indicia
Program, the US Postal Service is seeking to enhance user convenience with a
new access channel for postage that allows users to print postage from their
personal computer 24 hours a day, seven days a week. The Information Based
Indicia Program is intended to achieve the US Postal Service's security and
revenue objectives by incorporating technological security features in each
unique digitally-signed indicium and a secure postage accounting vault to
provide greater revenue security. All Internet postage products, including any
subsequent enhancements or additional implementation of a product, must
complete US Postal Service testing and evaluation to ensure operational
reliability, financial integrity and security to become certified for
commercial distribution. Overall, the Information Based Indicia Program aims to
provide improved, accurate mail processing and increased productivity, a result
which is intended to:
. reduce US Postal Service costs and postal fraud;
. increase US Postal Service service to underserved markets, including
the rapidly growing small office/home office and other small business
markets; and
. improve the US Postal Service's competitive position against overnight
delivery services.
28
<PAGE>
The emergence of Internet postage though the US Postal Service's
Information Based Indicia Program has created an attractive channel for the
sale of postage, particularly to small office/home office and other small
businesses. According to a 1997 US Postal Service survey of over 1,600 home
offices, 98% of the respondents would likely use commercial software products
to print postage directly from their computers, 88% of the respondents did not
use a postage meter and 43% of the respondents purchased over $50 of postage
per month. We believe that small businesses consider cost-effective mail
generation, elimination of trips to the post office and the production of
professional-looking mail as key components of an effective mailing system.
Internet postage satisfies these requirements by providing 24 hours a day,
seven day a week access to metered mail from the desktop. Furthermore, when
considering the total cost of a traditional postage meter, including lease fees
for both the meter and scale, meter resetting fees and special ink cartridges,
small businesses pay a significant premium in addition to their normal postage
expenditures for leasing a postage meter. Leasing a postage meter also requires
space for additional hardware and the purchase of specialized materials and
supplies. Meanwhile, small businesses that find leasing a postage meter
uneconomical are still faced with the inconvenience of travelling to the post
office, ATM or other locations to purchase stamps.
Our Solution
We offer a convenient, cost effective and easy to use service for
purchasing and printing postage over the Internet. We target the small
office/home office, other small business, corporate and consumer user markets
and provide an Internet service that is accessible via a free software
downloaded from the Internet or installed from a free CD-ROM; the user's
existing PC, printer and Internet set up are sufficient to purchase and print
postage. Using our service requires no purchase or installation of a hardware
device for a user's PC and users can access and print postage without the US
Postal Service address matching CD-ROM needed by hardware-based Internet
postage products. Our Internet postage solution was the first software-based
service approved for beta testing by the US Postal Service and provides the
following benefits to the user and the US Postal Service:
Benefits to the User. Our Internet postage service is designed to be
convenient, cost effective and easy to use and provides the following benefits
to the user:
. unlimited, convenient access to postage from the desktop 24 hours a
day, 7 days a week;
. prints address and postage in one easy step;
. secure and accurate tracking of postage expenditures;
. cost effective relative to traditional postage meter solutions; and
. no additional hardware is required.
Using our free software, which can be downloaded from the Internet or
installed from a CD-ROM, users can purchase postage with their PC from our
secure Postage Server where and when it is most convenient. Our solution allows
users to avoid common inconveniences, including running out of postage, using
too much postage for a letter or parcel and enduring long lines at the post
office. The Stamps.com service is designed to enable users to print postage in
any denomination and rely on secure, accurate management of their postal
dollars. Finally, we will seek to enhance our convenient, easy to use service
with other benefits, including integrating our software with a wide range of
software applications to increase the efficiency of the everyday tasks of
writing letters, paying bills or generating invoices.
Benefits to the US Postal Service. Our Internet postage service provides
several benefits to the US Postal Service including:
. increased convenience to the postal consumer;
. increased security to protect postal revenues;
. the ability to more effectively compete with overnight delivery
services;
. the use of advanced technology for more cost efficient mail processing
and tracking; and
. cost savings relating to printing and distribution of traditional
postage stamps.
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We believe our convenient, cost effective, easy to use Internet postage
solution addresses the US Postal Service's goals for the Information Based
Indicia Program. Our service is designed to provide a high level of security
and auditing capabilities, helping to reduce the millions of dollars of known
postal fraud to the US Postal Service. As additional security and as required
by US Postal Service specifications, our solution will provide for the printing
of unique, secure Information Based Indicia, or electronic postage, on ordinary
laser or inkjet printers. Our service is designed to promote postal
efficiencies and cost savings for the US Postal Service with address
verification and correction and extended zip code printing capabilities.
Finally, our solution is designed to allow the US Postal Service to capitalize
on advances in technology, especially as the US Postal Service seeks to phase
out traditional postage methods.
Our Strategy
Our objective is to be the leading provider of convenient, cost effective
and easy to use software-based Internet postage services. To achieve this
objective, our strategy includes the following key elements:
Enhance Our Brand Name. We intend to increase our brand recognition through
a variety of marketing and promotional techniques, including the prominent
display of our logo on all pieces of mail generated through our service and co-
marketing and co-branding agreements with strategic partners. We also intend to
promote our brand by conducting an ongoing public relations campaign and
developing affiliations and affinity programs. We believe that building the
brand awareness of our Internet Postage Server is critical to attracting and
expanding our customer base.
Leverage Our Strategic Partnerships. We intend to develop and utilize
strategic partnerships to gain access to large numbers of potential users,
cooperatively market products and services, cross-sell additional services and
gain entry into new markets. As of May 1999, we have entered into strategic
partnerships with AOL, Intuit and Office Depot, among others. We believe that
we can further utilize our premier strategic partnerships to enhance our brand
name and grow our customer base.
Establish First-to-Market Advantages. Our Internet postage solution was the
first software-based Internet postage solution approved for the beta testing
that is required for US Postal Service certification. We believe that we will
have significant first-to-market advantages as a software-based solution in the
Internet postage market. We intend to use this first-to-market advantage to
rapidly establish our brand and grow our customer base. We believe our
potential market position will be enhanced by significant barriers to entry,
including:
. a ten-step US Postal Service certification process, including a three
phase beta testing requirement;
. our anticipated lead in providing a software-based Internet postage
solution that does not require additional hardware or a CD-ROM to be
employed with a user's PC;
. significant up-front time and investment by potential competitors in
technology and technical infrastructure;
. strong brand awareness for our software-based Internet postage
solution; and
. inconvenience of switching from one metered postage provider to
another.
Rapidly Grow Our Customer Base. We intend to broaden our customer base by
enhancing our brand, forming strategic partnerships and establishing first-to-
market advantages. We believe that our service can achieve rapid distribution
because there is no investment in hardware beyond a PC and printer, and users
can obtain our software for free. We are primarily targeting the small
office/home office and small business markets as well as various segments of
the corporate and consumer markets.
Leverage Our Software-Based Solution and Technology. We intend to utilize
our scaleable, e-commerce platform to enhance our service offerings and expand
the benefits of secure online transactions. We believe that we have an inherent
advantage relative to our competitors in the Internet postage industry because
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our solution does not require the use of additional hardware. We believe we can
achieve rapid distribution of our services as users download or install our
free software. Additionally, we provide increased flexibility and scalability
over competing solutions because transactions are processed through our secure
Postage Server while competing hardware solutions require each user to utilize
a CD-ROM and peripheral hardware device for each PC that is engaged in a
postage transaction. We will continue to invest in and enhance our technology
in order to increase efficiency, reliability and bandwidth, and to expand our
services and reduce our costs.
Pursue Additional Revenue Opportunities. We intend to utilize our brand,
electronic commerce capabilities, infrastructure and user base to develop
additional revenue opportunities. We will consider the following opportunities:
. Sale of Postage Related Products. We intend to use our Web site to
offer mailing-related products, including labels and envelopes,
mechanical scales, PC-enabled digital scales and label printers. We
also intend to offer package insurance to our customers through third-
party insurance companies.
. International Internet Postage Market. We believe that if foreign
postal authorities accept the use of Internet postage there will be
significant opportunities in international markets for our Internet
postage service. We intend to focus on those regions where there is a
critical mass of Internet use and a large current postage market with a
need for highly secure, transaction-oriented Internet services.
. Document Fulfillment Market. We will consider investing in technology
that will allow us to extend our core Internet postage technology to
print authenticated documents, including airline, movie and concert
tickets, from laser or inkjet printers.
Our Internet Postage Service
We offer a convenient, cost effective and easy to use service for
purchasing and printing postage over the Internet. Our core service is designed
to enable users to print information based indicia, or electronic stamps,
directly onto envelopes, labels or business documents using ordinary laser or
inkjet printers. No additional hardware is necessary for a user to purchase and
print our Internet postage; the user's existing PC, printer and Internet set-up
are sufficient.
[Insert Graphic--Description: Describe three steps to using our service. Step 1
is download and install free software and complete brief registration process.
Step 2 is users print postage using their existing PC and printer set-up. Step
3 is postage is printed on envelopes, lables or business documents.]
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Accessing our service is simple. A user will obtain our free software
either via a download from the Internet or through an install from a CD-ROM.
After installing the software and completing a brief registration process, the
user can connect via the Internet to our secure Postage Server and purchase
postage electronically 24 hours a day, seven days a week. We act as an ongoing
intermediary between the US Postal Service and users by offering users the
ability to purchase postage through our secure Postage Server. We use
sophisticated technologies which meet strict US government security standards
and our service incorporates the US Postal Service mandated address
verification features to enhance the efficiency of mail processing and
delivery. Finally, our Postage Server is designed to interact with word
processing, contact and address management, accounting and corporate
applications to provide postage for letters, invoices, statements, checks and
other business documents automatically. Our customers will sign up for a
service plan that provides access to our Internet Postage Server and we plan to
assess a "convenience" fee based on the customer's postage use. The service
plan will also offer benefits that could include various items, such as free
postage, free labels and envelopes and discounts on scales or printers.
As part of our Internet postage service, we intend to roll out functional
modules of our Web site to address our strategic initiatives, including:
. a Virtual Post Office through which we plan to provide a variety of
mailing services and resources including bulk mail fulfillment, free e-
mail, Express and Priority Mail tracking, ZIP Code look-up, and other
postal information;
. a Product Center through which we plan to feature mailing supplies and
general office supplies; and
. a Small Business Resource Center through which we plan to feature
products, services, and editorial content targeted to the small business
market.
The US Postal Service Certification Process
All Internet postage products must complete extensive US Postal Service
testing and evaluation in the areas of operational reliability, financial
integrity and security to become certified for commercial distribution. Each
additional implementation of a particular product or function requires
additional evaluation and approval by the US Postal Service prior to commercial
delivery.
The US Postal Service certification process for Internet postage is a
standardized, ten-stage process concluding with commercial release. Each stage
requires US Postal Service review and authorization to proceed to the next
stage of the certification process. The US Postal Service has no published
timeline or estimated time to complete each of the ten stages of the program.
The ten stages of the US Postal Service certification process are defined
at the US Postal Service Web site and are as follows:
1. Letter of Intent 6. US Postal Service Address
2. Non-Disclosure Agreements Matching System CD-ROM
3. Concept of Operations Integration
4. Software and Documentation 7. Product Submission/Testing
Requirements 8. Product Infrastructure Testing
5. Provider Infrastructure Plan 9. Three Phase Beta Test Approval
(Limited Distribution)
10. Vendor Product Approval (Full
Distribution)
Our Certification Progress and Commercial Release
In March 1997, we submitted our letter of intent to join the Information
Based Indicia Program. From March 1997 through August 1998, we progressed
through the first eight stages of the US Postal Service certification process.
On August 24, 1998, the US Postal Service announced that we were approved for
beta
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testing and our Internet postage service became the first software-based
postage solution approved by the US Postal Service for market testing.
Subsequent to US Postal Service approval for beta testing, we selected 25 users
from approximately 1,000 beta test applications. Beta users are small
office/home office, other small business and home consumer users with an
average mail volume of 30 to 500 pieces per month. Most of the beta users we
selected do not have postage meters, but all have some form of Internet access.
The following describes the planned three phase beta test that we are currently
conducting:
Phase I. We completed Phase I testing in December 1998. All Phase I
participants were located in the Washington, D.C. area. In this phase, we
performed on-site software installations for all beta testers, including five
US Postal Service users. User feedback was largely positive and focused on
feature enhancements and US Postal Service regulations. We provided user
support through an 800-number, online help, and printed or viewable manuals. We
generated weekly usage reports and log files that were forwarded to the US
Postal Service Beta Program Manager. Phase I users and data requirements
continued for Phases II and III.
Phase II. We completed Phase II testing in May 1999. Phase II of our beta
testing included the expansion of the user base by an additional 475 users.
These users were in the Washington, D.C. and San Francisco Bay Areas per US
Postal Service specification. Installations in Phase II were executed via a
software download over the Internet or with a CD-ROM provided to users. Our
recruiting process for testers included use of our Web site, local advertising,
small office/home office lists and business development relationships. During
Phase II beta testing, we developed electronic file submission requirements,
continued to strengthen our US Postal Service relationship, maintained heavy
user focus and dialogue and continued to develop support strategy and
infrastructure.
Phase III. We commenced Phase III testing on May 6, 1999. Phase III of beta
testing includes expansion of the user base from 500 to 1,500 users in the
Washington, D.C. and California regions. Phase III will provide us and the US
Postal Service the opportunity to perform statistically significant market
analyses to determine marketing and pricing strategies and to further evaluate
our systems in preparation for a national launch.
US Postal Service Approval. Upon satisfactory completion of Phase III, the
US Postal Service will publish and announce in the federal register the
approval of the Stamps.com service for commercial release.
Commercial Release. Following US Postal Service approval, we will conduct a
readiness review and then be subject to a US Postal Service mandated limited
launch of 10,000 customers following the initial commercial release of our
service. After completion of the limited launch, we will conduct a controlled
national launch of our service through our strategic distribution partners.
Our Strategic Distribution Partners
Our objective is to achieve significant market penetration through
relationships with strategic partners in each of the four following categories:
. Web portals, content sites and Internet service providers, including
AOL;
. independent software vendors, including Intuit/Quicken.com;
. PC, printer and other equipment manufacturers; and
. office/postal supplies vendors, including Office Depot and Avery
Dennison.
We believe we will benefit from these relationships by achieving positive
brand association and a cost effective means of customer acquisition. We
believe our partners can utilize their relationships with us to derive
additional revenue opportunities, including revenue-sharing arrangements with
us, and provide more value-added services to their customers.
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America Online. In December 1998, we entered into a two phase co-marketing
and distribution agreement with AOL and are currently in the first phase, or
Pre-Launch Phase, of the program. During the Pre-Launch Phase, we are
collaboratively conducting development, testing, advertising and educational
activities over the AOL network. The second phase of the Stamps.com/AOL
program, or Launch Phase, becomes active when the US Postal Service approves
the commercial release of our Internet postage service. Subject to conditions,
the Launch Phase provides the following benefits to us:
. our software will be bundled exclusively on CD-ROMs that are
distributed to AOL prospects and customers;
. our software CD-ROMs will exclusively be inserted in boxes with select
products purchased through AOL Store;
. we will be featured prominently when AOL Keyword "stamps" is used;
. we will receive top positioning on the AOL Network postage category
page; and
. we will collaboratively develop and present an exclusive three day
Internet postage educational program for the AOL customer base.
The Launch Phase will also include a significant advertising impression
commitment throughout select AOL properties, including the AOL Service,
aol.com, Digital Cities and CompuServe.
Office Depot. In February 1999, we entered into a partnership with Office
Depot, Inc., a leading seller of office products. Our agreement with Office
Depot provides us with a download link to sign up for our service available
from the Office Depot Online Superstore, including "above the fold" positioning
of the link, which means our link will appear on the portion of the Office
Depot Web site that doesn't require a user to scroll down the page to access
our link. The agreement also contemplates a "point of purchase" advertisement
campaign.
Avery Dennison. In March 1999, we entered into to a distribution
relationship with Avery Dennison Corporation, a leading supplier of adhesive
materials, office products and label systems. Our agreement with Avery Dennison
provides that through 1999 our service will be exclusively offered for download
from the Avery Web Site and exclusively distributed on Avery Label Pro Software
CD-ROMs through retail channels. During this time period, we will exclusively
promote Avery Label products.
Dymo/CoStar. In March 1999, we entered into a distribution relationship
with Dymo, a leading label-making brand available in 160 countries worldwide.
Dymo is part of Esselte, an international office and business supply company,
which recently acquired CoStar Corporation. CoStar is a leading manufacturer of
specialty printers, software and supplies for printing labels, bar codes,
receipts and identification badges. Our agreement with Dymo/CoStar provides
that our software will be bundled on all software installation CD-ROMs included
in all CoStar LabelWriter printer boxes. In addition, our software will be
downloadable from the CoStar Web site.
Seiko Instruments. In March 1999, we entered into a distribution agreement
with Seiko Instruments USA Inc., a leading supplier and marketer of electronic
components, consumer electronics, printer mechanisms, PC peripheral color
printers, and specialty black and white printers. Our agreement with Seiko
provides that our software will be bundled on software installation CD-ROMs
included in all Seiko Smart Label Printer boxes. In addition, our software will
be downloadable from the Seiko Web site.
Westvaco. In April 1999, we entered into a distribution and co-development
agreement with Westvaco Corporation, a leading manufacturer and supplier of
paper materials, envelopes and other packaging products. Our agreement with
Westvaco provides that our service will be promoted on boxes of Westvaco's
Columbian brand laser and inkjet envelopes sold through several channels,
including office superstores. In addition, our service will be promoted on the
Columbian brand Web site.
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Intuit. In May 1999, we entered into a promotional agreement with Intuit,
Inc., a leading supplier of small business software. Our agreement provides us
with an electronic link to our Web site available from various channels within
the Intuit network of Web sites, including the "small business channel" of the
Quicken.com, Excite Money & Investing and WebCrawler Money & Investing Web
sites. Our agreement also provides us with promotional advertisements on the
"QuickBooks.com" Web site and on the home page of the "Quicken.com" Web site.
In addition, we have promotional advertisements and electronic links to our Web
site available from Quicken '99 software products.
Our Marketing and Sales
We intend to establish a strong brand name by allocating significant
resources to our marketing and distribution efforts. We intend to distribute
our postage printing software through our Web site. In addition, we will rely
on traditional media and several other channels to achieve rapid distribution
of our services, including:
Web Sites. We intend to work with high traffic Web sites including portals,
commerce and content sites, and other high visibility Internet sites. This
channel will provide the opportunity for users to download our software and
access our Internet postage service.
Affiliate Programs. We intend to utilize the traffic and customers of other
online sites by offering revenue-sharing opportunities to affiliates that
provide a link on their Web site to download our Internet postage software and
access other related services. Affiliates can capitalize on the ability to
offer new, value-added services and increase repeat visits to their site.
Preloaded/Bundled Hardware and Services. We intend to take advantage of
relationships with vendors of hardware products, including computers, printers
and label makers, and with Internet service providers to offer our software to
buyers of their products. Resellers can capitalize on the ability to promote
new features on commodity, non-differentiated products and services.
Embedded Software. We intend to seek further partnerships with software
publishing companies. Software packages that would benefit from our current
services would include word processing, contact and address management,
accounting, billing and retail software.
Postal Supplies. We will target companies in the postal supplies industry,
including manufacturers of envelopes, labels, checks, forms, digital scales and
postage meters.
Financial Services. We will seek distribution and co-branding opportunities
with banks and brokerages by incorporating our Internet postage service into
online banking and investing offered by financial service providers.
Direct Sales. We will target specific large industries or vertical markets
where distributed use of the mail is prevalent, including insurance, travel and
hospitality, financial services, law firms or other businesses where branch
offices or agent organizational structures are common. We believe that
significant benefits in the form of usability, convenience and cost savings to
large corporate users may result from integrating our Internet postage service
into the everyday work flow.
Customer Retention Programs. We believe we can increase customer retention
by offering co-branded affinity marketing programs, including frequent flyer
miles based on postage and other related expenditures. Further, we intend to
create strong customer loyalty by offering discounts to our online store that
are tied to customer postage volume.
Our Competition
The market for Internet postage products and services is new and we expect
it to be intensely competitive. At present, three other Internet postage
vendors have hardware products available for beta testing, one of which was
approved for Phase III beta testing at the same time as our software-based
service. One of the vendors also has a software-based product in beta testing.
However, we were the first participant authorized for beta testing by the US
Postal Service with a software-based solution that does not require the
purchase or use of additional hardware for a user's PC and printer set-up. We
were approved for beta testing on August 25,
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1998 and the other software-based product vendor announced their approval for
the first stage of beta testing on March 29, 1999. As a result, we believe we
have a significant development lead over software-based solutions given the
length of time associated with security evaluation and beta testing to which
the US Postal Service subjects all new product offerings.
The following is a summary of our competitors in the Information Based
Indicia Program program:
E-Stamp Corporation. E-Stamp is a developer and marketer of a hardware-
based solution enabling users to generate postage transactions from their
existing personal computers and printers. E-Stamp was the first company to gain
US Postal Service approval for market testing of a hardware storage device
identified as the Postal Security Device. E-Stamp is currently in beta testing
for its PC Postal Security Device product and announced their approval for
Phase III beta testing in May 1999. E-Stamp currently has partnerships with
America Online, Compaq, Microsoft and Yahoo!
Neopost. Neopost is a large French postage company with a small percentage
of US market share in the traditional postage meter industry. Similar to E-
Stamp, Neopost has developed an online postage product that requires a special
purpose hardware device, and announced their approval for Phase I beta testing
in September 1998. Neopost has also announced a software-based postage product
for which it is seeking US Postal Service certification. On March 29, 1999,
Neopost announced approval for their software based postage product for Phase I
beta testing. Finally, Neopost has commercially available a specialty metering
device that can be attached to a user's PC and allows a user to download
postage to the specialty device from the Internet. This specialty metering
device is not regulated by the Information Based Indicia Program because it
does not allow for the printing of postage from standard inkjet or laser
printers.
Pitney Bowes, Inc. Pitney Bowes is the current market leader in the
traditional postage meter business and according to its most recent annual
report had approximately $4.2 billion in revenues in 1998. Pitney Bowes has
developed a product similar to E-Stamp which requires the use of a specialized
hardware device for postage transactions. Pitney Bowes announced the approval
of their hardware-based product for Phase II beta testing on March 9, 1999. In
addition, Pitney Bowes has made formal comments to the US Postal Service
asserting that it holds several patents and has patent applications pending
which are infringed by the product specifications that Information Based
Indicia Program participants are required to follow. To that end, Pitney Bowes
filed two separate lawsuits in June 1999 against us and E-Stamp alleging
infringement of Pitney Bowes patents. See "Risk Factors--Intellectual property
claims, including a June 1999 claim against us by Pitney Bowes, could delay our
development and harm our results of operations."
In addition to competing with Internet postage vendors for market share of
Internet postage sales, we will also compete with traditional postage methods
including stamps and metered mail. While we believe our Internet postage
service provides benefits over traditional postage methods, we cannot be
certain that Internet postage will be adopted by postage consumers on a
commercial scale, if at all. These customers may continue to use traditional
means to purchase postage, including purchasing postage from their local post
office. Any failure by us or other Internet postage vendors to displace
traditional postage methods would seriously impact our ability to compete with
providers of traditional postage.
We may also face competition from hardware-based products. Although, we
believe our software-based solution is easier to use than hardware-based
products, hardware-based products have some advantages. For example, our
service requires a user to connect to the Internet each time the user prints
postage, while the hardware-based solution allows users to download postage
onto a storage device that is connected to the user's computer. If users of
hardware-based products do not transition to software-based solution we could
face continuing competition from this market.
Overall, we may not be able to maintain a competitive position against
current or future competitors as they enter the markets in which we compete.
This is particularly true with respect to competitors with greater financial,
marketing, service, support, technical, intellectual property and other
resources than us. Our failure to maintain a competitive position within the
market could seriously harm our business, financial condition and results of
operations. We believe that the principal competitive factors in our market
include:
. US Postal Service product certification;
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. ability to successfully achieve commercial release of an Internet
postage product;
. brand recognition;
. convenience;
. ease of use;
. price;
. accountability;
. security;
. compatibility;
. accuracy; and
. integration.
For further discussion of the competitive risks and factors to be
considering in making an investment in our common stock, see "Risk Factors--
Intellectual property infringement claims, including a June 1999 claim against
us by Pitney Bowes, could delay our development and harm our results of
operations" and "--If we are unable to compete successfully, particularly
against large, traditional providers of postage products such as Pitney Bowes
who enter the online postage market, our revenues and operating results will
suffer."
Our Technology
Our service is comprised of the following key components:
System Architecture. Our servers are located in a high-security, off-site
data center and operate with internally developed security software. These
servers create the information based indicia. These servers also process
postage purchases using secure technology that meets US Postal Service security
requirements.
Our service currently supports Windows-based client applications, which we
believe is easier for customers to use and provides the power and flexibility
necessary to support a variety of label and envelope options and a wide range
of printers. In addition, our application employs an internally developed user
authentication mechanism for additional security.
Transaction Processing. Our transaction processing servers are a
combination of secure, commercially available technologies that are designed to
provide secure and reliable transactions. Our system implements hardware to
exceed the highest government standard for security and data integrity
currently in effect. The performance and scalability of our Internet postage
system allows a wide range of users to process postage transactions through our
Web site.
Database Processing. Our database servers are designed to complement
industry leading database technologies and can be built to scale incrementally
as needed.
Client Interoperability. Our system utilizes a secure client module for
authentication, which has been designed to minimize transmission time over the
Internet. The client module is designed to be the building block for Internet
postage capabilities that are accessible from popular software applications.
Our client module will be used by our postage application as well as add-ins
for popular word processing applications and third party mailing and business
systems.
Our Intellectual Property
We rely on a combination of patent, trade secret, copyright and trademark
laws and contractual restrictions to establish and protect intellectual
property rights in products, services, know-how and information. We have three
issued US patents and have filed four patent applications in the United States.
We have also applied for several trademarks and service marks. We plan to apply
for other patents in the future.
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Despite efforts to protect our intellectual property rights, we face
substantial uncertainty regarding the impact that other parties' intellectual
property positions will have on the Internet postage market. In particular,
Pitney Bowes has sent formal comments to the US Postal Service asserting that
intellectual property of Pitney Bowes related to postage metering and systems
would be infringed by products meeting the requirements of the Information
Based Indicia Program's specifications. Furthermore, in June 1999, Pitney Bowes
filed two separate lawsuits in the United States District Court for the
District of Delaware against both us and E-Stamp alleging infringement of
Pitney Bowes patents. For a discussion of claims by Pitney Bowes and risks
associated with intellectual property, please refer to "Risk Factors--
Intellectual property infringement claims, including a June 1999 claim against
us by Pitney Bowes, could delay our development and harm our results of
operations and "--Legal Proceedings."
Our Employees
As of May 31, 1999, we had 99 full time employees, of which 40 were
employed in research and development, 32 were employed in network operations,
11 were employed in sales and marketing, and 16 were employed in administrative
positions. None of our employees are represented by a labor union, and we
consider our employee relations to be good. We intend to expand significantly
our employee base in 1999. See "Risk Factors--We rely on a relatively new
management team and need additional personnel to grow our business."
Our Properties
Our corporate headquarters is located in a 41,000 square foot facility in
Santa Monica, California under a lease expiring on May 31, 2004. We also have a
5,000 square foot satellite research and development site in Irvine, California
under a lease expiring in September 1999. We believe that our current
facilities and other facilities that will be available to us will be adequate
to accommodate our needs for the foreseeable future.
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 alleges
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. Pitney Bowes filed a similar
complaint in Delaware in early June 1999 against one of our competitors, E-
Stamp Corporation, alleging infringement of seven Pitney Bowes patents. If
Pitney Bowes successfully asserts its claims against us and E-Stamp, the
Internet postage market could be severely impacted and may not develop. We are
currently investigating the claims against us and have not responded to the
suit. To date, we believe we have meritorious defenses and intend to defend
ourselves vigorously. However, the litigation could result in significant
expenses and diversion of management time and other resources. Further, if
Pitney Bowes successfully asserts an infringement claim against us, our
operations would be impacted severely. The Pitney Bowes suit could result in
limitations on how we implement our service, delays and costs associated with
redesigning our service, payments of license fees and other payments. See "Risk
Factors--Intellectual property infringement claims, including a June 1999 claim
against us by Pitney Bowes, could delay our development and harm our results of
operations."
We are not currently involved in any other material legal proceedings, nor
have we been involved in any such proceedings that has had or may have a
significant effect on our financial position. We are not aware of any other
material legal proceedings pending against us.
38
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information regarding our executive
officers and directors as of May 31, 1999:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
John M. Payne........... 43 Chief Executive Officer, President and Director
John W. LaValle......... 42 Chief Financial Officer, Senior Vice President of Operations, and Secretary
Michael D. Walther...... 45 Senior Vice President, Network Operations
Timothy A. Von Kaenel... 33 Senior Vice President, Product Development
Douglas J. Walner....... 29 Vice President, Business Development
Jeffrey L. Green........ 28 Vice President, Marketing
Candelario J. Andalon... 30 Corporate Controller
Thomas H. Bruggere (2).. 53 Chairman of the Board of Directors
Mohan P. Ananda......... 52 Director
David C. Bohnett (1).... 43 Director
Jeffrey J. Brown (1).... 38 Director
Thomas N. Clancy (2).... 41 Director
G. Bradford Jones (2)... 44 Director
Marvin Runyon (1)....... 74 Director
Loren E. Smith.......... 61 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
John M. Payne has been our Chief Executive Officer and President and a
Director since October 1998, and was a consultant to us from May 1998 to
October 1998. From June 1994 to January 1998, Mr. Payne served as the President
and Chief Operating Officer and later the President and Chief Executive Officer
of Airmedia, Inc., a wireless communications software and service provider. On
April 15, 1999, Airmedia filed for Chapter 11 bankruptcy protection. From
October 1992 to June 1994, Mr. Payne was the founding Chief Executive Officer
of Fingertip Technologies, Inc., a software company. Previously, Mr. Payne co-
founded and served as President of two specialty software firms, Financial
Microsystems from June 1986 to October 1992, and LoanStar Computer from
September 1979 to November 1986. Mr. Payne received his B.A. in Economics from
the University of California, Irvine.
John W. LaValle has been our Chief Financial Officer, Senior Vice President
of Operations, and Secretary since September 1998. From July 1997 to September
1998, Mr. LaValle served as Chief Financial Officer of Comcore Semiconductor,
Inc., a semiconductor manufacturer. From November 1994 to July 1997, he was the
Chief Financial Officer of Trikon Technologies; a semiconductor equipment
manufacturer. Previously, Mr. LaValle served as the Chief Financial Officer at
Superconductor Technologies, a manufacturer of high temperature thin film
superconductors used in cellular base station applications from September 1989
to November 1994. From April 1987 to September 1989, he was the Chief Financial
Officer of PS Medical, a manufacturer of implantable neurosurgery products.
From August 1984 to February 1987, Mr. LaValle served as a senior financial
analyst for Chevron Corporation, and from December 1980 to September 1982, he
served as a senior analyst for Andersen Consulting. Mr. LaValle received his
B.A. in Government from Boston College and his M.B.A. from Harvard University.
Michael D. Walther has been our Senior Vice President of Network Operations
since April 1999 after having served as a consultant since January 1999. From
December 1997 to December 1998, Mr. Walther provided interim CEO/COO support to
early stage venture companies. In June 1994, he co-founded Artios Corporation,
an enterprise solutions company, and served as its President until December
1997. From October 1989 to June 1994, Mr. Walther served as President of AEI, a
computer aided design software firm. Mr. Walther received his B.S. in Computer
Science from the Texas A&M University--School of Commerce.
39
<PAGE>
Timothy A. Von Kaenel has been our Senior Vice President of Product
Development since January 1999. From July 1998 to January 1999, Mr. Von Kaenel
was Director, Product Management at IMA, a customer service software company.
From July 1995 to July 1998, Mr. Von Kaenel was Senior Vice President of
Product Development at AirMedia, Inc., a wireless communications software and
service provider. On April 15, 1999, Airmedia filed for Chapter 11 bankruptcy
protection. Before AirMedia, Mr. Von Kaenel was Vice President, Interactive
Technologies at Advanced Media, a multimedia software and interactive services
company. In 1990, he founded and was President of Vision Imaging, an
international developer and publisher of multimedia software products, which
was later acquired by Advanced Media. Mr. Von Kaenel received his B.A. in
Economics and M.B.A. from the University of California, Irvine.
Douglas J. Walner has been our Vice President of Business Development since
September 1998, and from March 1998 to August 1998, Mr. Walner served as a
business development and strategic relationship consultant. From January 1996
to March 1998, Mr. Walner was the Director of Business Development at
CyberMedia, a software company. Mr. Walner served as the Original Equipment
Manufacturer Sales Manager at Airmedia, Inc., from April 1994 to January 1996.
Prior to 1994, Mr. Walner served as a Program Manager at Mortgage Capital
Group/City National Bank. Mr. Walner received his B.A. in History from Tulane
University.
Jeffrey L. Green has been our Vice President of Marketing since co-founding
Stamps.com in September 1996. From August 1992 to May 1995, Mr. Green served as
an account executive at Ziff Davis, Inc., a publishing company. Mr. Green also
worked at Hewlett Packard in Product Marketing in 1996 while attending the
Anderson School at UCLA. Mr. Green received his B.A. in Political Science from
Dartmouth and his M.B.A. from UCLA.
Candelario J. Andalon has been our Corporate Controller since October 1998.
From September 1991 to September 1998, Mr. Andalon served in various capacities
at Ernst & Young LLP, most recently as Manager in the firm's Technology,
Communications and Entertainment group. Mr. Andalon received his B.S. degree in
Accounting from Loyola Marymount University and is a Certified Public
Accountant.
Thomas H. Bruggere has been our Chairman of the Board of Directors since
April 1998. Since 1994, Mr. Bruggere has been a private investor. In 1995 and
1996, Mr. Bruggere was the Democratic Nominee for the US Senate from Oregon.
Mr. Bruggere founded Mentor Graphics, an electronic design automation software
company, in 1981 and served as its Chief Executive Officer until 1994. Mr.
Bruggere also serves on the Board of Directors of Open Market, Inc., a software
development company, and several privately-held companies. Mr. Bruggere
received his B.S. in Mathematics from UC Santa Barbara, his M.S. in Computer
Science from the University of Wisconsin and his M.B.A. from Pepperdine
University.
Mohan P. Ananda 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 other privately-
held companies. Mr. Ananda received his B.S. in 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.
David C. Bohnett has been a Director since March 1999. Until May 1999, Mr.
Bohnett served as Chairman of the Board and Secretary of GeoCities, an Internet
hosting company, which he founded in November 1994. From November 1994 to April
1998, Mr. Bohnett also served as GeoCities' Chief Executive Officer and
President. From November 1994 to November 1997, Mr. Bohnett also served as
GeoCities' Chief Financial Officer. Prior to founding GeoCities, from February
1990 to May 1994, Mr. Bohnett served as Director of Product Marketing at Goal
Systems, which merged with LEGENT, a software company. From 1988 to 1990, Mr.
Bohnett was Chief Financial Officer of Essential Software, which merged with
Goal Systems. Mr. Bohnett also was a director of GeoCities until May 1999, and
he continues to serve on the Board of Directors
40
<PAGE>
of several private companies. Mr. Bohnett was elected to our Board of Directors
as a representative of the class of Series C investors under a voting agreement
which will terminate upon the closing of this offering. Mr. Bohnett received
his B.S. degree in Business Administration from the University of Southern
California and his M.B.A. degree in Finance from the University of Michigan.
Jeffrey J. Brown 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., 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 a
director 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 was elected to our Board of Directors as a representative
of SBIC Partners under a voting agreement which will terminate upon the closing
of this offering. Mr. Brown received his B.S. in Mathematics from Willamette
University and his M.B.A. from Stanford University.
Thomas N. Clancy has been a Director since February 1998. Mr. Clancy has
been a Venture Partner at Enterprise Partners Venture Capital since February
1997. Prior to joining Enterprise Partners in September 1996, Mr. Clancy was a
Partner at Technical Resource Connection, now Perot Systems, a provider of
information technology services, from March 1996 to July 1996. Previously, Mr.
Clancy served as the Chief Executive Officer at Expersoft from May 1994 to
January 1996 and as Vice President of Product Marketing at Expersoft from
October 1993 to May 1994. From March 1983 to November 1991, Mr. Clancy worked
at Citibank in engineering management and product development. Mr. Clancy
serves on the board of a number of private companies. Mr. Clancy was elected to
our Board of Directors as a representative of Enterprise Partners under a
voting agreement which will terminate upon the closing of this offering. Mr.
Clancy received his Computer and Systems Engineering degree from Rensselaer
Polytechnic Institute in New York.
G. Bradford Jones has been a Director since October 1998. Mr. Jones is
currently a General Partner at Brentwood Venture Capital, which he joined in
1981. Mr. Jones also currently serves on the board of directors of Onyx
Acceptance Corporation, a specialized consumer finance company, Interpore
International, a medical device company, and ISOCOR, a software developer, and
several privately-held companies. Mr. Jones was elected to our Board of
Directors as a representative of Brentwood Associates under a voting agreement
which will terminate upon the closing of this offering. Mr. Jones received his
B.S. in Chemistry from Harvard University, his Master degree in Physics from
Harvard University and his J.D./M.B.A. from Stanford University.
Marvin Runyon has been a Director since February 1999. From 1992 to 1999,
Mr. Runyon served as Postmaster General of the United States. Prior to joining
the US Postal Service, he served as Chairman of the Tennessee Valley Authority
from 1988 to 1992. From 1980 to 1988, Mr. Runyon was the founding President and
CEO of Nissan Motor Manufacturing Corporation U.S.A. Previously, Mr. Runyon
spent 37 years at Ford Motor Co., leaving in 1980 with the position of Vice
President, Body and Assembly Operations. Mr. Runyon serves as a board member of
Genesis Direct, Inc., a specialty retailer. Mr. Runyon received his B.S. from
Texas A&M University.
Loren E. Smith has served as a Director since February 1999. Since November
1996, Mr. Smith has been a Principal at Threshold Management, a consulting firm
that specializes in strategic growth management for leading businesses in a
diverse range of industries. He was also employed as a Principal at Threshold
Management from July 1993 to October 1994. From October 1994 to October 1996,
he served as the Senior Vice President and Chief Marketing Officer of the US
Postal Service. In 1985, Mr. Smith joined Citibank and was responsible for
establishing the national marketing organization of its Consumer Services
Group. From 1975 to 1995, he founded Threshold Management. Previously, Mr.
Smith held various management positions at General Foods Corporation and
Colgate Palmolive Co. Mr. Smith received his A.B. in Economics from Albion
College and his M.B.A. from the University of Michigan.
41
<PAGE>
Classified Board of Directors
Our Board of Directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board
of directors will be elected each year. These provisions, together with the
provision of our amended and restated certificate of incorporation, allow the
board of directors to fill vacancies of or increase the size of the board of
directors, and may deter a stockholder from removing incumbent directors and
filling such vacancies with its own nominees in order to gain control of the
board.
Our board has resolved that Messrs. Bohnett, Bruggere and Jones will serve
as Class I Directors whose terms expire at the 2000 annual meeting of
stockholders. Messrs. Ananda, Clancy and Runyon will serve as Class II
directors whose terms expire at the 2001 annual meeting of stockholders.
Messrs. Brown, Payne and Smith will serve as Class III directors whose terms
expire at the 2002 annual meeting of stockholders.
Board Committees
The Board has established an Audit Committee to meet with and consider
suggestions from members of management and our internal accounting personnel,
as well as our independent accountants, concerning our financial operations.
The Audit Committee also has the responsibility to review our audited financial
statements and consider and recommend the employment of, and approve the fee
arrangements with, independent accountants for both audit functions and for
advisory and other consulting services. The Audit Committee is currently
comprised of Messrs. Runyon, Bohnett and Brown. The Board has also established
a Compensation Committee to review and approve the compensation and benefits
for our key executive officers, administer our stock purchase, equity incentive
and stock option plans and make recommendations to the Board regarding these
matters. The Compensation Committee is currently comprised of Messrs. Bruggere,
Clancy and Jones.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Bruggere, Clancy and Jones.
Neither of these individuals was an employee of ours at any time since our
formation. None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or more
executive officers serving as a member of our Board of Directors or
Compensation Committee.
Director Compensation and Other Arrangements
Our directors receive no cash remuneration for serving on the Board of
Directors or any board committee. In March 1999, Messrs. Bohnett, Runyon and
Smith were each granted an option to purchase 108,000 shares of common stock.
The options were granted at fair market value on the date of grant and vest
ratably over three year periods. In April 1999, Messrs. Clancy, Jones and Brown
were each granted an option to purchase 36,000 shares of common stock. These
options were granted at fair market value on the date of grant and vest in full
on the first anniversary of the grant. In addition, directors are reimbursed
for all reasonable expenses incurred by them in attending Board and Committee
meetings.
In February 1999, we entered into a three-year consulting agreement with
Loren Smith under which he will provide marketing and strategic planning
services. Mr. Smith also agreed to serve as a director on our Board of
Directors and to serve as a member on a board committee. In exchange for these
services, we will compensate Mr. Smith $120,000 per year, and in consideration
of his consulting services, grant him an option to purchase 135,000 shares of
our common stock at $0.33 per share.
Directors who are also our employees are eligible to receive options and be
issued shares of common stock directly under our 1999 Stock Incentive Plan.
Non-employee directors will also receive automatic option grants under our 1999
Stock Incentive Plan. See "--1999 Stock Incentive Plan."
42
<PAGE>
Executive Compensation
The following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal year ended December 31, 1998 by our Chief
Executive Officer and each of our other four highest paid executive officers
whose total compensation exceeded or would have exceeded $100,000 during 1998
had those officers provided services to us for the entire fiscal year.
Summary Compensation Table for Fiscal Year 1998
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Securities
Name and Principal -------------------- Other Annual Underlying All Other
Positions Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
------------------ ---------- --------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
John M. Payne
President and Chief
Executive Officer
(October 1998 to
present)............ 27,897 -- -- -- 112,800(1)
John W. LaValle
Chief Financial Officer
and Senior Vice
President of
Operations........... 42,000 -- -- 395,802 --
Mohan P. Ananda
Chief Executive Officer
and President
(January 1998 to
October 1998)........ 85,500 -- -- -- --
Douglas J. Walner
Vice President of
Business Development. 35,000 25,000 -- 366,357 7,434(2)
</TABLE>
- --------
(1) Represents total payments to Mr. Payne for consulting services performed
during the period from May 1998 to October 1998.
(2) Represents total payments to Mr. Walner for consulting services performed
during the period from August 1998 to September 1998.
43
<PAGE>
Stock Options Granted During Fiscal Year 1998
During the fiscal year ended December 31, 1998, we granted options to
purchase 2,310,909 shares of 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. 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 officers
listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Appreciation
Individual Grants For Option Term
------------------------------------------------------------- ---------------
Number of
Securities Percentage of Exercise
Underlying Options Total Options Granted Price Per Expiration
Name Granted to Employees in 1998 Share Date 5% 10%
---- ------------------ --------------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
John W. LaValle......... 395,802 17.1% $0.07 9/24/08 $16,594 $42,054
Douglas J. Walner....... 366,357 15.6% $0.07 8/20/08 $15,360 $38,925
</TABLE>
Each option listed in the table was granted under our 1998 Stock Plan,
which will be succeeded by our 1999 Stock Incentive Plan upon the closing of
this offering. The options shown in the table are immediately exercisable. The
shares underlying the options are subject to a repurchase option which expires
over a four year period. The purchase price per share upon exercise of the
repurchase option by us is equal to the exercise price paid by the optionee to
originally purchase the shares. One year after the option grant date, 1/4 of
the shares are no longer subject to the repurchase option and the repurchase
option expires for 1/48 of the shares each month thereafter. The shares
underlying the options may also vest fully upon a change in control. See "--
1999 Stock Incentive Plan."
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. These amounts represent assumed rates of appreciation in the value of
the common stock from the fair market value on the date of grant. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the common stock and overall stock market conditions. The amounts reflected in
the table may not necessarily be achieved.
Aggregated Option Exercises and Year-End Option Values
The following table indicates the number and value of unexercised options
held by our officers listed on the Summary Compensation Table. There was no
public trading market for the common stock as of December 31, 1998.
Accordingly, these values of unexercised options have been calculated by
subtracting the exercise price from the fair market value of the underlying
securities as determined by the Board of Directors. No options were exercised
by our executive officers in 1998.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
December 31, December 31,
1998 1998
--------------- ---------------
Name Vested Unvested Vested Unvested
---- ------ -------- ------ --------
<S> <C> <C> <C> <C>
John W. LaValle................................. 0 395,802 0 $105,547
Douglas J. Walner............................... 0 366,357 0 $ 97,695
</TABLE>
44
<PAGE>
Employment Agreements and Change in Control Arrangements
John M. Payne has entered into a letter agreement, effective as of October
29, 1998, to serve as our President and Chief Executive Officer. Mr. Payne's
1999 compensation includes a base salary of $210,000 per year and a potential
bonus of $90,000. In addition, we gave Mr. Payne benefits that we make
available to our employees in comparable positions, and upon his execution of
the letter agreement, we sold 1,500,000 shares of our common stock to him at
$0.07 per share, the fair market value on the purchase date. Mr. Payne is an
at-will employee and his employment may be terminated at any time by him or by
us. If Mr. Payne's employment is constructively terminated or terminated by us
or a successor entity involuntarily within 12 months following a change in
control, or if we terminate or constructively terminate Mr. Payne's employment
for any reason other than for cause, he will be entitled to receive monthly
installments of his base salary for six months and all of his unvested stock
will become immediately vested. After two years of employment, Mr. Payne's
severance period will increase to nine months, and after three years of
service, the severance period will increase to one year.
John W. LaValle entered into a letter agreement, effective as of August
16, 1998, to serve as our Chief Financial Officer and Senior Vice President.
Mr. LaValle receives a base salary of $156,000 per year and was granted an
option to purchase 395,802 shares of common stock at $0.07 per share, the fair
market value on the grant date. In addition, Mr. LaValle receives standard
medical and dental benefits available to our other employees. Mr. LaValle is
an at-will employee and his employment can be terminated at any time by him or
by us. If Mr. LaValle's employment is constructively terminated or terminated
by us or a successor entity within 12 months following a change in control,
all of his unvested stock will become immediately vested.
For purposes of Messrs. Payne and LaValle, "constructive termination"
shall occur upon the following:
. a relocation without consent;
. disability or death;
. an assignment to a new position that is not commensurate with the
individual's seniority and compensation level; or
. any reduction in the individual's compensation.
Mohan P. Ananda entered into an employment agreement, effective as of
January 20, 1998, under which Mr. Ananda served as our President, Chief
Executive Officer and the Chairman of the Board of Directors. Mr. Ananda
received an initial base salary of $60,000, which was increased to $120,000
per year in October 1998. In addition, we sold 2,172,595 shares of our common
stock to Mr. Ananda at $0.01 per share, the fair market value on the purchase
date. Mr. Ananda has ceased active involvement with our operations, but he
continues as a director.
Douglas J. Walner is subject to an agreement which partially accelerates
the vesting of his options upon a change in control and his subsequent
termination.
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 eighteen (18) months following a
Corporate Transaction in which his or her options are assumed by the successor
corporation and do not otherwise 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
"Corporate Transaction" 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 of us. "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
45
<PAGE>
. 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, which will serve as a successor plan to our
1998 Stock Plan, will include change in control provisions which may result in
the accelerated vesting of outstanding option grants and stock issuances. See
"--1999 Stock Incentive Plan--Change in Control."
1999 Stock Incentive Plan
Introduction. The 1999 Stock Incentive Plan is intended to serve as the
successor program to our 1998 Stock Plan. The 1999 plan was adopted by the
board and approved by the stockholders in June 1999. The 1999 plan will become
effective when the underwriting agreement for this offering is signed. At that
time, all outstanding options under our existing 1998 plan will then be
transferred to the 1999 plan, and no further option grants will be made under
the 1998 plan. The transferred options will continue to be governed by their
existing terms, unless our compensation committee decides to extend one or more
features of the 1999 plan to those options. Except as otherwise noted below,
the transferred options have substantially the same terms as will be in effect
for grants made under the discretionary option grant program of our 1999 stock
plan.
Share Reserve. 7,290,000 shares of our common stock have been authorized
for issuance under the 1999 plan. This share reserve consists of the number of
shares we estimate will be carried over from the 1998 plan. The share reserve
under our 1999 plan will automatically increase on the first trading day in
January each year, beginning with calendar year 2000, by an amount equal to
three percent (3%) of the total number of shares of our common stock
outstanding on the last trading day of December in the prior year, but in no
event will this annual increase exceed 1,564,715 shares. In addition, no
participant in the 1999 plan may be granted stock options or direct stock
issuances for more than 1,125,000 shares of common stock in total in any
calendar year.
Programs. Our 1999 plan has five separate programs:
. the discretionary option grant program, under which eligible employees
may be granted options to purchase shares of our common stock at an
exercise price not less than the fair market value of those shares on
the grant date;
. the stock issuance program, under which eligible individuals may be
issued shares of common stock directly, upon the attainment of
performance milestones or upon the completion of a period of service or
as a bonus for past services;
. the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary to the acquisition
of special below market stock option grants;
. the automatic option grant program, under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members to purchase shares of common stock at an exercise price
equal to the fair market value of those shares on the grant date; and
. the director fee option grant program, under which our non-employee
board members may be given the opportunity to apply a portion of any
retainer fee otherwise payable to them in cash for the year to the
acquisition of special below-market option grants.
Eligibility. The individuals eligible to participate in our 1999 plan
include our officers and other employees, our board members and any consultants
we hire.
Administration. The discretionary option grant and stock issuance programs
will be administered by our compensation committee. This committee will
determine which eligible individuals are to receive option grants or stock
issuances under those programs, the time or times when the grants or issuances
are to be made, the number of shares subject to each grant or issuance, the
status of any granted option as either an incentive stock option or a
nonstatutory stock option under the federal tax laws, the vesting schedule to
be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding.
46
<PAGE>
The compensation committee will also have the authority to select the executive
officers and other highly compensated employees who may participate in the
salary investment option grant program in the event that program is put into
effect for one or more calendar years.
Plan Features. Our 1999 plan will include the following features:
. The exercise price for any options granted under the plan may be paid
in cash or in shares of our common stock valued at fair market value on
the exercise date. The option may also be exercised through a same-day
sale program without any cash outlay by the optionee.
. The compensation committee will have the authority to cancel
outstanding options under the discretionary option grant program,
including any transferred options from our 1998 Stock Plan, in return
for the grant of new options for the same or different number of option
shares with an exercise price per share based upon the fair market
value of our common stock on the new grant date.
. Stock appreciation rights may be issued under the discretionary option
grant program. These rights will provide the holders with the election
to surrender their outstanding options for a payment from us equal to
the fair market value of the shares subject to the surrendered options
less the exercise price payable for those shares. We may make the
payment in cash or in shares of our common stock. None of the options
under our 1998 Stock Plan have any stock appreciation rights.
Change in Control. The 1999 plan will include the following change in
control provisions which may result in the accelerated vesting of outstanding
option grants and stock issuances:
. In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program which
is not to be assumed by the successor corporation will immediately
become exercisable for all the option shares, and all outstanding
unvested shares will immediately vest, except to the extent our
repurchase rights with respect to those shares are to be assigned to
the successor corporation.
. The compensation committee will have complete discretion to grant one
or more options which will become exercisable for all the option shares
in the event those options are assumed in the acquisition but the
optionee's service with us or the acquiring entity is subsequently
terminated. The vesting of any outstanding shares under our 1999 plan
may be accelerated upon similar terms and conditions.
. The compensation committee may grant options and structure repurchase
rights so that the shares subject to those options or repurchase rights
will immediately vest in connection with a successful tender offer for
more than fifty percent of our outstanding voting stock or a change in
the majority of our board through one or more contested elections. This
accelerated vesting may occur either at the time of the transaction or
upon the subsequent termination of the individual's service.
. The options currently outstanding under our 1998 Stock Plan will
immediately vest in the event we are acquired and the acquiring company
does not assume those options. Any options which are assumed will
immediately vest upon an involuntary termination of the optionee's
employment within 18 months after the acquisition.
Salary Investment Option Grant Program. In the event the compensation
committee decides to put this program into effect for one or more calendar
years, each of our executive officers and other highly compensated employees
may elect to reduce his or her base salary for the calendar year by an amount
not less than $10,000 nor more than $50,000. Each selected individual who makes
this election will automatically be granted, on the first trading day in
January of the calendar year for which his or her salary reduction is to be in
effect, an option to purchase that number of shares of common stock determined
by dividing the salary reduction amount by two-thirds of the fair market value
per share of our common stock on the grant date. The option will have exercise
price per share equal to one-third of the fair market value of the option
shares on the grant date. As a result, the option will be structured so that
the fair market value of the option shares on the
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<PAGE>
grant date less the exercise price payable for those shares will be equal to
the amount of the salary reduction. The option will become exercisable in a
series of twelve equal monthly installments over the calendar year for which
the salary reduction is to be in effect.
Automatic Option Grant Program. Each individual who first becomes a non-
employee board member at any time after the effective date of this offering
will receive an option grant for 10,000 shares of common stock on the date such
individual joins the board. In addition, on the date of each annual
stockholders meeting held after the effective date of this offering, each non-
employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase 2,500 shares of common stock,
provided such individual has served on the board for at least six months.
Each automatic grant 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 term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid
per share, any shares purchased under the option which are not vested at the
time of the optionee's cessation of board service. The shares subject to each
annual automatic grant will be fully-vested when granted. The shares subject to
each initial 10,000-share automatic option grant will vest in a series of 36
successive equal monthly installments upon the optionee's completion of each
month of board service over the 36 month period measured from the grant date.
However, the shares will immediately vest in full upon certain changes in
control or ownership or upon the optionee's death or disability while a board
member.
Director Fee Option Grant Program. If this program is put into effect in
the future, then each non-employee board member may elect to apply all or a
portion of any cash retainer fee for the year to the acquisition of a below-
market option grant. The option grant will automatically be made on the first
trading day in January in the year for which the non-employee board member
would otherwise be paid the cash retainer fee in the absence of his or her
election. The option will have an exercise price per share equal to one-third
of the fair market value of the option shares on the grant date, and the number
of shares subject to the option will be determined by dividing the amount of
the retainer fee applied to the program by two-thirds of the fair market value
per share of our common stock on the grant date. As a result, the option will
be structured so that the fair market value of the option shares on the grant
date less the exercise price payable for those shares will be equal to the
portion of the retainer fee applied to that option. The option will become
exercisable in a series of twelve equal monthly installments over the calendar
year for which the election is in effect. However, the option will become
immediately exercisable for all the option shares upon the death or disability
of the optionee while serving as a board member.
Additional Program Features. Our 1999 plan will also have the following
features:
. Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50%
of our outstanding voting stock or a change in the majority of our
board through one or more contested elections.
. Limited stock appreciation rights will automatically be included as
part of each grant made under the salary investment option grant
program and the automatic and director fee option grant programs, and
these rights may also be granted to one or more officers as part of
their option grants under the discretionary option grant program.
Options with this feature may be surrendered to us upon the successful
completion of a hostile tender offer for more than 50% of our
outstanding voting stock. In return for the surrendered option, the
optionee will be entitled to a cash distribution from us in an amount
per surrendered option share based upon the highest price per share of
our common stock paid in that tender offer.
. The board may amend or modify the 1999 plan at any time, subject to any
required stockholder approval. The 1999 plan will terminate no later
than the last business day of June 2009.
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1999 Employee Stock Purchase Plan
Introduction. Our 1999 Employee Stock Purchase Plan was adopted by the
board and approved by the stockholders in June 1999. The plan will become
effective immediately upon the signing of the underwriting agreement for this
offering. The plan is designed to allow our eligible employees and the eligible
employees of our participating subsidiaries to purchase shares of common stock,
at semi-annual intervals, with their accumulated payroll deductions.
Share Reserve. 300,000 shares of our common stock will initially be
reserved for issuance. The reserve will automatically increase on the first
trading day in January each year, beginning in calendar year 2000, by an amount
equal to one percent (1%) of the total number of outstanding shares of our
common stock on the last trading day in December in the prior year. In no event
will any annual increase exceed 521,571 shares.
Offering Periods. The plan will have a series of successive offering
periods, each with a maximum duration of 24 months. The initial offering period
will start on the date the underwriting agreement for the offering covered is
signed and will end on the last business day in July 2001. The next offering
period will start on the first business day in August 2001, and subsequent
offering periods will be set by our compensation committee.
Eligible Employees. Individuals scheduled to work more than 20 hours per
week for more than 5 calendar months per year may join an offering period on
the start date or any semi-annual entry date within that period. Semi-annual
entry dates will occur on the first business day of February and August each
year. Individuals who become eligible employees after the start date of an
offering period may join the plan on any subsequent semi-annual entry date
within that offering period.
Payroll Deductions. A participant may contribute up to 15% of his or her
cash earnings through payroll deductions, and the accumulated deductions will
be applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per
share on the participant's entry date into the offering period or, if lower,
85% of the fair market value per share on the semi-annual purchase date.
Semi-annual purchase dates will occur on the last business day of January
and July each year. In no event, however, may any participant purchase more
than 1,200 shares on any purchase date, and not more than 75,000 shares may be
purchased in total by all participants on any purchase date.
Reset Feature. If the fair market value per share of our common stock on
any purchase date is less than the fair market value per share on the start
date of the two-year offering period, then that offering period will
automatically terminate, and a new two-year offering period will begin on the
next business day. All participants in the terminated offering will be
transferred to the new offering period.
Change in Control. Should we be acquired by merger or sale of substantially
all of our assets or more than fifty percent of our voting securities, then all
outstanding purchase rights will automatically be exercised immediately prior
to the effective date of the acquisition. The purchase price will be equal to
85% of the market value per share on the participant's entry date into the
offering period in which an acquisition occurs or, if lower, 85% of the fair
market value per share immediately prior to the acquisition.
Plan Provisions. The following provisions will also be in effect under the
plan:
. The plan will terminate no later than the last business day of June
2009.
. The board may at any time amend, suspend or discontinue the plan.
However, some amendments may require stockholder approval.
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Limitation on Liability and Indemnification Matters
The certificate of incorporation that we will adopt immediately prior to
the closing of this offering provides that, except to the extent prohibited by
the Delaware General Corporation Law, our directors will not be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as directors. Under the Delaware General Corporation Law, the
directors have a fiduciary duty to Stamps.com which is not eliminated by this
provision of the certificate of incorporation and, in appropriate
circumstances, equitable remedies including injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the Delaware law for:
. breach of the director's duty of loyalty;
. acts or omissions which are found by a court of competent jurisdiction
to be not in good faith or which involve intentional misconduct, or
knowing violations of law;
. actions leading to improper personal benefit to the director; and
. payment of dividends or approval of stock repurchases or redemptions
that are prohibited by Delaware law.
This provision also does not affect the director's responsibilities under any
other laws, including the federal securities laws or state or federal
environmental laws. We have obtained liability insurance for our officers and
directors.
Section 145 of the Delaware law empowers a corporation to indemnify its
directors and officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers, provided
that this provision shall not eliminate or limit the liability of a director:
. for any breach of the director's duty of loyalty to the corporation or
its stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. arising under Section 174 of the Delaware law; or
. for any transaction from which the director derived an improper
personal benefit.
The Delaware law provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights to which the
directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. The certificate of
incorporation provides that we indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that the person is or was a director
or officer, or is or was serving at our request as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses, judgements, fines and amounts paid in
settlement actually and reasonably incurred by the person in the action, suit
or proceeding.
We plan to enter into indemnification agreements with our directors and our
executive officers containing provisions that may require us, among other
things, to indemnify our directors and officers against liabilities that may
arise by reason of their status or service as directors or officers other than
liabilities arising from willful misconduct of a culpable nature, to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' liability
insurance if maintained for other directors or officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for indemnification.
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RELATED PARTY TRANSACTIONS
Sales of Securities
We have issued a total of 6,900,975 shares of common stock for a total
purchase price of $193,760.00. John M. Payne, our President and Chief Executive
Officer, purchased 1,500,000 shares of common stock in November 1998 for a
purchase price of $100,000.00, which amount includes a note payable to
Stamps.com for $99,000.00. Thomas Bruggere, our Chairman of the Board of
Directors, purchased 488,475 shares of common stock in October 1998 and
December 1998 for a total purchase price of $28,460.00. Mohan Ananda, a member
of our board of directors, purchased 2,172,595 shares of common stock in
January 1998 for a total purchase price of $28,967.94. As payment of the
purchase price, Mr. Ananda assigned to us intellectual property rights in his
inventions developed for us and received a license back from us to use those
intellectual property rights in a restricted field of use. A more detailed
description of transactions with Mr. Ananda appears below. In January 1998, we
also sold 423,993 shares of common stock to each of our co-founders, James
McDermott, Ari Engelberg and Jeffrey Green, for a total purchase price of
$16,959.72, which amount includes $9,000.00 in notes payable to Stamps.com.
We have issued, in private placement transactions, shares of preferred
stock as follows:
. 3,762,500 shares of Series A preferred stock at $0.40 per share in
February 1998;
. 6,020,000 shares of Series B preferred stock at $0.75 per share in
August, October and November 1998; and
. 5,464,486 shares of Series C preferred stock at $5.49 per share in
February and March 1999.
Transactions with Mr. Ananda
We paid $61,000 in March 1998 to Safeware Corporation for employee salary
and patent prosecution expenses incurred on our behalf to attain patents for
us. These patent prosecution expenses consisted primarily of fees paid to
patent counsel and fees paid to the US Patent and Trademark Office. Mr. Ananda
is the majority shareholder in Safeware Corporation. We also reimbursed Mr.
Ananda for approximately $20,000 for expenses incurred on our behalf.
Under our 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 relative to us. The new license agreement
reaffirmed our ownership of the intellectual property invented by Mr. Ananda.
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.
Consulting Services
We paid Mr. Payne $112,800 for consulting services he rendered to us
between May 1998 and October 1998.
In February 1999, Loren Smith, a director, entered into a three-year
consulting agreement with us to provide marketing and strategic planning
services. In exchange for his consulting services, Mr. Smith will receive
consulting fees of $120,000 per annum and an option to purchase 135,000 shares
of common stock at $0.33 per share. The term of this agreement expires in
February 2002.
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PRINCIPAL STOCKHOLDERS
The following table indicates beneficial ownership of our common stock as
of May 31, 1999, after giving effect to the conversion of convertible preferred
stock, and as adjusted to reflect the sale of the shares of common stock
offered in this offering, by:
. each stockholder whom we know to beneficially own 5% or more of the
outstanding shares of common stock;
. each of our directors and our executive officers named in the Summary
Compensation Table, and
. all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each beneficial owner listed below
is c/o Stamps.com Inc., 3420 Ocean Park Boulevard, Suite 1040, Santa Monica,
California 90405.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by the footnotes below,
we believe, based on information furnished to us, that the persons and entities
named in the table below have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. Percentage of
beneficial ownership is based on 29,771,454 shares of common stock outstanding
as of May 31, 1999 and 34,771,454 shares of common stock outstanding after the
completion of this offering. In computing the number of shares of common stock
subject to options held by that person that are exercisable within 60 days of
May 31, 1999, these shares are deemed outstanding for the purpose of
determining the percentage ownership of the optionee. These shares, however,
are not deemed outstanding for the purpose of computing the percentage
ownership of any other stockholder.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
------------------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
------------------------ ------------------ ---------- ----------
<S> <C> <C> <C>
Named executive officers and
Directors:
Jeffrey J. Brown(1)........... 5,457,448 18.3% 15.7%
Thomas N. Clancy(2)........... 5,457,448 18.3% 15.7%
G. Bradford Jones(3).......... 5,457,448 18.3% 15.7%
Mohan P. Ananda(4)............ 2,172,595 7.3% 6.2%
John M. Payne................. 1,500,000 5.0% 4.3%
Thomas H. Bruggere(5)......... 488,475 1.6% 1.4%
John W. LaValle (6)........... 395,802 1.3% 1.1%
Douglas J. Walner(7).......... 366,357 1.2% 1.0%
Loren E. Smith(8)............. 243,000 * *
David C. Bohnett(9)........... 135,322 * *
Marvin Runyon(10)............. 114,831 * *
Other 5% Stockholders:
Brentwood Venture Capital
(11)........................ 5,421,448 18.2% 15.6%
11150 Santa Monica Blvd,
Suite 1200
Los Angeles, CA 90025
Enterprise Partners IV, L.P.
(12)........................ 5,421,448 18.2% 15.6%
5000 Birch Street, Suite
6200
Newport Beach, CA 92660
SBIC Partners, L.P. .......... 5,421,448 18.2% 15.6%
201 Main Street, Suite 2302
Fort Worth, TX 76102
Vulcan Ventures Inc........... 2,732,241 9.2% 7.9%
110-110th Ave., N.E., Suite
550
Bellevue, WA 98004
Chase Venture Capital
Partners, L.P............... 2,185,792 7.3% 6.3%
380 Madison Ave., 12th
Floor
New York, NY 10017
All directors and executive
officers as a group
(15 people) (13).............. 22,400,086 71.6% 64.2%
</TABLE>
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- --------
* Represents beneficial ownership of less than 1% of the outstanding shares
of common stock.
(1) Consists of 5,421,448 shares held by SBIC Partners, L.P. Jeffrey 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. Also
includes 36,000 shares subject to options, all of which are presently
exercisable within 60 days from March 31, 1999.
(2) Includes 4,987,732 shares and 433,716 shares held by Enterprise Partners
IV, L.P. and Enterprise Partners IV Associates, L.P., respectively.
Thomas N. Clancy is a Venture Partner at Enterprise Partners Venture
Capital. Mr. Clancy disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest therein. Also includes 36,000
shares subject to options, all of which are presently exercisable within
60 days from March 31, 1999.
(3) Includes 5,204,590 shares and 216,858 shares held by Brentwood Associates
VIII, L.P. and Brentwood Affiliates Fund, L.P., respectively. G. Bradford
Jones is a General Partner at Brentwood Venture Capital. Mr. Jones
disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest therein. Also includes 36,000 shares subject to
options, all of which are presently exercisable within 60 days from March
31, 1999.
(4) Includes 240,000 shares held in trust for the benefit of Mr. Ananda's
family.
(5) Includes 75,000 shares held in trust for the benefit of his children as
to which Mr. Bruggere disclaims beneficial ownership.
(6) Includes 395,802 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days from March 31,
1999.
(7) Includes 366,357 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days from March 31,
1999.
(8) Includes 243,000 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days from March 31,
1999.
(9) Includes 108,000 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days from March 31,
1999.
(10) Includes 108,000 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days from March 31,
1999.
(11) Includes 5,204,590 shares and 216,858 shares held by Brentwood Associates
VIII, L.P. and Brentwood Affiliates Fund, L.P., respectively. G. Bradford
Jones is a General Partner at Brentwood Venture Capital. Mr. Jones
disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest therein.
(12) Includes 4,987,732 shares and 433,716 held by Enterprise Partners IV,
L.P. and Enterprise Partners IV Associates, L.P., respectively. Thomas N.
Clancy is a Venture Partner at Enterprise Partners Venture Capital. Mr.
Clancy disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
(13) Includes 1,516,659 shares subject to options, all of which are presently
exercisable or will become exercisable within 60 days of March 31, 1999.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our securities and provisions of our
certificate of incorporation and bylaws is only a summary. You should also
refer to the copies of our certificate and bylaws which have been filed with
the Securities and Exchange Commission as exhibits to our registration
statement, of which this prospectus forms a part. The description of common
stock and preferred stock reflect changes to our capital structure that will
occur upon the closing of this offering in accordance with the terms of the
certificate of incorporation that will be adopted by us immediately prior to
the closing of this offering.
Upon the closing of this offering, our authorized capital stock will
consist of 95,000,000 shares of common stock, par value $0.001, and 5,000,000
shares of preferred stock, par value $0.001.
Common Stock
As of May 31, 1999, there were 29,771,454 shares of common stock
outstanding and held of record by 36 stockholders, assuming conversion of all
shares of preferred stock into common stock. Based on the number of shares
outstanding as of that date and giving effect to the issuance of the 5,000,000
shares of common stock in this offering, there will be 34,771,454 shares of
common stock outstanding upon the closing of the offering.
Holders of the common stock are entitled to one vote for each share held on
all matters submitted to a vote of the stockholders. Holders of common stock
are entitled to receive dividends ratably, if any, as may be declared by the
Board of Directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock. Upon our liquidation,
dissolution or winding up, the holders of common stock are entitled to receive
ratably our net assets available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
offered by us in this offering will be, upon receipt of payment for the shares,
fully paid and nonassessable. The rights, preferences and privileges of holders
of common stock are subject to, and may be adversely affected by, the rights of
holders of shares of any series of preferred stock which we may designate and
issue in the future without further stockholder approval. Upon the closing of
the offering, there will be no shares of preferred stock outstanding.
Preferred Stock
Upon the closing of this offering, all outstanding shares of our redeemable
preferred stock will convert into shares of common stock. Thereafter, the Board
of Directors will be authorized without further stockholder approval, to issue
from time to time up to a total of 5,000,000 shares of preferred stock in one
or more series and to fix or alter the designations, preferences, rights and
any qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting
rights, term of redemption, redemption price or prices, liquidation preferences
and the number of shares constituting any series or designations of these
series without further vote or action by the stockholders. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our management without further action by the stockholders
and may adversely affect the voting and other rights of the holders of common
stock. The issuance of preferred stock with voting and conversion rights may
adversely affect the voting power of the holders of common stock, including the
loss of voting control to others. We have no present plans to issue any shares
of preferred stock.
Warrant
On May 1, 1998, we issued a warrant which is currently exercisable for
7,050 shares of common stock at $0.27 per share. The warrant may be exercised
at any time on or before May 1, 2005.
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Anti-Takeover Effects of Provisions of Delaware Law and our Certificate of
Incorporation and Bylaws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years from the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained this status with the approval of the board of
directors or unless the business combination is approved in a prescribed
manner. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to exceptions, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years did own, 15% or
more of the corporation's voting stock. This statute could prohibit or delay
the accomplishment of mergers or other takeover or change in control in
attempts with respect to us and, accordingly, may discourage attempts to
acquire us.
In addition, provisions of our certificate of incorporation and bylaws, may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in his best
interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 120 days prior to the date of our annual meeting. The bylaws also specify
requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
Classified Board of Directors; Removal. Upon the closing of this offering,
our directors will be divided into three classes. The number of directors will
be distributed among the three classes so that each class will consist of one-
third of the Board of Directors. The classification of the Board of Directors
will have the effect of requiring at least two annual stockholder meetings,
instead of one, to replace a majority of the directors which could have the
effect of delaying or preventing a change in control of Stamps.com. Subject to
the rights of the holders of any outstanding series of preferred stock, the
certificate of incorporation will authorize only the Board of Directors to fill
vacancies, including newly created directorships. The certificate of
incorporation will also provide that directors may be removed by stockholders
only for cause and only by the affirmative vote of holders of two-thirds of the
outstanding shares of voting stock.
Supermajority Vote to Amend Charter and Bylaws. Our certificate of
incorporation and bylaws will each provide that our bylaws may only be amended
by a two-thirds vote of the outstanding shares. In addition, our certificate of
incorporation will provide that its provisions related to bylaw amendments,
staggered board and indemnification may only be amended by a two-thirds vote of
the outstanding shares.
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<PAGE>
Registration Rights
After this offering, holders of approximately 25,043,074 shares of common
stock issuable upon conversion of the outstanding preferred stock upon the
closing of this offering will be entitled to registration rights with respect
to their shares. Of these shares, 2,172,595 shares of common stock do not have
demand registration rights and are only entitled to "piggy-back" registration
rights. The holders of securities with registration rights can require us to
register all or part of their shares at any time following six months after
this offering. In addition these holders may also require us to include their
shares in future registration statements that we file and may require us to
register their shares on Form S-3. Upon registration, these shares are freely
tradable in the public market without restriction.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock will be U.S. Stock
Transfer Corporation.
Listing
Our common stock has been approved for quotation on the Nasdaq National
Market under the trading symbol "STMP."
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 34,771,454 shares of common
stock outstanding assuming no exercise of the underwriters' over-allotment
option or outstanding options as of May 31, 1999. Of this amount, the 5,000,000
shares offered by this prospectus will be available for immediate sale in the
public market as of the date of this prospectus. Approximately 10,313,199
additional shares will be available for sale in the public market following the
expiration of 180-day lock-up agreements with the representatives of our
underwriters, subject in some cases to compliance with the volume and other
limitations of Rule 144.
<TABLE>
<CAPTION>
Days after the
Date of this Approximate Shares
Prospectus Eligible for Future Sale Comment
-------------- ------------------------ ---------------------------------
<C> <C> <S>
Upon Effectiveness 5,000,000 Freely tradable shares sold in
offering and shares salable under
Rule 144(k) that are not subject
to 180-day lock-up
90 days 209,301 Shares salable under Rules 144 or
701 that are not subject to 180-
day lock-up
180 days 10,313,199 Lock-up released; shares salable
under Rules 144 or 701
</TABLE>
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year is entitled to sell within any
three-month period commencing 90 days after the date of this prospectus a
number of shares that does not exceed the greater of (a) 1% of the then
outstanding shares of common stock (approximately 348,000 shares immediately
after the offering) or (b) the average weekly trading volume during the four
calendar weeks preceding the sale, subject to the filing of a Form 144 with
respect to the sale. A person who is not deemed to have been an affiliate of
Stamps.com at any time during the 90 days immediately preceding the sale and
who has beneficially owned his or her shares for at least two years is entitled
to sell these shares under Rule 144(k) without regard to the limitations
described above. Persons deemed to be affiliates must always sell under Rule
144, even after the applicable holding periods have been satisfied.
We are unable to estimate the number of shares that will be sold under Rule
144, since this will depend on the market price for our common stock, the
personal circumstances of the sellers and other factors. Prior to the offering,
there has been no public market for the common stock, and there can be no
assurance that a significant public market for the common stock will develop or
be sustained after the offering. Any future sale of substantial amounts of the
common stock in the open market may adversely affect the market price of the
common stock offered by this prospectus.
Our directors, executive officers, and other significant stockholders have
agreed that they will not sell any common stock without the prior written
consent of BancBoston Robertson Stephens Inc. for a period of 180 days from the
date of this prospectus. We have also agreed not to issue any shares during the
lock-up period without the consent of BancBoston Robertson Stephens Inc.,
except that we may, without this consent, grant options and sell shares under
our stock incentive and purchase plans although the shares may not be resold
into the public market during the lock-up period.
Any of our employees or consultants who purchased his or her shares under a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to resell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
resell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus. As of May 31, 1999, there were outstanding 3,208 shares of common
stock that would be entitled to rely on Rule 701 for resales.
As of May 31, 1999, there were outstanding options to purchase 5,374,959
shares of common stock under our stock plans. We intend to file a registration
statement on Form S-8 under the Securities Act shortly after the completion of
the offering to register the shares of common stock subject to outstanding
stock options that may be issued under these plans, which will permit the
resale of these shares in the public market without restriction after the lock-
up period expires.
In addition, some of our stockholders have registration rights with respect
to approximately 25,043,074 shares of common stock and common stock
equivalents. Registration of these securities under the Securities Act would
result in these shares becoming freely tradable without restriction under the
Securities Act provided their shares were not purchased by any of our
affiliates.
57
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Thomas Weisel Partners LLC, Volpe Brown
Whelan & Company, LLC and Wit Capital Corporation have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the number of shares of common stock indicated opposite their
names below. The underwriters are committed to purchase and pay for all of the
shares if any are purchased.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ----------
<S> <C>
BancBoston Robertson Stephens Inc. ..............................
Thomas Weisel Partners LLC.......................................
Volpe Brown Whelan & Company, LLC................................
Wit Capital Corporation..........................................
----------
Total.......................................................... 5,000,000
==========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus and to dealers at that price less a concession of not
in excess of $ per share, of which $ may be reallowed to other
dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
reduction in this price will change the amount of proceeds to be received by us
as indicated on the cover page of this prospectus.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 750,000 additional shares of common stock at the same price per
share as we will receive for the 5,000,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of additional shares that the number of shares of common
stock to be purchased by it shown in the above table represents as a percentage
of the 5,000,000 shares offered by this prospectus. If purchased, the
additional shares will be sold by the underwriters on the same terms as those
on which the 5,000,000 shares are being sold. We will be obligated, under this
option, to sell shares to the extent the option is exercised. The underwriters
may exercise the option only to cover over-allotments made in connection with
the sale of the 5,000,000 shares of common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.
<TABLE>
<CAPTION>
Per Without With
Share Option Option
----- ------- ------
<S> <C> <C> <C>
Public offering price................................... $ $ $
Underwriting discounts and commissions.................. $ $ $
Proceeds, before expenses, to us........................ $ $ $
</TABLE>
The expenses of the offering are estimated at $700,000 and are payable entirely
by us. BancBoston Robertson Stephens Inc. expects to deliver the shares of
common stock to purchasers on , 1999.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representation and warranties contained in the underwriting agreement.
Future Sales. Each of our executive officers, directors and other
significant stockholders of record has agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock, any options or warrants to
purchase any shares of common stock, or
58
<PAGE>
any securities convertible into or exchangeable for shares of common stock
owned as of the date of this prospectus or acquired directly from us by these
holders or with respect to which they have or may acquire the power of
disposition, without the prior written consent of BancBoston Robertson Stephens
Inc. However, BancBoston Robertson Stephens Inc. may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements. There are no agreements between the
representatives and any of our stockholders providing consent by the
representatives to the sale of shares prior to the expiration of the 180-day
lock-up period. In addition, we have generally agreed that, during the 180-day
lock-up period, we will not, without the prior written consent of BancBoston
Robertson Stephens Inc., (a) consent to the disposition of any shares held by
stockholders prior to the expiration of the 180-day lock-up period or (b)
issue, sell, contract to sell or otherwise dispose of, any shares of common
stock, any options or warrants to purchase any shares of common stock, or any
securities convertible into, exercisable for or exchangeable for shares of
common stock, other than our sale of shares in the offering, our issuance of
common stock upon the exercise of currently outstanding options and warrants,
and our issuance of incentive awards under our stock incentive plans. See
"Shares Eligible for Future Sale."
Directed Shares. We have requested that the underwriters reserve up to ten
percent of the shares of common stock for sale at the initial public offering
price to directors, officers, employees and other individuals designated by
Stamps.com. All of our directors, executive officers and five percent or
greater stockholders have received allocations in the directed share program.
The number of shares reserved for these persons ranges from 7,500 to 25,000
shares.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
No Prior Public Market. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price
for the common stock offered by this prospectus has been determined through
negotiations between us and the representatives. Among the factors considered
in these negotiations were prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Bayview Investors, Ltd., an investment partnership affiliated with
BancBoston Robertson Stephens Inc., purchased 60,717 shares of Series C
Preferred Stock from us on February 17, 1999 at a price of $5.49 per share and
on the same terms and conditions as all other purchasers in our Series C
Preferred Stock financing. BancBoston Robertson Stephens Inc. acted as
placement agent for our Series C Preferred Stock financing and received for its
services a fee of approximately $1.4 million from us.
Electronic Prospectus Delivery. A prospectus in electronic format is being
made available on an Internet Web site maintained by Wit Capital. In addition,
pursuant to an e-Dealer Agreement, all dealers purchasing shares from Wit
Capital in the offering similarly have agreed to make a prospectus in
electronic format available on Web sites maintained by each of the e-Dealers.
New Underwriters. Thomas Weisel Partners LLC, one of the representatives of
the underwriters, was organized and registered as a broker-dealer in December
1998. Since December 1998, Thomas Weisel Partners has been named as a lead or
co-manager on 37 filed public offerings of equity securities, of which 16 have
been completed, and has acted as a syndicate member in an additional 10 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us under the underwriting agreement entered into in connection with this
offering.
Wit Capital, a member of the National Association of Securities Dealers,
Inc. will participate in the offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997. Since that time, Wit Capital has acted as an underwriter,
co-manager or selected dealer in over 70 public offerings. Except for its
participation as a manager in this offering, Wit Capital has no relationship
with Stamps.com, Inc. or any of its founders or significant stockholders.
59
<PAGE>
Stabilization. The representatives have advised us that, under Regulation M
under the Securities Exchange Act, some participants in the offering may engage
in transactions, including stabilizing bids, syndicate covering transactions or
the imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by the underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by the underwriter or syndicate member. The
representatives have advised us that these transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Brobeck, Phleger & Harrison LLP, Irvine, California. As of May
31, 1999, affiliates of Brobeck, Phleger & Harrison LLP beneficially owned a
total of 77,413 shares of our common stock. Legal matters relating to the sale
of common stock in this offering will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
The financial statements included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares to be
sold in the offering. This prospectus does not contain all the information
contained in the registration statement. For further information with respect
to Stamps.com and the shares to be sold in the offering, reference is made to
the registration statement and the exhibits and schedules filed with the
registration statement. We have described all material information for each
contract, agreement or other document filed with the registration statement in
the prospectus. However, statements contained in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. As a result, you should refer to the copy of the
contract, agreement or other document filed as an exhibit to the registration
statement for a complete description of the matter involved.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information that we file at the Securities and
Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon payment
of a duplicating fee, by writing to the Securities and Exchange Commission.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. The
Securities and Exchange Commission's filings, including the registration
statement are also available to you without charge on their Web site
(http://www.sec.gov).
60
<PAGE>
STAMPS.COM INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Balance Sheets at December 31, 1998 and March 31, 1999 (unaudited)....... F-3
Statements of Operations for the period from January 9, 1998 (date of
inception) to December 31, 1998, the period from January 9, 1998 (date
of inception) to March 31, 1998 (unaudited), the three months ended
March 31, 1999 (unaudited) and the period from January 9, 1998 (date of
inception) to March 31, 1999 (unaudited)............................... F-4
Statements of Stockholders' Equity (Deficit) for the period from January
9, 1998 (date of inception) through December 31, 1998 and the three
months ended March 31, 1999 (unaudited)................................ F-5
Statements of Cash Flows for the period from January 9, 1998 (date of
inception) to December 31, 1998, the period from January 9, 1998 (date
of inception) to March 31, 1998 (unaudited), the three months ended
March 31, 1999 (unaudited) and the period from January 9, 1998 (date of
inception) to March 31, 1999 (unaudited)............................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Stamps.com Inc.:
We have audited the accompanying balance sheet of Stamps.com Inc. (a
Delaware corporation in the development stage) as of December 31, 1998, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the period from January 9, 1998 (date of inception) through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Stamps.com Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from January 9, 1998 (date of inception) through December 31, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 13, 1999
F-2
<PAGE>
STAMPS.COM INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999
------------------------
December 31, Pro Forma
1998 Historical (Note 1)
------------ ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 3,470,207 $28,523,897 $28,523,897
Prepaid expenses................... 48,118 170,809 170,809
----------- ----------- -----------
Total current assets................. 3,518,325 28,694,706 28,694,706
Property and equipment, net.......... 670,301 920,255 920,255
Patents, trademarks and other
intangibles, net................... 78,122 75,854 75,854
Other................................ 159,071 181,437 181,437
----------- ----------- -----------
Total assets......................... $ 4,425,819 $29,872,252 $29,872,252
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Line of credit..................... $ 1,000,000 $ 1,000,000 $ 1,000,000
Accounts payable................... 392,372 559,158 559,158
Accrued expenses................... 192,528 537,106 537,106
Accrued payroll and related........ 140,942 300,751 300,751
Accrued professional............... 200,000 -- --
Current portion of capital lease
obligations...................... 207,683 207,683 207,683
----------- ----------- -----------
Total current liabilities............ 2,133,525 2,604,698 2,604,698
Capital lease obligations, less
current portion.................... 265,070 216,916 216,916
Commitments
Redeemable preferred stock, $.001 par
value (Series A, B & C):
Authorized shares 10,000,000 at
December 31, 1998 and 15,500,000
at March 31, 1999 (pro forma:
5,000,000).......................
Issued and outstanding shares
9,782,500 at December 31, 1998
and 15,246,986 at March 31, 1999
(pro forma: none)................
Liquidation preference of
$6,020,000 at December 31, 1998
and $36,020,028 at March 31, 1999
(pro forma: none)................ 5,978,344 34,277,938 --
Stockholders' equity (deficit):
Common stock, $.001 par value:
Authorized shares 20,000,000 at
December 31, 1998 and 40,000,000
at March 31, 1999 (pro forma:
95,000,000).....................
Issued and outstanding shares
6,900,975 at December 31, 1998
and March 31, 1999 (pro forma:
29,771,454)..................... 6,901 6,901 29,771
Additional paid-in capital......... 1,437,859 4,784,859 39,039,927
Notes receivable from stock sales.. (117,000) (117,000) (117,000)
Deferred compensation.............. (1,083,000) (4,020,000) (4,020,000)
Deficit accumulated during the
development stage................ (4,195,880) (7,882,060) (7,882,060)
----------- ----------- -----------
Total stockholders' equity
(deficit).......................... (3,951,120) (7,227,300) 27,050,638
----------- ----------- -----------
Total liabilities and stockholders'
equity (deficit)................... $ 4,425,819 $29,872,252 $29,872,252
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
STAMPS.COM INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from Period from Period from
January 9, 1998 January 9, 1998 Three Months January 9, 1998
(inception) to (inception) Ended (inception) to
December 31, 1998 to March 31, 1998 March 31, 1999 March 31, 1999
----------------- ----------------- -------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues................ $ -- $ -- $ -- $ --
Costs and expenses:
Research and
development......... 1,531,811 83,381 1,159,772 2,691,583
General and
administrative...... 2,648,279 279,713 2,528,426 5,176,705
----------- --------- ----------- -----------
Total costs and
expenses......... 4,180,090 363,094 3,688,198 7,868,288
----------- --------- ----------- -----------
Loss from operations.... (4,180,090) (363,094) (3,688,198) (7,868,288)
Other income (expense):
Interest expense...... (27,624) -- (33,001) (60,625)
Interest income....... 11,834 -- 35,019 46,853
----------- --------- ----------- -----------
Net loss................ $(4,195,880) $(363,094) $(3,686,180) $(7,882,060)
=========== ========= =========== ===========
Basic and diluted net
loss per share........ $ (0.85) $ (0.09) $ (0.53) $ (1.48)
=========== ========= =========== ===========
Pro forma basic and
diluted net loss per
share................. $ (0.36) $ (0.05) $ (0.15) $ (0.55)
=========== ========= =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
STAMPS.COM INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Notes Accumulated
Common Stock Additional Receivable During the
----------------- Paid-in from Deferred Development
Shares Amount Capital Stock Sales Compensation Stage Total
---------- ------ ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 9,
1998 (inception)....... -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock................. 4,912,500 4,913 61,387 (18,000) -- -- 48,300
Issuance of restricted
common stock.......... 1,988,475 1,988 126,472 (99,000) -- -- 29,460
Deferred compensation.. -- -- 1,250,000 -- (1,250,000) -- --
Amortization of
deferred
compensation.......... -- -- -- -- 167,000 -- 167,000
Net loss............... -- -- -- -- -- (4,195,880) (4,195,880)
---------- ------ ---------- --------- ----------- ----------- -----------
Balance at December 31,
1998................... 6,900,975 6,901 1,437,859 (117,000) (1,083,000) (4,195,880) (3,951,120)
Deferred compensation
(unaudited)........... -- -- 3,347,000 -- (3,347,000) -- --
Amortization of
deferred compensation
(unaudited)........... -- -- -- -- 410,000 -- 410,000
Net loss (unaudited)... -- -- -- -- -- (3,686,180) (3,686,180)
---------- ------ ---------- --------- ----------- ----------- -----------
Balance at March 31,
1999 (unaudited)....... 6,900,975 $6,901 $4,784,859 $(117,000) $(4,020,000) $(7,882,060) $(7,227,300)
========== ====== ========== ========= =========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
STAMPS.COM INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
January 9 Period from
1998 January 9, Three Period from
(inception) 1998 Months January 9, 1998
to (inception) to Ended (inception) to
December 31, March 31, March 31, March 31,
------------ -------------- ----------- ---------------
1998 1998 1999 1999
------------ -------------- ----------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Operating activities:
Net loss.............. $(4,195,880) $ (363,094) $(3,686,180) $(7,882,060)
Adjustments to
reconcile net loss
to net cash used in
operating
activities:
Depreciation and
amortization..... 81,540 4,126 63,480 145,020
Amortization of
deferred
compensation..... 167,000 4,000 410,000 577,000
Changes in
operating assets
and liabilities:
Prepaid
expenses....... (48,118) (10,023) (122,691) (170,809)
Accounts
payable........ 392,372 20,928 166,786 559,158
Accrued
expenses....... 533,470 -- 304,387 837,857
----------- ---------- ----------- -----------
Net cash used in
activities............ (3,069,616) (344,063) (2,864,218) (5,933,834)
Investing activities:
Capital
expenditures........ (195,297) (111,513) (311,166) (506,463)
Other................. (209,071) (24,512) (22,366) (231,437)
----------- ---------- ----------- -----------
Net cash used in
investing activities.. (404,368) (136,025) (333,532) (737,900)
Financing activities:
Net proceeds from
line of credit...... 1,000,000 -- -- 1,000,000
Repayment of capital
lease obligations... (81,945) -- (48,154) (130,099)
Issuance of series A
redeemable
preferred stock,
net................. 1,463,344 1,463,344 -- 1,463,344
Issuance of series B
redeemable
preferred stock..... 4,515,000 -- -- 4,515,000
Issuance of series C
redeemable
preferred stock,
net................. -- -- 28,299,594 28,299,594
Issuance of common
stock............... 47,792 18,332 -- 47,792
----------- ---------- ----------- -----------
Net cash provided by
financing activities.. 6,944,191 1,481,676 28,251,440 35,195,631
----------- ---------- ----------- -----------
Net increase in cash and
cash equivalents...... 3,470,207 1,001,588 25,053,690 28,523,897
Cash and cash
equivalents at
beginning of period... -- -- 3,470,207 --
----------- ---------- ----------- -----------
Cash and cash
equivalents at end of
period................ $ 3,470,207 $1,001,588 $28,523,897 $28,523,897
=========== ========== =========== ===========
Supplemental cash flow
disclosure:...........
Cash paid for:
Interest.............. $ 27,624 $ -- $ 33,001 $ 60,625
Income taxes.......... $ 800 $ 800 $ 800 $ 1,600
Noncash investing and
financial activity:
Issuance of common
stock in exchange
for a patent and a
trademark name...... $ 29,968 $ 28,968 $ -- $ 29,968
Equipment acquired
under capital
lease............... $ 554,698 $ -- $ -- $ 554,698
Issuance of notes
receivable from
stock sales......... $ 117,000 $ 117,000 $ -- $ 117,000
</TABLE>
See accompanying notes.
F-6
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
Stamps.com Inc. (Stamps.com Inc. or the Company), formerly known as
StampMaster, Inc., was incorporated in Delaware on January 9, 1998, and is a
development stage company. Its primary activities since inception have been to
develop an internet-based postal service delivery system for end-users and
raise capital to finance operations.
The Company is subject to the normal risks associated with a development
stage enterprise in the technology industry. These risks include, among others,
the risks associated with product development, approval of product by the
United States Postal Service, acceptance of the product by end users and the
ability to raise additional capital to sustain operations.
The Company's Internet postage service for purchasing postage over the
Internet has not yet been approved by the US Postal Service. The Company is
currently in the pre-approval testing stage of the US Postal Service's
Information Based Indicia Program. There can be no assurance that the Company's
service will successfully emerge from this testing phase or that the US Postal
Service will approve the service for commercial use.
The statement of operations for the period from inception through December
31, 1998 includes approximately $35,000 of expenses incurred prior to
incorporation. In September 1996, the founders began to investigate the
feasibility of entering into the United States Postal Service's Information
Based Indicia Program and initiated the certification process.
Unaudited Interim Financial Information and Pro Forma Balance Sheet
The interim financial statements of the Company for the period from January
9, 1998 (date of inception) to March 31, 1998 and the three months ended March
31, 1999, included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations relating to interim financial statements. In the opinion of
management, the accompanying unaudited interim financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company at March 31, 1999, the
results of operations and its cash flows for the period from January 9, 1998
(date of inception) to March 31, 1998 and the three months ended March 31,
1999.
The unaudited pro forma balance sheet is presented to show the effects on
the unaudited March 31, 1999 balance sheet of the conversion of all outstanding
shares of redeemable preferred stock into 22,870,479 shares of common stock
which will occur upon the completion of the anticipated initial public offering
(see Note 6 and 7) as if the conversions took place at inception, or the date
of original issuance, if later.
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.
Cash Equivalents
Cash equivalents include demand deposits and short-term investments with a
maturity of three months or less when purchased.
Concentration of Risk
The financial instrument that potentially exposes the Company to
concentrations of credit risks consists primarily of cash equivalents. The
Company places its cash equivalents with high quality financial institutions.
At times, such balances may be in excess of the FDIC insurance limit.
F-7
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Computation of Historical Net Loss per Share and Pro Forma Net Loss Per Share
In accordance with Statement of Financial Accounting Standards (SFAS) No.
128, "Computation of Earnings 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.
A summary of the shares used to compute earnings per share is as follows:
<TABLE>
<CAPTION>
Period from Period from Period from
January 9, 1998 January 9, 1998 Three Months January 9, 1998
(inception) to (inception) to Ended (inception) to
December 31, 1998 March 31, 1998 March 31, 1999 March 31, 1999
----------------- --------------- -------------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Weighted average common
shares used to compute
basic net loss per
share.................. 4,955,913 4,240,518 6,900,975 5,344,926
Effect of dilutive
securities............. -- -- -- --
---------- --------- ---------- ----------
Weighted average common
shares used to compute
dilutive net loss per
share.................. 4,955,913 4,240,518 6,900,975 5,344,926
---------- --------- ---------- ----------
Conversion of preferred
stock.................. 6,637,467 2,623,399 18,156,807 8,941,335
---------- --------- ---------- ----------
Weighted average common
shares used to compute
pro forma basic and
diluted net loss per
share.................. 11,593,380 6,863,917 25,057,782 14,286,261
========== ========= ========== ==========
</TABLE>
Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Series A, B and C Preferred Stock into shares of
the Company's Common Stock effective upon the closing of the Company's Initial
Public Offering as if such conversion occurred at inception or the date of
original issuance, if later. Pro forma diluted earnings per share is computed
using the pro forma weighted average number of common and common equivalents
shares outstanding during the period, to the extent such shares are dilutive.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization is
computed principally on a straight-line method over the estimated useful lives
of the assets ranging from three to five years. Assets acquired under
capitalized lease arrangements are recorded at the present value of the minimum
lease payments. Amortization of assets capitalized under capital leases is
computed using the straight-line method over the life of the asset or term of
the lease, whichever is shorter. Expenditures for repairs and maintenance are
charged to expense as incurred.
Patents, Trademarks and Other Intangibles
Patents, trademarks and other intangibles are carried at cost less
accumulated amortization that is calculated on a straight-line basis over the
estimated useful lives of the assets, not to exceed 40 years. Patents are
currently amortized over an estimated useful live of 17 years. Trademarks and
other intangibles have useful lives that range from 5 to 15 years. Accumulated
amortization as of December 31, 1998 is $1,846.
F-8
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Income Taxes
The Company accounts for income taxes in accordance with FASB 109,
"Accounting for Income Taxes." Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statements
and the tax basis of assets and liabilities using the enacted tax rate in
effect for the years in which the differences are expected to reverse.
Research and Development Costs
Research and development costs are expensed as incurred. These costs
primarily consist of salaries, development materials, supplies and applicable
overhead expenses of personnel directly involved in the research and
development of new technology and products.
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123)
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen
to continue to account for stock-based compensation using the intrinsic-value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees."
2. Line of Credit
On May 1, 1998, the Company entered into a credit line agreement with a
lender. The initial $300,000 borrowing base was increased to $1 million based
on the Company's net equity balance, as defined, through December 31, 1998.
Borrowings bear interest at the lender's prime rate plus 1% (8.75% at
December 31, 1998) and are collateralized by certain of the Company's assets.
The Company used the amount drawn for working capital purposes. The unpaid
balance due under the line of credit at February 9, 1999 may be converted to a
term loan payable in 24 equal monthly installments commencing on such date.
Otherwise, the credit line agreement matures on October 8, 1999.
In connection with this indebtedness agreement, the Company issued a
detachable warrant which permits the holder to purchase 7,050 shares of the
Company's Common Stock for $.27 per share. The term of this warrant is for a
period of seven years from the date of grant.
3. Income Taxes
The provision for income taxes consists solely of minimum state taxes. The
Company's effective tax rate differs from the statutory federal income tax rate
primarily as a result of the establishment of a valuation allowance for the
future benefits to be received from the net operating loss carryforwards and
research tax credit carryforwards. The tax effect of temporary differences that
give rise to a significant portion of the deferred tax assets and liabilities
at December 31, 1998 are presented below.
<TABLE>
<S> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards............................. $ 537,154
Research credits............................................. 150,000
Depreciation................................................. (28,006)
Capitalized start-up costs................................... 988,403
Accruals..................................................... 46,068
-----------
Total deferred tax assets...................................... 1,693,619
Valuation allowance............................................ (1,693,619)
-----------
Net deferred tax assets........................................ $ --
===========
</TABLE>
F-9
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Because the Company is uncertain when it may realize the benefits of its
favorable tax attributes in future returns, the Company has placed a valuation
allowance against its otherwise recognizable deferred tax assets. In 1998, the
valuation allowance recorded was $1,693,619.
The Company has a net operating loss carryforward for federal and state
income tax purposes at December 31, 1998 of $1,348,467, and an available tax
credit carryforward at December 31, 1998 of $150,000, each of which can be
carried forward to offset future taxable income, if any. The Company's federal
net operating loss expires starting in 2018, state net operating loss expires
starting in 2006, and credits expire starting in 2018. The Federal Tax Reform
Act of 1986 and similar state tax laws contain provisions which may limit the
net operating losses carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership
interests.
4. Capital Leases, Commitments and Contingencies
The Company leases certain equipment under capital lease arrangements
expiring on various dates through 2001. Included in property and equipment are
the following assets held under capital lease at December 31, 1998:
<TABLE>
<S> <C>
Computer equipment................................................ $ 554,698
Accumulated depreciation.......................................... (58,129)
---------
$ 496,569
=========
</TABLE>
The following is a schedule of future minimum lease payments:
<TABLE>
<S> <C>
Year ending December 31, 1998:
1999............................................................. $254,148
2000............................................................. 254,520
2001............................................................. 31,007
--------
539,675
Less amount representing interest................................ (66,922)
--------
Present value of net minimum lease payments ($207,683 payable
currently)..................................................... $472,753
========
</TABLE>
The Company currently rents its facilities on a month-to-month basis or for
terms less than one year. Total rent expense for the period from January 9,
1998 through December 31, 1998 was $109,428 and includes $23,400 paid to a
stockholder/officer for rental of office space.
In December 1998, the Company entered into a Distribution and Marketing
Agreement with America Online, Inc. (AOL) that provides broad distribution and
marketing campaigns amongst AOL's diverse properties. In exchange for these
services, the Company is required to make minimum payments that approximate
$1,700,000 and $525,000 in 1999 and 2000, respectively. In exchange for these
services, the Company is required to pay $2.3 million in varied amounts through
February 2000 ($75,000 in 1998, $1,700,000 in 1999 and $525,000 in 2000). The
Company may purchase additional advertising under this Marketing and
Distribution Agreement but it is not required. The Company will recognize the
related expense upon performance of services.
F-10
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Stock Options
In January 1998, the Company adopted the 1998 Stock Option Plan (the Plan)
which authorizes the Board of Directors to grant incentive stock options,
nonqualified stock options and stock purchase rights (collectively options) to
employees, directors, consultants and advisors of the Company. The maximum
number of shares of common stock to be issued under the Plan is 7,290,000. All
options granted under the Plan have been made at prices not less than fair
value of the stock at the date of grant, as determined by the Board of
Directors. Options granted under the Plan are generally exercisable
immediately, however, they vest 25% per year, and the Board of Directors has
the discretion with respect to vesting periods applicable to a particular
grant. During 1998, the Company issued options to purchase approximately
2,310,909 shares of common stock at prices which included approximately
$600,000 of a compensation element. The $600,000 is being recognized as expense
over the vesting periods of the related options and has been presented as a
reduction of stockholders' equity (deficit) in the accompanying balance sheets.
The following tabulation summarizes certain information related to options
for common stock:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- --------
<S> <C> <C>
Outstanding options at January 9, 1998................... -- $ --
Grants................................................... 2,310,909 .07
Surrendered, forfeited or expired........................ (36,562) .03
Exercised................................................ -- --
--------- ----
Outstanding options at December 31, 1998................. 2,274,347 $.06
========= ====
</TABLE>
As of December 31, 1998, all options were exercisable. However, no options
were vested and 1,904,091 were available for future grant. The weighted average
remaining contractual life of the outstanding stock options at December 31,
1998, is 9.7 years.
Pro forma information regarding net loss is required by SFAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair-value method of that statement. The fair value for these options
was estimated at the date of grant using the minimum-value method, which
utilizes a near-zero volatility factor. The remaining assumptions, which are
weighted average, under this method are as follows:
<TABLE>
<S> <C>
Expected life (years)............................................. 5
Risk-free interest rate........................................... 5.50%
Dividend yield.................................................... --
</TABLE>
This option-valuation method requires input of highly subjective
assumptions. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because change in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing method does not necessarily provide a
reliable single measure of the fair value of its employee stock options. The
effects of applying SFAS 123 in this pro forma disclosure are not indicative of
future amounts and additional awards in future years are anticipated.
If the Company recognized employee stock related compensation expense in
accordance with SFAS 123 under the minimum value method, its net loss for 1998
would not be materially different.
F-11
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stock Transactions
During 1998, the Company issued restricted stock to an employee and a
director totaling 1,988,475 shares. These shares vest one-fourth on May 30,
1999 and the remaining shares vest monthly over the subsequent thirty-six
months. The Company issued these shares at prices which included approximately
$650,000 of a compensation element. The $650,000 is being recognized as expense
over the vesting periods and has been presented as a reduction of stockholders'
equity (deficit) in the accompanying balance sheets.
In February 1998, the Company issued 3,762,500 shares of its Series A
Redeemable Preferred Stock at $0.40 per share and warrants to acquire 6,020,000
shares of the Company's its Series B Redeemable Preferred Stock at $0.75 per
share. In August and October 1998, 6,020,000 shares of Series B Redeemable
Preferred Stock were issued under these warrants.
Redeemable Preferred stock is convertible to common stock on a one-for-one
basis at the option of the holder at any time after issuance, subject to anti-
dilution protection. Each share of Redeemable Preferred Stock automatically
converts to Common Stock upon (i) the sale of Common Stock by the Company in an
underwritten public offering with a public offering price of $2.00 per share
and net proceeds of $15 million or (ii) written consent of the majority holders
of outstanding shares of Preferred Stock (see Note 7).
The holders of Redeemable Preferred Stock are entitled to receive non-
cumulative dividends in preference to the Common stock at a rate of $0.040 and
$0.075 per share per annum, respectively, or if greater (as determined on a per
annum basis and an as converted basis for Redeemable Preferred Stock), an
amount equal to that paid on any other outstanding share, payable quarterly
when, as and if declared. No dividends can be paid or declared on any Common
Stock unless full cash dividends, including past dividends declared, have been
paid on the Redeemable Preferred Stock.
The Series A and Series B Redeemable Preferred Stock have a liquidation
preference over Common Stock of $0.40 and $0.75 per share, respectively.
The Redeemable Preferred Stock may be redeemed at any time after February
26, 2003 at the written consent of the majority holders of outstanding shares
of Redeemable Preferred Stock. The redemption price for Series A and Series B
Redeemable Preferred Stock is $0.40 and $0.75 per share, respectively. Series A
and Series B Redeemable Preferred Stock has been reflected in the accompanying
balance sheets outside of stockholders' equity (deficit) due to its redemption
feature.
In connection with the issuance of Common Stock during the period, the
Company exchanged shares with a fair value of $117,000 for notes receivable of
the same amount. These notes receivable bear interest at 9% per annum and are
payable in February 2003.
7. Events Subsequent to the Date of the Auditors' Report (Unaudited)
Redeemable Preferred Stock
On February 10, 1999, the Board of Directors approved the sale of Series C
Redeemable Preferred Stock. In February and March 1999, the Company issued
5,464,486 shares of its Series C Redeemable Preferred Stock at $5.49 per share.
Series C Redeemable Preferred Stock is convertible to common stock on a one-
for-one basis at the option of the holder at any time after issuance, subject
to anti-dilution protection. In connection with the sale of Series C Redeemable
Preferred Stock, the board of directors amended the certificate of
incorporation and each share of Series A, Series B and Series C Redeemable
Preferred Stock automatically converts to
F-12
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Common Stock upon (i) the sale of Common Stock by the Company in an
underwritten public offer with a public offering price of at least $10.98 per
share and net proceeds of $20 million or (ii) written consent of the majority
of holders of outstanding shares of Redeemable Preferred Stock.
The holders of Series C Redeemable Preferred Stock are entitled to receive
noncumulative dividends in preference of the Common Stock at a rate of $0.55
per share per annum or if greater (as determined on a per annum basis and as a
converted bases for Preferred Stock), an amount equal to that paid on any other
outstanding share, payable quarterly when, as and if declared. No dividends can
be paid or declared on any Common Stock unless full cash dividends, including
past dividends declared, have been paid on the Redeemable Preferred Stock. The
Series C Redeemable Preferred Stock have a liquidation preference over Common
Stock or $5.49 per share and may be redeemed at any time after February 27,
2003, at the written consent of the majority holders of outstanding shares of
Redeemable Preferred Stock at the redemption price of $5.49 per share. Series C
Redeemable Preferred Stock has been reflected in the accompanying balance
sheets outside of stockholders' equity (deficit) due to its redemption feature.
Authorized Stock and Stock Dividend
On February 17, 1999, the Company increased the number of authorized shares
of common stock and preferred stock to 40,000,000 shares and 15,500,000 shares,
respectively. Subsequent to year end, the Board of Directors increased the
number of shares reserved for issuance under the 1998 Stock Option Plan to
7,290,000 shares.
On June 3, 1999, the Board of Directors declared a stock dividend of 3
shares of Common Stock for every 2 shares of Common Stock then outstanding, an
action which also resulted in an adjustment to the conversion ratio of the
Series A, B and C redeemable preferred stock to a three-for-two basis. The
stock dividend will become effective on the date that the Company's public
offering of Common Stock is closed. Accordingly, the accompanying financial
statements and footnotes have been restated to reflect the stock dividend. In
addition the board increased the number of authorized shares of Common Stock
and Preferred Stock to 95,000,000 and 5,000,000 shares, respectively. These
increases will also take effect upon closing of the Company's initial public
offering.
Stock options
During the period from January 1, 1999 through June 3, 1999, the Company
issued 3,072,000 additional stock options under the 1998 stock option plan. A
summary of the options granted is as follows:
<TABLE>
<CAPTION>
Exercise Estimated
Number of options Price Fair Value
----------------- -------- ----------
<S> <C> <C>
189,150.............................................. $5.60 $1.33
892,050.............................................. $3.00 $0.71
1,990,800.............................................. $0.33 $0.08
</TABLE>
The estimated fair value for these options was estimated at the date of
grant using the minimum-value method using the same assumptions as Note 5. From
January 1, 1999 through March 31, 1999, the Company issued options to purchase
approximately 2,180,250 shares of common stock at prices which included
approximately $3,347,000 of a compensation element. The $3,347,000 is being
recognized as expense over the vesting periods of the related options and has
been presented as a reduction of stockholders' equity (deficit) in the
accompanying balance sheets.
F-13
<PAGE>
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Commitments
In May 1999, the Company entered into a facility lease agreement for its
corporate headquarters with minimum lease payments approximating $4.8 million
over 5 years.
Also, in May 1999, the Company entered into a Sponsorship Agreement with
Intuit Inc. (Intuit) that markets our Internet postage service on various
Intuit Internet sites and software. In exchange for this sponsorship, the
Company is required to pay $3.3 million ($2 million in 1999 and $1.3 million in
2000). Additional payments may be required if this Sponsorship Agreement
results in certain customer levels. The related expense will be recognized as
the services are provided.
Legal Proceedings
On June 16, 1999, Pitney Bowes filed a patent infringement lawsuit against
the Company in the United States District Court for the District of Delaware.
The suit alleges that the Company is 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. The
Company is currently investigating the claims against it and has not responded
to the suit. To date, the Company believes it has meritorious defenses and
intends to defend the lawsuit vigorously. However, the litigation could result
in significant expenses and diversion of management time and other resources.
Further, if Pitney Bowes successfully asserts an infringement claim against the
Company, its operations would be impacted severely. The Pitney Bowes suit could
result in limitations on the Company's ability to market its service, delays
and costs associated with redesigning its service or payments of license fees
or other payments.
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission and NASD. All of the expenses
below will be paid by the Company.
<TABLE>
<CAPTION>
Item
----
<S> <C>
Registration fee................................................... $ 17,583
NASD filing fee.................................................... 6,250
Nasdaq National Market listing fee................................. 95,000
Blue sky fees and expenses......................................... 10,000
Printing and engraving expenses.................................... 100,000
Legal fees and expenses............................................ 250,000
Accounting fees and expenses....................................... 150,000
Transfer Agent and Registrar fees.................................. 5,000
Miscellaneous...................................................... 66,167
--------
Total............................................................ $700,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that, except to the extent prohibited by the Delaware
General Corporation Law (the "DGCL"), the Company's directors shall not be
personally liable to the Company or its stockholders for monetary damages for
any breach of fiduciary duty as directors of the Company. Under the DGCL, the
directors have a fiduciary duty to the Company which is not eliminated by this
provision of the Certificate and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will remain
available. In addition, each director will continue to be subject to liability
under the DGCL for breach of the director's duty of loyalty to the Company, for
acts or omissions which are found by a court of competent jurisdiction to be
not in good faith or involving intentional misconduct, for knowing violations
of law, for actions leading to improper personal benefit to the director, and
for payment of dividends or approval of stock repurchases or redemptions that
are prohibited by DGCL. This provision also does not affect the directors'
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws. The Company has obtained liability
insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to the fullest
extent permitted by Section 102(b)(7) of the DGCL and provides that the Company
shall fully indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the
fact that such person is or was a director or officer of the Company, or is or
was serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
II-1
<PAGE>
The Company, with the approval of the Board of Directors, intends to obtain
directors' and officers' liability insurance prior to the effectiveness of this
offering. In addition, the Company intends to enter into indemnification
agreements with each of its directors and executive officers, a form of which
is filed as Exhibit 10.20 hereto.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company in which indemnification will be
required or permitted. Moreover, the Company is not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
The Company believes that the foregoing indemnification provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
The Underwriting Agreement (the form of which is filed as Exhibit 1.1
hereto) provides for indemnification by the Underwriters of the Company and its
officers and directors, and by the Company of the Underwriters, for certain
liabilities arising under the Securities Act or otherwise.
Item 15. Recent Sales of Unregistered Securities.
The following is a summary of transactions by the Company since the
Company's inception in September 1996 involving sales of the Company's
securities that were not registered under the Securities Act. Prior to the
Company's incorporation in Delaware in January 1998, it had been operating as a
sole proprietorship.
On January 20, 1998, we issued an aggregate of 4,897,500 shares of Common
Stock at $.01 per share to certain employees and consultants to the Company.
The total number of individuals who received stock in this transaction was 15.
On May 1, 1998, we granted a warrant to a lender to purchase up to 4,700
shares of Series A Preferred Stock at $0.40 per share.
In October 1998, we issued an aggregate of 307,875 shares of Common Stock
at $.05 per share to Thomas Bruggere.
In November 1998, we issued an aggregate of 1,500,000 shares of Common
Stock at $.07 per share to John Payne.
In December 1998, we issued an aggregate of 186,000 shares of Common Stock
at $.07 per share to Thomas Bruggere.
In December 1998, we issued 15,000 shares of Common Stock to Gregory Deeter
in exchange for all rights and goodwill in connection with the Stamps.com
domain name.
In January and February of 1998, we issued an aggregate of 3,762,500 shares
of our Series A Redeemable Preferred Stock to certain accredited investors for
an aggregate offering price of $1,505,000, or $0.40 per share, less $42,000 in
offering expenses.
In August, October and November of 1998, we issued an aggregate of
6,020,000 shares of Series B Redeemable Preferred Stock upon the exercise of
warrants to certain accredited investors for an aggregate offering price of
$4,515,000.50, or $0.75 per share.
In February and March of 1999, we issued an aggregate of 5,464,486 shares
of Series C Redeemable Preferred Stock to certain accredited investors for an
aggregate offering price of $30,000,028, or $5.49 per share, less $1,645,000 in
offering expenses.
II-2
<PAGE>
From January 1998 to June 1999, we have granted options to purchase an
aggregate of 5,374,959 shares of common stock to our directors, executive
officers, employees and consultants at a weighted exercise price of $0.84.
The foregoing transactions were effected under Section 4(2) or Rule 701 of
the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following Exhibits are attached hereto and incorporated herein by
reference:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Second Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Proposed Amended and Restated Certificate of Incorporation of the
Registrant.
3.3** Bylaws of the Registrant.
3.4** Proposed Bylaws of the Registrant.
4.1** See Exhibit 3.1, 3.2 and 3.3 for provisions of the Registrant's
Certificate of Incorporation and Bylaws defining the rights of holders
of the Registrant's common stock. See Exhibit 10.3 for the rights of
certain holders of registration rights.
4.2** Specimen common stock certificate.
5.1** Opinion of Brobeck, Phleger & Harrison LLP.
10.1** Series A Stock Purchase Warrant dated May 1, 1998 between the
Registrant and Silicon Valley Bank.
10.2** Amended and Restated Investors' Rights Agreement dated February 17,
1999 between the Registrant and the investors named therein.
10.3** Patent Assignment from Mohan P. Ananda to the Registrant dated January
20, 1998.
10.4** Assignment and License Agreement between the Registrant and Mohan P.
Ananda dated January 20, 1998.
10.5** Employment Offer Letter dated October 29, 1998 by and between the
Registrant and John M. Payne.
10.6** Employment Agreement dated January 20, 1998 by and between the
Registrant and Mohan P. Ananda.
10.7** 1998 Stock Plan and Forms of Notice of Grant and Stock Option
Agreement.
10.8** 1999 Stock Incentive Plan (revised from previous filing).
10.9** 1999 Employee Stock Purchase Plan (revised from previous filing).
10.10** Form of Indemnification Agreement between the Registrant and its
directors and officers.
10.11** Lease Agreement dated August 27, 1998 between the Registrant and
Spieker Properties, L.P. and Amendment No. One dated January 8, 1999.
10.12+ Advertising Insertion Order dated December 16, 1998 between the
Registrant and America Online, Inc.
10.13** Master Lease Agreement between the Registrant and FirstCorp dated June
5, 1998.
10.14** Quick Start Loan and Security Agreement dated May 1, 1998 between the
Registrant and Silicon Valley Bank.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.15** Employment Offer Letter dated August 7, 1998 between the Registrant
and John W. LaValle.
10.16** Consulting Agreement dated February 1, 1999 between the Registrant and
Loren Smith.
10.17** Lease dated April 12, 1999 between the Registrant and Spieker
Properties, L.P.
10.18+ Sponsorship Agreement dated May 14, 1999 between Registrant and
Intuit, Inc.
10.19+ Distributor Agreement dated December 10, 1998 between Registrant and
Westvaco.
10.20+ Distributor Agreement dated January 15, 1999 between Registrant and
Office Depot, Inc.
10.21+ Distributor Agreement dated March 31, 1999 between Registrant and
Seiko Instruments USA, Inc.
10.22+ Distributor Agreement dated March 30, 1999 between Registrant and
Avery Dennison Office Products Company.
10.23+ Distributor Agreement dated March 11, 1999 between Registrant and
Dymo-Costar Corporation.
10.24** Series A Preferred Stock and Warrant Purchase Agreement dated February
26, 1998 between Registrant and certain investors.
10.25** Amended and Restated Voting Agreement dated February 17, 1999 between
Registrant and certain investors.
10.26** Separation Agreement and Release dated May 13, 1999 between Registrant
and Mohan Ananda.
10.27** License Agreement dated May 13, 1999 between Registrant and Mohan
Ananda.
10.28** Series C Preferred Stock Purchase Agreement dated February 17, 1999
between Registrant and certain investors.
10.29** Amendment Letter to AOL dated June 4, 1999.
10.30** Nondisclosure Agreement and Agreement to Release University from
damages caused by testing, dated December 6, 1998.
10.31** Nondisclosure Agreement and Agreement to Release Carnegie Mellon, Inc.
from damages caused by testing, dated April 22, 1997.
10.32** Letter of Intent from Stampmaster, Inc. and US Postal Service response
letter between Stampmaster, Inc. and the US Postal Service, dated
February 21, 1997 and April 23, 1997, respectively.
23.1** Consent of Brobeck, Phleger & Harrison LLP (Included in Exhibit 5.1
hereto).
23.2 Consent of Arthur Andersen LLP.
24.1** Power of Attorney (Included on signature pages hereto).
27.1** Financial Data Schedule.
</TABLE>
- --------
** Previously filed by the registrant with the Commission.
+ Confidential treatment is requested for certain confidential portions of
this exhibit pursuant to Rule 406 under the Securities Act. In accordance
with Rule 406, these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
II-4
<PAGE>
(b) Financial Statement Schedules
All such Schedules have been omitted because the information required to be
set forth therein is not applicable or is shown in the financial statements or
notes thereto.
Item 17. Undertakings.
The undersigned Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreements, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus as filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by us pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we have duly
caused this Amendment No. 5 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa
Monica, State of California, on the 24th day of June, 1999.
STAMPS.COM INC.
By: /s/ John M. Payne
-----------------------------------
John M. Payne
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John M. Payne Chief Executive Officer, June 24, 1999
____________________________________ President and Director
John M. Payne (Principal Executive
Officer)
/s/ John W. LaValle Chief Financial Officer, June 24, 1999
____________________________________ Senior Vice President of
John W. LaValle Operations and Secretary
(Principal Financial and
Accounting Officer)
Thomas H. Bruggere* Chairman of the Board of June 24, 1999
____________________________________ Directors
Thomas H. Bruggere
Mohan P. Ananda* Director June 24, 1999
____________________________________
Mohan P. Ananda
David C. Bohnett* Director June 24, 1999
____________________________________
David C. Bohnett
Jeffrey J. Brown* Director June 24, 1999
____________________________________
Jeffrey J. Brown
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Thomas N. Clancy* Director June 24, 1999
____________________________________
Thomas N. Clancy
G. Bradford Jones* Director June 24, 1999
____________________________________
G. Bradford Jones
Marvin Runyon* Director June 24, 1999
____________________________________
Marvin Runyon
Loren E. Smith* Director June 24, 1999
____________________________________
Loren E. Smith
</TABLE>
* Power of Attorney
By: /s/ John W. LaValle
----------------------------
John W. LaValle
Attorney-in-fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Second Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Proposed Amended and Restated Certificate of Incorporation of the
Registrant.
3.3** Bylaws of the Registrant.
3.4** Proposed Bylaws of the Registrant.
4.1** See Exhibit 3.1, 3.2 and 3.3 for provisions of the Registrant's
Certificate of Incorporation and Bylaws defining the rights of holders
of the Registrant's common stock. See Exhibit 10.3 for the rights of
certain holders of registration rights.
4.2** Specimen common stock certificate.
5.1** Opinion of Brobeck, Phleger & Harrison LLP.
10.1** Series A Stock Purchase Warrant dated May 1, 1998 between the
Registrant and Silicon Valley Bank.
10.2** Amended and Restated Investors' Rights Agreement dated February 17,
1999 between the Registrant and the investors named therein.
10.3** Patent Assignment from Mohan P. Ananda to the Registrant dated January
20, 1998.
10.4** Assignment and License Agreement between the Registrant and Mohan P.
Ananda dated January 20, 1998.
10.5** Employment Offer Letter dated October 29, 1998 by and between the
Registrant and John M. Payne.
10.6** Employment Agreement dated January 20, 1998 by and between the
Registrant and Mohan P. Ananda.
10.7** 1998 Stock Plan and Forms of Notice of Grant and Stock Option
Agreement.
10.8** 1999 Stock Incentive Plan (revised from previous filing).
10.9** 1999 Employee Stock Purchase Plan (revised from previous filing).
10.10** Form of Indemnification Agreement between the Registrant and its
directors and officers.
10.11** Lease Agreement dated August 27, 1998 between the Registrant and
Spieker Properties, L.P. and Amendment No. One dated January 8, 1999.
10.12+ Advertising Insertion Order dated December 16, 1998 between the
Registrant and America Online, Inc.
10.13** Master Lease Agreement between the Registrant and FirstCorp dated June
5, 1998.
10.14** Quick Start Loan and Security Agreement dated May 1, 1998 between the
Registrant and Silicon Valley Bank.
10.15** Employment Offer Letter dated August 7, 1998 between the Registrant
and John W. LaValle.
10.16** Consulting Agreement dated February 1, 1999 between the Registrant and
Loren Smith.
10.17** Lease dated April 12, 1999 between the Registrant and Spieker
Properties, L.P.
10.18+ Sponsorship Agreement dated May 14, 1999 between Registrant and
Intuit, Inc.
10.19+ Distributor Agreement dated December 10, 1998 between Registrant and
Westvaco.
10.20+ Distributor Agreement dated January 15, 1999 between Registrant and
Office Depot, Inc.
10.21+ Distributor Agreement dated March 31, 1999 between Registrant and
Seiko Instruments USA, Inc.
10.22+ Distributor Agreement dated March 30, 1999 between Registrant and
Avery Dennison Office Products Company.
10.23+ Distributor Agreement dated March 11, 1999 between Registrant and
Dymo-Costar Corporation.
10.24** Series A Preferred Stock and Warrant Purchase Agreement dated February
26, 1998 between Registrant and certain investors.
10.25** Amended and Restated Voting Agreement dated February 17, 1999 between
Registrant and certain investors.
10.26** Separation Agreement and Release dated May 13, 1999 between Registrant
and Mohan Ananda.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.27** License Agreement dated May 13, 1999 between Registrant and Mohan
Ananda.
10.28** Series C Preferred Stock Purchase Agreement dated February 17, 1999
between Registrant and certain investors.
10.29** Amendment Letter from AOL dated June 4, 1999
10.30** Nondisclosure Agreement and Agreement to Release University from
damages caused by testing, dated December 6, 1998.
10.31** Nondisclosure Agreement and Agreement to Release Carnegie Mellon, Inc.
from damages caused by testing, dated April 22, 1997.
10.32** Letter of Intent from Stampmaster, Inc. and US Postal Service response
letter between Stampmaster, Inc. and the US Postal Service, dated
February 21, 1997 and April 23, 1997, respectively.
23.1** Consent of Brobeck, Phleger & Harrison LLP (Included in Exhibit 5.1
hereto).
23.2 Consent of Arthur Andersen LLP.
24.1** Power of Attorney (Included on signature pages hereto).
27.1** Financial Data Schedule.
</TABLE>
- --------
** Previously filed by the registrant with the Commission.
+ Confidential treatment is requested for certain confidential portions of
this exhibit pursuant to Rule 406 under the Securities Act. In accordance
with Rule 406, these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
<PAGE>
EXHIBIT 10.12
==================================================
AOL ADVERTISING INSERTION ORDER
==================================================
Contract #: ________________
AOL Salesperson: ___________
Credit Approval Received
Sales Coordinator: _________
Date: ______________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Advertiser Advertising Agency
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Contact Person Doug Walner
- ------------------------------------------------------------------------------------------
Company Name Stamps.com, Inc.
- ------------------------------------------------------------------------------------------
Address - Line 1 2900 31st St., Suite 150
- ------------------------------------------------------------------------------------------
Address - Line 2 Santa Monica, CA 90405
- ------------------------------------------------------------------------------------------
Phone # 310-450-1444
- ------------------------------------------------------------------------------------------
Fax #
- ------------------------------------------------------------------------------------------
Email [email protected]
- ------------------------------------------------------------------------------------------
SIC Code
- ------------------------------------------------------------------------------------------
Advertiser IAB Category
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Billing Information
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Send Invoices to (choose one): Advertiser [_] Agency
- -----------------------------------------------------------------------------------------
Advertiser or Agency Billing Same as above
Contact Person
- -----------------------------------------------------------------------------------------
Company Name
- -----------------------------------------------------------------------------------------
Billing Address - Line 1
- -----------------------------------------------------------------------------------------
Billing Address - Line 2
- -----------------------------------------------------------------------------------------
Billing Phone #
- -----------------------------------------------------------------------------------------
Billing Fax #
- -----------------------------------------------------------------------------------------
Billing Email Address
- -----------------------------------------------------------------------------------------
P.O. #, if applicable
- -----------------------------------------------------------------------------------------
</TABLE>
1. Guaranteed Payments. Advertiser shall make the following payments to AOL:
a. [***]* upon execution of this Insertion Order Agreement,
b. [***]* on each of (i) January 1,1999 and (ii) February 1, 1999;
c. [***]* on March 1, 1999; and
d. Subject to the provisions of Section 2 of Exhibit A, [***]* on each of
(i) May 1, 1999, (ii) August 1, 1999, (iii) November 1, 1999, and (iv)
February 1, 2000; provided however, should the Phase II Promotions
commence prior to or after May 1, 1999, Advertiser shall pay AOL [***]*
on the commencement date of the Phase II Promotions (the "Phase II
Promotion Launch Date"), and [***]* on each of the four (4) month, seven
(7) month, and ten (10) month anniversaries of the Phase II Promotion
Launch Date.
2. Additional Payments. See Sections 3 and 8 of Exhibit A, and Section 9 of
Exhibit E attached hereto.
3. Late Payments; Wired Payments. All amounts owed hereunder not paid when due
-----------------------------
and payable will bear interest from the date such amounts are due and
payable at the prime rate in effect at such time. All payments required
hereunder will be paid in immediately available, non-refundable U.S. funds
wired to the "America Online" account, Account Number 323070752 at The
Chase Manhattan Bank, 1 Chase Manhattan Plaza, New York, NY 10081 (ABA:
021000021). In the event of nonpayment on any of the dates specified above,
Advertiser shall have an additional five (5) business days within which to
make such payment and if Advertiser does not make the required payment in
such additional five (5) business days, AOL reserves the right to
immediately terminate this Insertion Order Agreement with written notice to
Advertiser.
- --------------------------------------------------------------------------------
* [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inventory Type(choose one): [_] AOL Service only [_] AOL Affiliate only (e.g AOL.com)
[_] Aol Service & AOL Affiliate
- ------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AOL Service
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
AOL Inventory/Demographic* Display Display # of Ad Slots Total Gross Total
Purchased Start Date Stop Ad Type Purchased Price Impressions
Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PHASE I PROMOTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Run of E-mail: Zip Code Area 1 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Run of E-mail: Zip Code Area 2 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Run of E-mail: Zip Code Area 3 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Run of Service: Zip Code Area 1 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Run of Service: Zip Code Area 2 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Run of Service: Zip Code Area 3 [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
Computing Download Software: Zip [***]* [***]* Banner [***]* [***]*
Code Targeted Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PHASE II PROMOTIONS [***]* [***]*
See Exhibit B attached hereto
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
* Attach completed AOL Demographic PHASE I $193,000 [***]*
Profile Worksheet PROMOTIONS TOTAL:
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
All necessary artwork and active URL's must be provided by advertiser 3 business days prior to start date.
Artwork required from Advertiser/Agency:
----------------------------------------
[_] 234x60 IAB Standard /10k Max [_] 145x30 Old Standard /10k Max [_] 120x60 Shopping/10k Max
[_] 175x45 Chat/Mail in-box/10k Max [_] 197x40 PF Area/10k Max [_] Special_____
* Static banners only, no animation*
Linking URL: The HTTP/URL address to be connected to the Advertisement shall be: http://www.stamps.com, or any other HTTP/URL
agreed upon by Advertiser and AOL (the "Affiliated Advertiser Site"). Advertiser shall be responsible for any hosting or
communication costs associated with the Affiliated Advertiser Site.
Please send artwork and URL to (choose one):
[_] [email protected] [_] [email protected]
------------------ ------------------
AOL reserves the right to immediately cancel any advertising flight in the event of a material change to the nature or content of
the site linked to the Advertisement.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
AOL Affiliate (e.g., AOL.com)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
AOL Affiliate Display Display # of Ad Slots Total Gross Total
Inventory/Demographic* Start Stop Ad Type Purchased Price Impressions
Purchased Date Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PHASE I PROMOTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Digital City - Market Selection [***]* [***]* Banner [***]* [***]*
Rotation
- ----------------------------------------------------------------------------------------------------------------------------------
PHASE II PROMOTIONS [***]* [***]*
See Exhibit B attached hereto
- ----------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------
* See attached package description for PHASE I $7,000 [***]*
any AOL.com package purchases PROMOTIONS
TOTAL :
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
All necessary artwork and active URL's must be provided by advertiser 3 business days prior to start date.
Artwork required from Advertiser/Agency :
-----------------------------------------
[_] 468x60 NF Reviews, Search Terms, My News & Hometown/10k Max/animation OK
[_] 100x70 AOL.com Home Page/3k Max/No animation [_] 120x60 NF Home Page/2k Max/No animation
[_] 120x60 Shopping/4k Max/No animation [_] 234x60 NF Kids Only & Hometown/5k Max/animation OK
[_] 120x60 Instant Messenger/7.5k Max/animation OK
Linking URL: The HTTP/URL address to be connected to the Advertisement shall be the same address as that of the Advertiser Site.
Please send artwork and URL to (choose one):
[_] [email protected] [_] [email protected]
------------------ ------------------
AOL reserves the right to immediately cancel any advertising flight in the event of a material change to the nature or content of
the site linked to the Advertisement.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Advertising Purchase Summary
- --------------------------------------------------------------------------------
Total Price Total Impressions CPM
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AOL Networks [***]* [***]*
- --------------------------------------------------------------------------------
AOL Affiliate [***]* [***]*
- --------------------------------------------------------------------------------
Total Purchase Price [***]* [***]* [***]*
- --------------------------------------------------------------------------------
(Less Agency Discount) N/A N/A
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------
Net Purchase Price Total Impressions
---------------------------------------------------------
<S> <C>
$1,900,350 [***]*
---------------------------------------------------------
</TABLE>
The products and/or services to be offered or promoted by Advertiser in the
Advertisements are as follows: online postal services (i.e., services associated
with the online sale of postage stamps and ancillary products and services
related thereto) (the "Advertiser Products").
* [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE>
4. Impressions Commitment. Any guarantees are to impressions (as measured by
----------------------
AOL in accordance with its standard methodologies and protocols), not
"click-throughs." In the event there is (or will be in AOL's reasonable
judgment) a shortfall in impressions as of the end of a display period (a
"Shortfall"), such Shortfall shall not be considered a breach of the
Agreement by AOL; instead, AOL will provide Advertiser, as its sole remedy,
with "makegood" impressions through advertisement placements on the AOL
Service. In connection with the foregoing, AOL shall use reasonable efforts
to ensure that any makegood impressions shall be provided to Advertiser
through promotions that are comparable in nature to the appropriate type of
promotions through which the impressions should have been delivered (e.g.,
if there is a Shortfall that should have been delivered through Level A
Promotions, AOL shall use reasonable efforts to make up such impressions
with other Level A Promotions). In the event that AOL is unable to provide
makegood impressions through the appropriate comparable promotions, AOL
shall provide such impressions through other types of promotions as
follows: (i) for each Level A impression that was not delivered, AOL shall
deliver either (a) three (3) Level B impressions or (b) ten (10) Level C
impressions; (ii) for each Level B impression that was not delivered, AOL
shall deliver either (a) 1/3 of a Level A impression or (b) three (3) Level
C impressions; and (iii) for each Level C impression that was not
delivered, AOL shall deliver one Level C impression. To the extent
impressions commitments are identified without regard to specific
placements, such placements will be as mutually agreed upon by AOL and
Advertiser during the course of the display period. AOL reserves the right
to alter Advertiser flight dates to accommodate trafficking needs or other
operational needs. In such cases, AOL will make available to Advertiser
reasonably equivalent flight(s).
5. Navigation. Advertiser shall provide continuous navigational ability for
----------
AOL users to return to an agreed-upon point on the AOL Service (for which
AOL shall supply the proper address) from the Affiliated Advertiser Site
(e.g., the point on the AOL Service from which the Affiliated Advertiser
Site is linked).
6. Term. Unless otherwise terminated as provided herein, the term hereof
----
shall begin on the first Display Start Date and shall expire on the last
Display Stop Date.
AUTHORIZED SIGNATURES
In order to bind the parties to this Insertion Order Agreement, their duly
authorized representatives have signed their names below on the dates indicated.
This Agreement (including Exhibits A, B, C, D and E attached hereto and
incorporated by reference) shall be binding on both parties when signed on
behalf of each party and delivered to the other party (which delivery may be
accomplished by facsimile transmission of the signature pages hereto).
AOL ADVERTISER
By: /s/ David M. Colburn By: /s/ John M. Payne
---------------------------- ----------------------------
(signature) (signature)
Print Name: David M. Colburn Print Name: John M. Payne
--------------------- --------------------
Title: SVP Business Affairs Title: Pres/CEO
------------------------ -------------------------
(Print or Type) (Print or Type)
Date: 12/16/98 Date: 12/15/98
4
<PAGE>
EXHIBIT A
---------
1. Authorization to Conduct Business. Advertiser hereby represents and
---------------------------------
warrants that it has obtained all necessary permits, licenses or other
authorizations from the United States Postal Service (the "USPS") which
permits Advertiser to conduct a beta test of the Advertiser Products by
advertising and offering for sale the Advertiser Products on the AOL
Service during the Phase I Promotions.
2. Phased Roll-Out of Promotions. The Advertisements provided hereunder
----------------------------
shall be provided by AOL in accordance with the Insertion Order provided
above, subject to the following:
a. At least three (3) days prior to the Phase I Promotions Display Stop
Date, Advertiser shall provide AOL with a written notice which shall
contain the following :
i. a representation by Advertiser that Advertiser has obtained all
necessary permits, licenses or other authorizations from the
USPS which permits Advertiser to engage in a full scale rollout
and sale of the Advertiser Product through the AOL Service (the
"USPS Authorization"), and
ii. an election by Advertiser to receive the Phase II Promotions.
Provided, however, that if prior to the end of the Phase I
Promotions Advertiser shall receive USPS Authorization to
promote and sell the Advertiser Products on a full scale basis
through the AOL Service, Advertiser shall provide AOL with a
written notice (provided at least two (2) days prior to the date
on which Advertiser wishes to begin receiving the Phase II
Promotions) (the "Acceleration Notice"), containing (A) the
representation required pursuant to Section 2(a)(i) of this
Exhibit A, and (B) an election by Advertiser to receive the
Phase II Promotions. In such event, the parties hereto shall
create a new insertion order which will indicate the new Display
Start Date of the Phase II Promotions, which insertion order
shall be attached hereto as an Exhibit. Notwithstanding the
foregoing, (1) upon receipt of an Acceleration Notice, AOL shall
only be obligated to place Advertisements for which Advertiser
has already provided the necessary creative art work and related
materials to AOL, and which requires less than two (2) days of
advance notice to place on the AOL Service; to the extent that
any Advertisement required to be placed during the Phase II
Promotions shall require more than two (2) days of advance
notice to be placed on the AOL Service, AOL shall provide such
Advertisements within thirty (30) days after receipt of the
Acceleration Notice; (2) AOL shall not be obligated to provide
the Phase II Promotions unless and until Advertiser makes the
representation required pursuant to Section 2(a)(i) of this
Exhibit A; and (3) if Advertiser does not receive the USPS
Authorization prior to June 30, 1999, notwithstanding anything
otherwise contained herein, either party shall have the right to
immediately terminate this Insertion Order Agreement without any
further obligation or liability of any kind (other than any
liability incurred by either party prior to such date) to the
other party on account of such termination. In the event of such
termination, Advertiser shall have no further payment
obligations under this Insertion Order Agreement other than
payment obligations due and payable at the time of termination.
3. Additional Promotions.
---------------------
a. Phase I. During the Phase I Promotions, from time to time, Advertiser
-------
shall have the right to purchase up to [***]* worth of additional
---
from AOL subject to the following restrictions:
i Advertiser shall purchase such additional impressions in minimum
increments of [***]* at a CPM value that is equivalent to the
----
CPM value of comparable types of provided hereunder, pursuant to
an AOL Insertion Order Agreement entered into by Advertiser and
AOL (an "Insertion Order") which will be attached hereto as an
exhibit,
ii. Advertiser shall submit the relevant Insertion Order to AOL at
least five (5) days prior to the date on which Advertiser wishes
to begin receiving impressions; and
iii. AOL's obligation to deliver any additional impressions pursuant
to this Section 3 shall be subject to the availability of
advertising inventory on the AOL Service from which AOL can
deliver such additional impressions.
b. Phase II. During the Phase II Promotions, from time to time,
--------
Advertiser shall have the right to purchase up to [***]* worth of
---
additional impressions from AOL subject to the restrictions contained
in Section 3(a)(i), (ii) and (iii). Notwithstanding the foregoing, in
the event that the transaction between AOL and Advertiser which is
contemplated under Section 9 hereof is not consummated, or if
Advertiser expends less than the amounts earmarked for such
transactions, Advertiser will use the funds earmarked for such
transaction (or any remaining portion thereof) to purchase up to
[***]* of additional impressions from AOL subject to the provisions
---
Section 3(a)(i), (ii) and (iii).
*[***]Confidential treatment has been requested for the bracketed
portions. The confidential redacted portion has been omitted and
filed separately with the Securities and Exchange Commission.
5
<PAGE>
4. Product Parity. Advertiser will ensure that the prices, terms and
--------------
conditions for the Advertiser Products in the Affiliated Advertiser Site
are no less favorable than the prices, terms and conditions on which the
Advertiser Products or substantially similar products are offered by or on
behalf of Advertiser through any other distribution channels.
5. Special Offers/Member Benefits. Advertiser will generally promote through
------------------------------
the Affiliated Advertiser Site any special or promotional offers made
available by or on behalf of Advertiser through any other distribution
channels directed primarily at a consumer audience (i.e., non-corporate
customers). Advertiser shall not be required to comply with the foregoing
provision if compliance therewith would result in a breach by Advertiser of
any contractual arrangements with third parties, and it is understood by
the parties that the foregoing shall not prevent Advertiser from providing
one time special offers which may not be appropriate for AOL users. In
addition, Advertiser shall promote (a) at least four (4) special offers on
the Affiliated Advertiser Site that are exclusively available to AOL users
(the "AOL Special Offers") and (b) at least one special offer in connection
with the Stamp Days Promotions described in Section 10 hereof (the "Stamp
Days Promotion Special Offer"). AOL Special Offers made available by
Advertiser shall provide a substantial benefit to AOL users as reasonably
determined by Advertiser, either by virtue of a meaningful price discount,
product enhancement, unique service benefit or other special feature.
Advertiser shall have the right to promote special or promotional offers to
AOL users which in addition to the promotion of Advertiser, may promote
other third parties; provided that, (i) such third parties cannot be
entities that are reasonably construed to be competitive with AOL, (ii) AOL
shall have the right to review and approve such third parties prior to the
placement of such special or promotional offers, and (iii) such special or
promotional offers shall link only to the Affiliated Advertiser Site
(unless otherwise agreed upon by the parties) and shall represent no more
than ten percent (10%) of the special or promotional offers offered
hereunder. Advertiser will provide AOL with reasonable prior notice of the
AOL Special Offers and the Stamp Days Promotion Special Offer so that AOL
can market the availability of such special offers in the manner AOL deems
appropriate in its editorial discretion.
6. Advertiser Promotion of AOL. Subject to Advertiser's existing contractual
---------------------------
arrangements, within Advertiser's web sites on the World Wide Web portion
of the Internet that are not co-branded with a third party (each an
"Advertiser Web Site"), at AOL's option, Advertiser shall include one of
the following (each an "AOL Promo"): (i) a prominent promotional banner or
button having a size, prominence and placement location as mutually agreed
upon by the parties (but in no event shall such button have a size,
prominence or placement location that is less favorable, in any respect,
than the size, prominence or placement location provided to any other third
party) to promote such AOL products or services as AOL may designate (for
example, the America Online brand service, the CompuServe brand service,
the AOL.com site, any of the Digital City services or the AOL Instant
Messenger service); or (ii) a prominent "Try AOL" feature having a size,
prominence and placement location as mutually agreed upon by the parties
(but in no event shall such button have a size, prominence or placement
location that is less favorable, in any respect, than the size, prominence
or placement location provided to any other third party) through which
users can obtain promotional information about AOL products or services
designated by AOL and, at AOL's option, download or order the then-current
version of client software for such AOL products or services. AOL will
provide the creative content to be used in the AOL Promo (including
designation of links from such content to other content pages). To the
extent Advertiser notifies AOL of reasonable complaints or concerns
regarding the AOL Promo or any other content or materials linked thereto or
associated therewith ("Objectionable AOL Content"), AOL will, to the extent
such Objectionable AOL Content is within AOL's control, use commercially
reasonable efforts to respond in good faith to such complaints or concerns.
Advertiser shall use reasonable efforts to post (or update, as the case may
be) the creative content supplied by AOL within the spaces for the AOL
Promos within five days of its receipt of such content from AOL. In the
event that AOL elects to serve the AOL Promos to the Advertiser Web Site
from an ad server controlled by AOL or its agent, Advertiser shall take all
reasonable operational steps necessary to facilitate such ad serving
arrangement including, without limitation, inserting HTML code designated
by AOL on the pages of the Advertiser Web Site on which the AOL Promos will
appear. In addition, in Advertiser's television, radio, print and "out of
home" (e.g., buses and billboards) advertisements and in any publications,
programs, features or other forms of media over which Advertiser exercises
at least partial editorial control, Advertiser will include specific
references or mentions (verbally where possible) of the availability of the
Affiliated Advertiser Site through the AOL Service, which are at least as
prominent as any references that Advertiser makes to any Advertiser Web
Site (by way of site name, related company name, URL or otherwise). Without
limiting the generality of the foregoing, (i) Advertiser's listing of the
"URL" for any Advertiser Web Site will be accompanied by an equally
prominent listing of the "keyword" term on AOL for the Affiliated
Advertiser Site (if any) and (ii), Advertiser shall use commercially
reasonable efforts to promote any special offers offered on the AOL Service
through its offline promotional efforts (e.g., cable and or television
advertising buys). In connection with the foregoing, AOL will pay
Advertiser AOL's then current standard bounty fee for any new subscribers
to the AOL Service who subscribe to the AOL Service through the AOL Promo.
7. Functionality of Advertiser Product. In the event that any Advertiser
------------------------------------
Products (or any software associated therewith) that are promoted and sold
through the Advertisements result in a poor user experience for a
significant number of AOL users (e.g., poor user interface, incompatible
software, unusable software, software which contain bugs or viruses which
substantially reduces the usability of the Advertiser Product, or software
which does not perform the functions for which it is advertised), and
provided that Advertiser does not remedy such poor user experience within
fifteen (15) days (or thirty (30) days in the event that such poor user
experience is directly attributable to the USPS) after written notice from
AOL (during which fifteen (15) day or thirty (30) day period AOL shall have
the right to decrease or cease the placement of the Advertisements, and in
such event, AOL will be relieved of the proportionate amount of any
Advertisement placement commitments made to Advertiser by AOL hereunder
corresponding to such decrease in placements), AOL shall have the right to
terminate this Insertion Order Agreement upon thirty (30) days written
notice to Advertiser. In the event of such termination, Advertiser shall
have no further payment obligations under this Insertion Order Agreement
other than payment obligations due and payable at the time of termination.
6
<PAGE>
8. Distribution of Advertiser Software with AOL Store Fulfillment Packages.
-----------------------------------------------------------------------
AOL will facilitate the distribution of the software developed by
Advertiser which is necessary for the operation of Advertiser's electronic
stamp product and enables end-users to purchase postal services
electronically through Advertiser's network (the "Advertiser Software")
through a third party package fulfillment distributor (the "Distributor")
in accordance with the terms and conditions of the agreement attached
hereto as Exhibit D. Advertiser will pay the Distributor up to a maximum
amount of [***]* (the "Set-Aside Payment") in consideration for the
---
distribution of the Advertiser Software. In the event that Advertiser shall
not have used the entire Set-Aside Payment in connection with the
distribution of the Advertiser Product by December 1, 1999, Advertiser will
use the remaining portion of the Set-Aside Payment to purchase additional
impressions on the AOL Service, subject to the restrictions provided in
Section 3(a)(i), (ii) and (iii) hereof.
9. Distribution of Advertiser Software with AOL 4.0 CD-ROMS. AOL will
--------------------------------------------------------
distribute the Advertiser Software of Advertiser in accordance with the
provisions of Exhibit E attached hereto.
10. Stamp Days Promotion/Rainman Production. With respect to the Special
---------------------------------------
Campaign Promotion: Stamp/Postage Days listed on Exhibit B (each a "Stamp
Day Promotion" and collectively "Stamp Day Promotions"), AOL will work with
Advertiser to create various editorial and programming content related to
the Advertiser Products. AOL shall be responsible for the creation of a
rainman area (the "Stamp Rainman Area") on the AOL Service to promote Stamp
Days. Advertiser shall be responsible for providing AOL with content and
promotions to be promoted by AOL during Stamp Days. At Advertiser's option,
the Stamp Days promotion may occur over a period of three (3) contiguous
days or three (3) separate and unrelated days and Advertiser shall provide
AOL with no less than forty five (45) days notice prior to the time that
Advertiser wishes to receive the Stamp Days promotion or a Stamp Day
promotion. In addition to the Stamp Rainman Area, AOL will program and
create at least one other rainman area for Advertiser which will contain
such content and promotions as mutually agreed upon by the parties hereto
(the "Additional Rainman Area" and together with the Stamp Rainman Area the
"Rainman Areas"). AOL will incur the expense of creating the Rainman Areas
up to a maximum expenditure of [***]*. If the costs associated with the
---
Rainman Areas exceed [***]*, Advertiser shall be responsible for such
---
excess amounts.
11. Keyword: Stamps. AOL will create a "referee" screen in the appropriate
---------------
areas of the AOL Service to which Keyword Stamp or Stamps will link. Such
"referee" screen will contain programming created by AOL in its sole
discretion, provided that, AOL shall provide Advertiser with a button or
link on such screen which will link to the Advertiser Site or any other
area agreed upon by the parties and Advertiser shall be the only provider
of online postal services (except for specialty or collectible non-
electronically issued postage stamp providers) to be provided with a button
or link on such "referee" screen. In addition to the foregoing, subject to
the provisions hereof, Advertiser shall have the right to use the AOL
Keyword Term Stamps.com and one additional AOL Keyword Term as mutually
agreed upon by the parties.
* [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
7
<PAGE>
EXHIBIT B
---------
PHASE II PROMOTIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Impressions Percent of Average CPM Total Cost
Carriage
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Level A -- Highly Targeted [***]* [***]* [***]* [***]*
Level B - Targeted [***]* [***]* [***]* [***]*
Level C -- Relevant Broad Reach [***]* [***]* [***]* [***]*
Campaign Promotion: Stamp Days [***]* [***]* [***]* [***]*
- ---------------------------------------------------------------------------------------------------------------
Total Campaign [***]* [***]* [***]* $1,700,350
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Level A Promotions Type of
------------------ -------
Promotion
---------
AOL Network
Workplace Business Services: Permanent
Postage Category placement (top
listing in such area
for so long
as such area
retains its current
design)-
Workplace Professions: Sponsorship
Admin/Support treatment
Workplace Professions: Home Sponsorship
Business treatment
Workplace Professions: MultiLevel Sponsorship
Marketing treatment
Workplace Newsletter: Specials Feature link
Section integration
Computing Download Software Banner rotation
Computing Download Software: Sponsorship &
Business/Finance list box*
Shopping: Computer Software Tenant position
Shopping: Mother's Day Holiday Slideshow
Catalog integration
Shopping: Father's Day Holiday Slideshow
Catalog integration
Shopping: Gift Reminder Service Feature link
14 day** integration
Personal Finance: Tax Special Sponsorship
(banner only)
Personal Finance: Tax Area** Banner rotation
Mail Center Main Screen Banner rotation
Classifieds: Employment Banner rotation
AOL.com
AOL.com Search Terms***
CompuServe
----------
Mindset Package: Business Banner rotation
Professional/News
Mindset Package: Home & Family Banner rotation
* [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
8
<PAGE>
Level B Areas
-------------
AOL.com
AOL.COM or NetFind Home Page/s Banner rotation
slots
My News - Run of Top News Banner rotation
My News - Run of Business News Banner rotation
Digital City
Digital City: Market Selection Banner rotation
Level C Areas
-------------
AOL Network
Email Banner rotation
News Banner rotation
AOL Network Run of Service Banner rotation
AOL.com
AIM Banner rotation
Special Campaign Promotion:
---------------------------
Stamp/Postage Days (3-day
--------------------------
promotion)
----------
Email
News
AOL Network
Remnant and Promotional Support
Vehicles
-----------------------------------------------------------------------
*Subject to Advertiser's compliance with all technical and programming
requirements (including quality assurance testing) of AOL.
**Advertiser will only be provided with these Promotions if the Phase
II Promotions shall have begun prior to April 15, 1999.
*** List to include: mail, mailing, post, postal, postage, stamp, stamps
- ------------------------------------------------------------------------
9
<PAGE>
EXHIBIT C
---------
AOL Advertising Standard Terms and Conditions
---------------------------------------------
1. Advertising Material/Display. Advertiser acknowledges that the sole
----------------------------
obligation of America Online, Inc. ("AOL") is to display an advertisement
or icon (the "Advertisement") from Advertiser which conforms to the
specifications set forth in the applicable Insertion Order Agreement which
has been executed by AOL and Advertiser (the "Insertion Order," and,
collectively with these Standard Terms and Conditions, the "Insertion Order
Agreement") through the standard narrowband U.S.-based America Online brand
service (excluding any sub-products, sub-services or third party areas
which may be offered therein) or such other U.S.-based AOL property as may
be expressly described as the site for placement in the Insertion Order
(the "AOL Service"). Subject to Advertiser's reasonable approval, AOL will
have the right to fulfill its promotional commitments with respect to the
Advertisements by providing Advertiser with comparable placements of the
Advertisements in alternative areas of the AOL Service. AOL reserves the
right to redesign or modify the organization, structure, "look and feel"
and other elements of the AOL Service (including any redesign of the
Workplace Business Services: Postage Category) at its sole discretion at
any time without prior notice (a "Redesign"). In the event such
modifications will materially and adversely affect the placement of the
Advertisement, AOL will work with Advertiser to display the Advertisement
in a comparable location and manner that is reasonably satisfactory to
Advertiser. Except as expressly provided in the Insertion Order, the
specific nature and positioning of the Advertisement will be as determined
by AOL in its editorial discretion. Advertiser agrees that AOL has the
right to market, display, perform, transmit and promote the Advertisement
through the AOL Service and in connection therewith, subject to the terms
and conditions hereof, Advertiser hereby grants to AOL a non-exclusive,
non-sublicensable (except to an Affiliate of AOL) and non-transferable
license to use the names specified by Advertiser from time to time which
Advertiser shall have a legal right to use (the "Advertiser Marks") in the
Advertisements and in connection with the advertising, marketing and
promotion of the Advertiser Products on the AOL Service. Additionally, AOL
shall have the right to use the Advertiser Marks in connection with the
distribution of the Advertiser Software in accordance with Exhibit E. AOL
hereby acknowledges and agrees that (i) except as set forth herein, AOL has
no rights, title or interest in or to the Advertiser Marks, (ii) AOL shall
not challenge Advertiser's exclusive rights in and to the Advertiser Marks,
(iii) AOL shall not apply for registration of the Advertiser Marks anywhere
in the world, (iv) AOL shall not alter any of the Advertiser Marks in any
way and shall use the Advertiser Marks exactly as provided by Advertiser,
(v) the use by AOL of the Advertiser Marks shall inure to the benefit of
Advertiser with respect to Advertiser's rights and ownership in and to the
Advertiser Marks, and (vi) Advertiser reserves all rights not expressly
granted to AOL hereunder in connection with the Advertiser Marks. AOL shall
use reasonable efforts to notify Advertiser promptly of any infringement of
any copyrights, trademarks, or other intellectual property or proprietary
rights relating to the Advertiser Software of which AOL is aware.
Advertiser may, in its sole discretion, take or not take whatever action it
believes is appropriate in connection with any such infringement. In the
event that AOL intends to use an Advertiser Mark in a manner which was not
previously approved by Advertiser, AOL shall provide notice to Advertiser
of its intended use of such Advertiser Mark, Advertiser shall then have
three (3) business days to respond to AOL's proposed use of such Advertiser
Mark, and if Advertiser does not respond in such three (3) day period,
AOL's use of such Advertiser Mark shall be deemed approved. Additionally,
Advertiser agrees that users of the AOL Service have the right to access
and use the Advertisement together with any content or materials linked to
the Advertisement (the "Advertiser Content"). The Advertiser Content (a)
shall not offer or promote any other products and/or services other than
those expressly provided for in the relevant Insertion Order, (b) will link
only to the site specified on the Insertion Order and (c) shall not (1)
disparage AOL; (2) promote any product or service which is reasonably
competitive with one or more of the principal products or services offered
through AOL's products and services (other than the Advertiser Products)
("Competitive Products") on any page of the Affiliated Advertiser Site
which is directly linked to the AOL Service; (3) be in contravention of
AOL's generally applicable advertising standards and practices, as such may
be modified by AOL from time to time; or (d) violate any applicable law,
regulation or third party right (including, without limitation, any
copyright, trademark, patent or other proprietary right). Additionally,
Advertiser shall consistently update the Advertiser Content and will
review, delete, edit, create, update and otherwise manage such content in
accordance with the terms of this Insertion Order Agreement. In no event
shall the Advertisement or the linked area state or imply that (i) the
Advertisement was placed by AOL or (ii) that AOL endorses Advertiser's
products or services. To the extent AOL notifies Advertiser of reasonable
complaints or concerns (e.g., from an AOL member) regarding the Advertiser
Content or any other content or materials linked thereto or associated
therewith ("Objectionable Content"), Advertiser will, to the extent such
Objectionable Content is within Advertiser's control, use commercially
reasonable efforts to respond in good faith to such complaints or concerns.
AOL may alter or shorten the flight dates set forth in the Insertion Order
if advertising materials required per the Insertion Order are not provided
in a timely manner, and Advertiser shall not be entitled to any refund or
proration for delays caused by Advertiser's failure to deliver such
materials.
2. Operations. Unless expressly provided for elsewhere in this Insertion
----------
Order Agreement, AOL will have no obligation to provide any creative,
design, technical or production services to Advertiser ("Services").
Delivery by AOL of any such Services shall be subject to (i) AOL's
availability to perform the requested work, (ii) execution by both parties
of a separate work order specifically outlining the Services to be provided
and the fees to be paid by Advertiser for such Services and (iii) payment
in advance by Advertiser of such fees. Advertiser will ensure that the
Advertiser Content and the site linked to the Advertiser Content are in
compliance with AOL's then-current, generally applicable technical
standards and will take all reasonable steps necessary to conform the
Advertiser Content to the then-existing technologies identified by AOL
which are optimized for the AOL Service (including, without limitation, any
"quick checkout" tool which AOL may implement to facilitate purchase of
products by AOL users). In the event that the Advertiser Content or the
site linked to the Advertiser Content fails to comply with AOL's generally
applicable technical standards, AOL shall have the right to cease or
decrease the placement of the Advertisements, and if Advertiser is unable
to cure such non-compliance within five business days after notice from
AOL, AOL shall have the right to terminate this Insertion Order Agreement.
Additionally, AOL will be entitled to discontinue links to Advertiser
Content to the extent such Advertiser Content will, in AOL's good faith
judgment, adversely affect the operations of the AOL Service. Advertiser
will bear full responsibility for all customer service, including without
limitation, order processing, billing, fulfillment, shipment, collection
and other customer support associated with any products or services
offered, sold or licensed through Advertiser's site, and AOL will have no
obligations whatsoever with respect thereto. Advertiser will take all steps
necessary to ensure that any contest, sweepstakes or similar promotion
conducted or promoted through the Advertiser Content complies with all
applicable federal, state and local laws and regulations.
3. Search Terms/Keywords. To the extent Advertiser is purchasing an
----------------------
Advertisement related to an Internet-based "search" term, Advertiser
represents and warrants that Advertiser has the legal rights necessary to
utilize such search term in connection with the Advertisement. Any
"keyword" terms for navigation from within the proprietary America Online
brand service ("AOL Keyword Terms") (as contrasted to Internet-based search
terms) which may be made available to Advertiser shall be (i) subject to
availability and (ii) limited to the combination of the keyword modifier
combined with a
10
<PAGE>
registered trademark of Advertiser. AOL reserves the right to revoke at any
time Advertiser's use of any AOL Keyword Terms which do not incorporate
registered trademarks of Advertiser. Advertiser acknowledges that its
utilization of any AOL Keyword Term will not create in it, nor will it
represent it has, any right, title or interest in or to such AOL Keyword
Term, other than the right, title and interest Advertiser holds in
Advertiser's registered trademark independent of the AOL Keyword Term.
4. Payment; Cancellation. Advertiser agrees to pay AOL for all advertising
---------------------
displayed in accordance with the agreed upon amounts and billing schedule
shown on the relevant Insertion Order. Advertising packages are
nonrefundable or proratable except to the extent otherwise expressly
contemplated hereunder. Should AOL fail to display the Advertisements in
accordance with the Insertion Order due to Advertiser's failure to comply
with any requirement of the Insertion Order or this Insertion Order
Agreement, Advertiser will remain liable for the full amount indicated on
the Insertion Order. In the event of a Redesign, if AOL and Advertiser
cannot reach agreement on a substitute placement, Advertiser shall have the
right to cancel the Advertisement upon thirty (30) days advance written
notice to AOL. In such case, Advertiser will only be responsible for the
pro-rata portion of payments attributable to the period from the
commencement of the Insertion Order Agreement through the effectiveness of
such cancellation (the "Pro Rata Payments"). AOL reserves the right to
cancel and remove at any time any Advertisement in the event that AOL
reasonably and in good faith believes that further display of the
Advertisement will expose AOL to liability or other adverse consequences.
In the event of such a cancellation, Advertiser will only be responsible
for the Pro-Rata Payments. Advertiser may not resell, trade, exchange,
barter or broker to any third-party any advertising space which is the
subject of this Insertion Order Agreement.
5. Usage Data. AOL will provide Advertiser with usage information related to
----------
the Advertisement in substance and form determined by AOL, consistent with
its then-standard reporting practices. Advertiser may not distribute or
disclose usage information to any third party without AOL's prior written
consent. Additionally, AOL will not disclose usage information to a third
party in a manner which connects Advertiser to such usage information.
6. Each party acknowledges that Confidential Information may be disclosed to
the other party during the course of this Insertion Order Agreement. Each
party agrees that it will take reasonable steps, at least substantially
equivalent to the steps it takes to protect its own proprietary
information, during the term of this Insertion Order Agreement, and for a
period of three years following expiration or termination of this Insertion
Order Agreement, to prevent the duplication or disclosure of Confidential
Information of the other party, other than by or to its employees or agents
who must have access to such Confidential Information to perform such
party's obligations hereunder, who will each agree to comply with this
Section 6. Notwithstanding the foregoing, either party may issue a press
release or other disclosure containing Confidential Information without the
consent of the other party, to the extent such press release or disclosure
is required by law, rule, regulation or government or court order. In such
event, the disclosing party will provide at least five (5) business days
prior written notice of such proposed disclosure to the other party.
Further, in the event such disclosure is required of either party under the
laws, rules or regulations of the Securities and Exchange Commission or any
other applicable governing body, such party will (i) redact mutually
agreed-upon portions of this Insertion Order Agreement to the fullest
extent permitted under applicable laws, rules and regulations and (ii)
submit a request to such governing body that such portions and other
provisions of this Insertion Order Agreement receive confidential treatment
under the laws, rules and regulations of the Securities and Exchange
Commission or otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other
applicable governing body. For the purposes hereof, "Confidential
Information" shall mean any information relating to or disclosed in the
course of the Insertion Order Agreement, which is or should be reasonably
understood to be confidential or proprietary to the disclosing party,
including, but not limited to, the material terms of this Insertion Order
Agreement, information about AOL users, technical processes and formulas,
source codes, product designs, sales, cost and other unpublished financial
information, product and business plans, projections, and marketing data.
"Confidential Information" will not include information (a) already
lawfully known to the receiving party and which the receiving party has a
reasonable basis to believe it may use or disclose without restriction, (b)
independently developed by the receiving party, (c) disclosed in published
materials except as disclosed by the receiving party in breach of this
Section 6, (d) generally known to the public except as disclosed by the
receiving party in breach of this Section 6, or (e) lawfully obtained from
any third party without restriction.
7. Limitation of Liability; Disclaimer; Indemnification.
----------------------------------------------------
(A) EXCEPT AS PROVIDED IN SECTION 7(C)(I)(A) AND SECTION 7(C)(II)(A)
BELOW, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM ANY ASPECT OF THE ADVERTISING RELATIONSHIP PROVIDED FOR
HEREIN. EXCEPT AS PROVIDED IN SECTION 7(C) LIABILITY ARISING UNDER THIS
INSERTION ORDER AGREEMENT WILL BE LIMITED TO DIRECT, OBJECTIVELY MEASURABLE
DAMAGES, AND THE MAXIMUM LIABILITY OF ONE PARTY TO THE OTHER PARTY FOR ANY
CLAIMS ARISING IN CONNECTION WITH THIS INSERTION ORDER AGREEMENT WILL NOT
EXCEED THE AGGREGATE AMOUNT TO BE PAID BY ADVERTISER DURING THE YEAR IN
WHICH THE LIABILITY ACCRUES.
(B)(I)(A) AOL MAKES NO AND HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL
SERVICE OR ANY PORTION THEREOF, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE; WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY
REGARDING (1) THE NUMBER OF PERSONS WHO WILL ACCESS THE ADVERTISER CONTENT
OR "CLICK-THROUGH" THE ADVERTISEMENTS, (2) ANY BENEFIT ADVERTISER MIGHT
OBTAIN FROM INCLUDING THE ADVERTISEMENT WITHIN THE AOL SERVICE AND (3) THE
FUNCTIONALITY, PERFORMANCE OR OPERATION OF THE AOL SERVICE WITH RESPECT TO
THE ADVERTISEMENTS, AND (B) EXCEPT AS SPECIFICALLY PROVIDED IN CLAUSE II
BELOW, ADVERTISER MAKES NO AND HEREBY SPECIFICALLY DISCLAIMS ANY OTHER
WARRANTIES EXPRESS OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
(II) Advertiser warrants to AOL that the Advertiser Software will, under
normal use, conform to the limited warranty contained in the Software
License Agreement (as defined in Exhibit E) applicable to the Advertiser
Software during the warranty period set forth in such Software License
Agreement (the "Warranty Period"). The foregoing warranty will apply only
to the version of the Advertiser Software distributed by AOL in accordance
with Exhibit E. If a Customer (as defined in Exhibit E) contacts Advertiser
during the Warranty Period claiming a breach of the warranty set forth in
the Software License Agreement provided with the Advertiser Software
distributed by AOL in accordance with Exhibit E, Advertiser will use
reasonable efforts to resolve the claim directly with such Customer by
correcting or replacing such Advertiser Software. If a Customer contacts
AOL during the Warranty Period claiming any such breach of warranty, AOL
will use reasonable efforts to promptly refer the matter to Advertiser.
(C) (i) Advertiser hereby agrees to indemnify, defend and hold harmless AOL
and the officers, directors, agents, affiliates,
11
<PAGE>
distributors, franchises and employees of AOL from and against all claims,
actions, liabilities, losses, expenses, damages and costs (including,
without limitation, reasonable attorneys' fees) that may at any time be
incurred by any of them by reason of any claims, suits or proceedings to
the extent such claims, suits or proceedings arise out of or are related
to: (a) third party claims (1) for libel, defamation, violation of right of
privacy or publicity, copyright infringement, trademark infringement or
other infringement of any third party right, fraud, false advertising,
misrepresentation, product liability or violation of any law, statute,
ordinance, rule or regulation throughout the world in connection with the
Advertisements or Advertiser Content provided by Advertiser to AOL
hereunder or in connection with the Advertiser Software distributed by AOL
hereunder (collectively referred to as the "Advertiser Rights Violations");
provided, however, that Advertiser shall have no such indemnification
obligation to the extent that any alleged Advertiser Rights Violation
arises from or in connection with any (x) modification or other alteration
of any Advertisement or Advertiser Content provided to AOL by Advertiser
hereunder, without Advertiser's prior approval, (y) (i) use of any
Advertisement or Advertising Content other than in a manner specified
hereunder or authorized by Advertiser (ii) claim based upon the combination
of the Advertisement, the Advertising Content, or the Advertiser Software
with other content, software technology or materials which Advertiser has
not approved, or (z) (i) any Advertiser Software that has been modified by
AOL without the prior consent of Advertiser, (ii) use of the Advertiser
Software by AOL in a manner which is beyond the scope of the license
granted to it by Advertiser pursuant to Exhibit E, (iii) AOL's use of the
Advertiser Software after notice from Advertiser of infringement or
misappropriation ((i) (ii) and (iii) collectively the "Advertiser Software
Exceptions"); (2) any material breach by Advertiser of any duty,
representation or warranty under this Insertion Order Agreement; or (3) any
contaminated file, virus, worm or Trojan horse originating solely from the
Advertisements or Advertiser Content, or (4) solely arising out of or in
connection with the ability of the Advertiser Software distributed by AOL
hereunder to process calendar date values, including but not limited to,
calendar date values from January 1, 1999 through or beyond January 1,
2000, and in processing such calendar values, to operate in accordance with
the procured system documentation or whether any or all data fields for
calendar date values and data are four digit fields capable of indicating
century and millennium or addressing leap years correctly, and (b) any
contaminated file, virus, worm or Trojan horse originating solely from the
Advertisements or Advertiser Content.
(ii) AOL hereby agrees to indemnify, defend and hold harmless Advertiser
and the officers, directors, agents, affiliates, distributors, franchises
and employees of Advertiser from and against all claims, actions,
liabilities, losses, expenses, damages and costs (including, without
limitation, reasonable attorneys' fees) that may at any time be incurred by
any of them by reason of any claims, suits or proceedings to the extent
such claims, suits or proceedings arise out of or are related to: (a) third
party claims: (1) for libel, defamation, violation of right of privacy or
publicity, copyright infringement, trademark infringement or other
infringement of any third party right, fraud, false advertising,
misrepresentation, product liability or violation of any law, statute,
ordinance, rule or regulation throughout the world in connection with the
AOL Promos or content provided by AOL to Advertiser hereunder (collectively
referred to as the "AOL Rights Violations"); provided, however, that AOL
shall have no such indemnification obligation to the extent that any
alleged AOL Rights Violation arises from any (x) modification or other
alteration of any AOL Promo or AOL Promo content provided to Advertiser by
AOL, without AOL's prior approval, or (y) (i) use of such AOL Promo or AOL
Promo content other than in a manner specified hereunder or authorized by
AOL, or (ii) claim based upon the combination of the AOL Promo or AOL Promo
content with other content, software technology or materials which AOL has
not approved; (2) any infringement of any patent or other intellectual
property right which results from the Advertiser Software Exceptions, (3)
AOL's grant of a warranty to any Customer which exceeds the limited
warranty provided by Advertiser above, and (4) any material breach by AOL
of any duty, representation or warranty under this Insertion Order
Agreement, and (b) AOL's failure to comply with all applicable laws,
regulations, authorizations and rules related to the export or re-export of
any technical data or online postal services.
(iii) Each party (the "Indemnitee") will promptly notify the other party
(the "Indemnitor") of any claim, action or demand (an "Action") for which
indemnity is claimed, permit the Indemnitor to have sole authority to
defend and/or negotiate a settlement of such Action, with counsel of the
Indemnitor's choice and reasonably acceptable to the Indemnitee, and
provide reasonable assistance and cooperation to the Indemnitor in the
investigation, defense and settlement of such Action at the Indemnitor's
expense. The Indemnitee shall be entitled to participate fully in the
defense of any Action at its own expense with counsel of its choice. The
Indemnitor shall have no obligation for any settlement that the Indemnitor
does not approve in writing; provided that the Indemnitor shall not,
without the Indemnitee's prior written consent, enter into any settlement
or compromise that would impose any obligation upon the Indemnitee, impair
the rights of the Indemnitee or require the Indemnitee to pay any amount.
This section will survive the completion, expiration, termination or
cancellation of this Insertion Order Agreement.
8. Solicitation.
------------
(a) Advertiser will not send unsolicited, commercial e-mail (i.e., "spam")
through or into AOL's products or services, absent a prior business
relationship, and will comply with any other standard AOL policies and
limitations relating to distribution of bulk e-mail solicitations or
communications through or into AOL's products or services (including,
without limitation, the requirement that Advertiser provide a prominent and
easy means for the recipient to "opt-out" of receiving any future
commercial e-mail communications from Advertiser. Advertiser will not use
the Advertisement or any other aspect of AOL's products or services to
promote or solicit on behalf of a Competitive Product.
(b) Advertiser shall ensure that its collection, use and disclosure of
information obtained from AOL members under this Insertion Order Agreement
("Member Information") complies with (i) all applicable laws and
regulations and (ii) AOL's standard privacy policies, available on the AOL
Service at the keyword term "Privacy" (or, in the case of Advertiser's
site, Advertiser's standard privacy policies so long as such policies are
prominently published on the site and provide adequate notice, disclosure
and choice to users regarding Advertiser's collection, use and disclosure
of user information).
(c) Advertiser shall ensure that each request of Member Information shall
clearly and conspicuously specify to the AOL members at issue the purpose
for which the Member Information collected by Advertiser shall be used (the
"Specified Purpose"). Advertiser shall limit use of the Member Information
to the Specified Purpose. In the case of AOL members who purchase products
or services from Advertiser, Advertiser will be entitled to incorporate
such members into Advertiser's aggregate lists of customers; provided that
Advertiser shall in no way: (i) disclose Member Information in a manner
that identifies AOL members as end-users of an AOL product or service (or
in any other manner that could reasonably be expected to facilitate use of
such information by or on behalf of a Competitive Product); or (ii)
otherwise use such Member Information in connection with marketing of a
Competitive Product. This section shall survive the completion, expiration,
termination or cancellation of this Insertion Order Agreement.
9. Miscellaneous. The parties to this Insertion Order Agreement are
-------------
independent contractors. Neither party is an agent, representative or
partner of the other party. Neither party shall have any right, power or
authority to enter into any agreement for or on behalf of, or incur any
obligation or liability of, or to otherwise bind, the other party. The
failure of either party to insist upon or enforce strict performance by the
other party of any provision of this Insertion Order Agreement or to
exercise any right under this Insertion Order Agreement shall not be
construed as a waiver or relinquishment to any extent of such party's right
to assert or rely upon any such provision or right in that or any other
instance. Except where otherwise specified herein or in the Insertion
Order, the rights and remedies granted to a party under this Insertion
Order Agreement are cumulative and in addition to, and not in lieu of, any
other rights
12
<PAGE>
or remedies which the party may possess at law or in equity. Advertiser
shall not (i) issue any press releases or public statements concerning the
existence or terms of this Insertion Order Agreement or (ii) use, display
or modify AOL's trademarks in any manner absent AOL's express prior written
approval. Either party may terminate this Insertion Order Agreement (a) at
any time with written notice to the other party in the event of a material
breach of this Insertion Order Agreement by the other party, which remains
uncured after thirty days written notice thereof; (b) immediately following
written notice to the other party if the other party (1) ceases to do
business in the normal course, (2) becomes or is declared insolvent or
bankrupt, (3) is the subject of any proceeding related to its liquidation
or insolvency (whether voluntary or involuntary) which is not dismissed
within ninety (90) calendar days, or (4) makes an assignment for the
benefit of creditors. Additionally, in the event of a change of control of
Advertiser which results in control of more than 50% of the equity
securities of Advertiser or the power to vote for the election of directors
or other governing authority of Advertiser by an AOL Competitor , AOL may
terminate this Insertion Order Agreement by providing forty five (45) days
prior written notice of such intent to terminate. For the purposes hereof,
an "AOL Competitor" shall be any entity listed on Exhibit F attached
hereto; provided, however, that from time to time AOL shall have the right
to add to such list as reasonably determined by AOL, provided that AOL may
add to such list no more than once every three months. Notwithstanding the
foregoing, to the extent that Advertiser can demonstrate to AOL's
reasonable satisfaction that Advertiser is engaged in negotiations with any
third party that is not listed on Exhibit F, which negotiations would
result in a change of control of Advertiser as provided herein, AOL shall
not have the right to add such third party to the list after Advertiser has
so reasonably demonstrated to AOL that Advertiser is in negotiations with
such third party. This Insertion Order Agreement sets forth the entire
agreement between Advertiser and AOL, and supersedes any and all prior
agreements of AOL or Advertiser with respect to the transactions set forth
herein. No change, amendment or modification of any provision of this
Insertion Order Agreement shall be valid unless set forth in a written
instrument signed by the party subject to enforcement of such amendment.
Advertiser shall not assign this Insertion Order Agreement or any right,
interest or benefit under this Insertion Order Agreement without the prior
written consent of AOL. Assumption of the Insertion Order Agreement by any
successor to Advertiser (including, without limitation, by way of merger or
consolidation) shall be subject to AOL's prior written approval. Subject to
the foregoing, this Insertion Order Agreement shall be fully binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In the event that any provision of this
Insertion Order Agreement is held invalid by a court with jurisdiction over
the Parties to this Insertion Order Agreement, (i) such provision shall be
deemed to be restated to reflect as nearly as possible the original
intentions of the Parties in accordance with applicable law and (ii) the
remaining terms, provisions, covenants and restrictions of this Insertion
Order Agreement shall remain in full force and effect. Both parties shall
adhere to all applicable laws, regulations and rules relating to the export
of technical data and shall not export or re-export any technical data, any
products received from the other party or the direct product of such
technical data to any proscribed country listed in such applicable laws,
regulations and rules unless properly authorized. This Insertion Order
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
document. Except with respect to any claims brought by Advertiser in
connection with Exhibit E or with respect to the AOL Promos, this Insertion
Order Agreement shall be interpreted, construed and enforced in all
respects in accordance with the laws of the Commonwealth of Virginia,
except for its conflicts of laws principles. Except as otherwise provided
herein, Advertiser hereby irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the federal
courts situated in the Commonwealth of Virginia in connection with any
action arising under this Insertion Order Agreement. With respect to any
claims brought by Advertiser in connection with Exhibit E or with respect
to the AOL Promos, such claims will be interpreted and enforced in
accordance with the laws of the State of California and AOL hereby consents
to the exclusive jurisdiction of the courts of the State of California and
the federal courts situated in the State of California in connection with
any claim brought by Advertiser in connection with Exhibit E or with
respect to the AOL Promos.
13
<PAGE>
EXHIBIT D
---------
AOL TO PROVIDE
--------------
14
<PAGE>
EXHIBIT E
---------
ADVERTISER SOFTWARE DISTRIBUTION TERMS AND CONDITIONS
-----------------------------------------------------
1. Terms and Conditions. The following terms and conditions shall govern the
--------------------
distribution by AOL of the advertiser software.
2. Definitions. As used in this Exhibit E, the following terms shall have the
-----------
following meanings:
"Affiliate" shall mean an entity in which AOL holds at least a nineteen
---------
percent (19%) equity interest.
"AOL Client" shall mean the object code form of the client software for
----------
Win16, Win32 and Mac developed and distributed by AOL that enables end-
users to subscribe to, access and use the AOL Service, and upgrades
thereto.
"Authorized Testing Service" shall mean any third-party person or entity
--------------------------
designated in writing by AOL, in its sole discretion, to offer support and
quality assurance services relating to interoperability of third party
products with the AOL Client and the AOL Service.
"Commerce Customer" shall mean any Customer of Advertiser acquired through
-----------------
the distribution of the Advertiser Software by AOL as provided hereunder
and who purchases the Advertiser Product at least two times.
"Customer" shall mean end-user customers of the Advertiser Software.
--------
"Documentation" shall mean the documentation provided to AOL by Advertiser
-------------
for use with the Advertiser Software. "Software "License Agreement" shall
---------------------------
mean Advertiser's standard software license agreement between Advertiser
and Customers, as provided by Advertiser to AOL for inclusion with the
Advertiser Software.
3. License Grant. Subject to all the terms and conditions of this Insertion
-------------
Order Agreement, Advertiser hereby grants to AOL and its Affiliates a
worldwide, non-exclusive, non-transferable, royalty-free license to use,
reproduce, market, promote and distribute to end users through its usual
and customary channels of distribution, solely to the limited extent and
for the express purposes stated herein, the Advertiser Software in object
code form, through CD-ROMs any other physical media containing the AOL
client.
4. Copying/Reverse Engineering. AOL agrees not to (i) disassemble, decompile
---------------------------
or otherwise reverse engineer the Advertiser Software or otherwise attempt
to learn the source code, structure, algorithms or ideas underlying the
Advertiser Software, (ii) take any action contrary to Advertiser's Software
License Agreement, except as expressly and unambiguously agreed upon by
Advertiser, (iii) alter or modify the Advertiser Software except as agreed
upon by Advertiser, (iv) attempt to disable any security devices or codes
incorporated in the Advertiser Software, or (v) allow or assist others to
do any of the foregoing.
5. Advertiser's Obligations.
------------------------
(i) Certification Requirements. AOL shall provide to Advertiser a written
--------------------------
copy of, and Advertiser shall comply with, all quality assurance and
testing requirements for the Advertiser Software to be distributed by
AOL hereunder, as may be reasonably amended by AOL from time to time,
and together with any other reasonable quality assurance and testing
requirements delivered by AOL in writing (including amendments) to
Advertiser, the ("Certification Requirements").
(ii) Support and Quality Assurance by the Authorized Testing Service. The
---------------------------------------------------------------
Authorized Testing Service shall provide support and quality
assurance testing with respect to the Advertiser Software and
interoperability of such products with the AOL Client and the AOL
Service. Support and quality assurance testing shall be provided on
terms and conditions to be worked out between Advertiser and the
Authorized Testing Service and at Advertiser's expense. In connection
with the foregoing, Advertiser shall deliver a master copy of the
Advertiser Software in object code form, along with any required
Documentation to the Authorized Testing Service and AOL no later than
May 15, 1999. The Authorized Testing Service shall perform quality
assurance testing on the Advertiser Products in accordance with the
Certification Requirements. If and when the Authorized Testing
Service determines that any such product meets the relevant
Certification Requirements, the Authorized Testing Service shall then
certify in writing that such product is a "Complying Product". AOL
shall use commercially reasonable efforts, if and to the extent
within its control and consistent with the purposes hereof, to help
expedite such testing processes by the Authorized Testing Service.
(iii) AOL Release Approval. AOL shall have the right to inspect the
--------------------
Complying Product prior to commercial production or public release by
AOL under this Agreement. AOL shall, in its discretion (but based
upon commercially reasonable factors (including without limitation a
change of control of Advertiser, or technical or operational problems
or incompatibilities), provide notice of approval or rejection within
fifteen (15) business days of receiving certification from the
Authorized Testing Service that such product is a Complying Product
together with a copy of the Complying Product. AOL shall have no
obligation to distribute any copy of the Advertiser Software that has
not first obtained release approval from AOL. The parties may
negotiate in good faith to cure any circumstance or issue causing AOL
to so reject, provided that if AOL does not approve release pursuant
to this Section 5(iii), then AOL shall refund to Advertiser any
payments made by Advertiser to AOL pursuant to Section 9(i) of this
Exhibit E.
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<PAGE>
(iv) Re-certification Requirements. Revisions of copies of the Advertiser
-----------------------------
Software that have previously been certified by the Authorized
Testing Service must be re-certified. For purposes of this provision,
a "revision" is defined as any version of a Complying Product that
contains programming code that differs materially from the Complying
Product. Without limiting the foregoing, revisions include
maintenance updates, patches, fixes, and new releases of a Complying
Product. Revisions to a Complying Product shall be re-certified
according to the Certification Requirements, unless AOL or the
Authorized Testing Service first provides to Advertiser in writing a
list of "Re-Certification Requirements," if any, in which case such
Re-Certification Requirements shall apply.
6. AOL's Distribution Obligations. Subject to the provisions of Section 5
------------------------------
of this Exhibit E, and provided that Advertiser is otherwise in compliance
with the provisions of this Insertion Order Agreement, AOL shall distribute
the Advertiser Software with a minimum number of [***]* AOL 4.0 CD-ROMs
---
containing the AOL Client which is sent by AOL in direct marketing programs
to prospective AOL customers during the period commencing on May 15, 1999
and ending on September 1, 2000 (the "Distribution Period"); provided
however, that (i) AOL shall have the right to continue distribution of the
Advertiser Software after the Distribution Period has ended subject to the
terms and conditions hereof and (ii) if Advertiser shall not have delivered
a master copy of the Advertiser Software to the authorized testing service
and AOL by May 15, 1999, then AOL shall no longer be obligated to
distribute the Advertiser Software with a minimum number of [***]* AOL 4.0
---
CD-ROMs, and in such event, AOL `s sole obligation will be to distribute
the Advertiser Software during the period commencing on the date on which
the Advertiser Software becomes a complying product and ending at the end
of the Distribution Period. When the end-user installs the AOL Client on
the end-user's system, the Advertiser Software installation program will be
automatically copied onto the end-user's hard drive, and the end-user will
be presented with the opportunity to install the Advertiser Software. AOL
will distribute the Advertiser Software together with, and subject to, the
terms of the Software License Agreement furnished by Advertiser.
Notwithstanding the foregoing, (i) once AOL begins distribution of the
advertiser software, AOL shall not be obligated to distribute any updates
or upgrades to the Advertiser Software, and (ii) AOL reserves the right, in
the event of technical problems or incompatibilities (e.g., new "bugs"),
excessive usage, or other situations which may adversely affect the user
experience or AOL's costs (collectively, an "Adverse User Situation"), not
to include any Advertiser Software on such CD-ROMs (a "Pull"); provided
however that, in the event of a Pull, AOL shall deliver written notice
thereof to Advertiser within five (5) business days of such Pull. A Pull
will remain in effect as long as any Adverse User Situation remains, in
AOL's reasonable discretion. If such Adverse User Situation is not cured to
AOL's reasonable satisfaction within thirty (30) days from such notice,
then AOL's obligations hereunder shall terminate, and Advertiser shall not
be obligated to make any further payments under section 9(i) hereof.
7. Distribution Requirements. End-users who install the Advertiser Software
-------------------------
distributed pursuant to this will be prompted to send an electronic
registration to Advertiser the first time they attempt to use the
Advertiser Software via the end-user system on which the Advertiser
Software is installed. During such electronic registration, Advertiser
shall create a process by which such end-user will be identified as a user
obtained through the 4.0 CD-ROMs distributed by AOL hereunder. AOL agrees
not to interfere with, obfuscate, remove or alter any of the automatic
installation mechanisms, electronic registration mechanisms, or patent,
copyright or other proprietary rights notices included in the Advertiser
Software provided by Advertiser to AOL. AOL's obligations under this
Section 7 shall be contingent upon Advertiser's delivery of Advertiser
Software that has been quality assurance tested in accordance with Section
5 hereof.
8. Installation and Support. Advertiser shall be solely responsible for
------------------------
providing Customers with installation, maintenance and technical
integration support with respect to the Advertiser Software. AOL shall
notify Advertiser as soon as possible of AOL's receipt of any customer
requests for support or assistance with respect to the Advertiser Software.
9. Payments. In connection with AOL's obligations hereunder, Advertiser shall
--------
pay to AOL the following:
(i) Cash Payments. Advertiser shall pay to AOL a cash amount equal to
$400,000 as follows: (a) [***]* on May 15, 1999, (b) [***]* on August
--- ---
1, 1999, (c) [***]* on November 1, 1999, and (d) [***]* on February 1,
--- ---
2000.
(ii) Bounty Payments. Advertiser shall pay to AOL a bounty payment of
[***]*, for each Commerce Customer acquired by Advertiser during the
---
Term and for a period of three years thereafter. This provision shall
survive the termination or expiration of this Insertion Order
Agreement.
* [***] Confidential treatment has been requested for the bracketed
portions. The confidential redacted portion has been omitted and
filed separately with the Securities and Exchange Commission.
16
<PAGE>
10. Auditing Rights. Advertiser will maintain complete, clear and accurate
records of all expenses, revenues and fees in connection with the
performance of this Insertion Order Agreement, including reports which
indicate the number of customers acquired as a result of the distribution of
the Advertiser Software by AOL, and the number of such customers which
become Commerce Customers . For the sole purpose of ensuring compliance with
Section 9(ii) of this Insertion Order Agreement, AOL (or its representative)
will have the right to conduct a reasonable and necessary inspection of
portions of the books and records of Advertiser which are relevant to
Advertiser's performance pursuant to this Insertion Order Agreement. Any
such audit may be conducted after twenty (20) business days prior written
notice to Advertiser. AOL shall bear the expense of any audit conducted
pursuant to this Section 9 unless such audit shows an error in AOL's favor
amounting to a deficiency to AOL in excess of five percent (5%) of the
actual amounts paid and/or payable to AOL hereunder, in which event
Advertiser shall bear the reasonable expenses of the audit. Advertiser shall
pay AOL the amount of any deficiency discovered by AOL within thirty (30)
days after receipt of notice thereof from AOL. This provision shall survive
the termination or expiration of this Insertion Order Agreement for an
additional three year period.
17
<PAGE>
EXHIBIT F
---------
Yahoo!
Excite
Snap!/CNET
Infoseek
Lycos
Geocities
Tripod
Hot Bot
Amazon.com
AT&T Worldnet
Mindspring
Earthlink
MCI Internet Services
Prodigy
Road Runner Group
@ Home
Hotmail
Juno
WhoWhere
IChat
TalkCity
Concentric
Juno
Erol's
WorldCom
MediaOne, Inc. (US West Media Group Subsidiary)
Microsoft Network
Microsoft Corporation
Netcom
All Interactive Divisions of RBOCs and CLECs
Web TV
Alta Vista
MS Verticals (Expedia, Carpoint, MSNBC)
Pointcast
Walt Disney Interactive Services
AT&T Interactive Services
GTE Interactive Services
Sprint Interactive Services
MSNBC
NBC Interactive Services
Jfax
18
<PAGE>
EXHIBIT 10.18
SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is entered into as of the 14th day of
May, 1999 ("Effective Date"), by and between Intuit Inc. a Delaware corporation,
located at 2550 Garcia Ave., Mountain View, California 94043 ("Intuit"), and
Stamps.com Inc., a Delaware corporation, located at 2900 31st Street, Suite 150,
Santa Monica, CA 90405-3035 ("Client").
RECITALS
A. Intuit maintains sites on the Internet at http://www.quicken.com (the
"Quicken.com Site") and at http://www.quickbooks.com (the "QuickBooks
-------------------------
Site"), and owns, manages or is authorized to place advertising on the
following affiliated Web sites worldwide http://www.quicken.excite.com
-----------------------------
("Excite Money & Investing Site"), http://www.quicken.webcrawler.com
---------------------------------
("WebCrawler Money & Investing Site"), and http://www.quicken.aol.com
--------------------------
("AOL.com Personal Finance Site") (all such sites, including the
Quicken.com Site and QuickBooks Site, collectively referred to as the
"Intuit Sites"). Within the Intuit Sites, content is organized into topical
channels ("Channels").
B. Intuit maintains the Quicken'99 software product into which Banner
Advertisements are served ("Quicken Software").
C. Client is engaged in the business of the sale and delivery of electronic
postage at its Web site located at http://www.stamps.com (the "Client
Site").
D. Client wishes to promote its business to users of the Intuit Sites through
promotions and advertising in various portions of the Intuit Sites.
Therefore, the parties agree as follows:
1. ADDITIONAL DEFINITIONS
1.1 "Above-the-Fold" means the portion of a page that is designed to be visible
on a standard computer screen with a resolution of 640 pixels by 480 pixels
without requiring the user to scroll horizontally or vertically through the
page.
1.2 "Banner Advertisement" means advertisements consisting of billboard-like
graphics displayed in a standardized specific location on the Intuit Sites,
which advertisements click-through to the Client Site, or such other
address mutually agreed upon by the parties from time to time.
1.3 "Channel Home Page" means, with respect to any Channel the introductory or
welcome page for such Channel.
1.4 "Client Competitor" means any of the entities listed on Exhibit A to this
Agreement, as such list may be amended by mutual agreement by the parties,
provided such entity derives any of its annual gross revenues from the sale
or delivery of electronic postage or postage meters.
1.5 "Client Graphic" means those mutually agreed upon graphics, artwork, logos,
descriptions and other material provided by Client for use on the Intuit
Sites.
1.6 "Impression" is generated where a User's browser software requests a file
via the World Wide Web service of the Internet, where such file contains a
Banner Advertisement or Link.
1
<PAGE>
1.7 "Launch Date" means [***]
---
1.8 "Link" means a hypertext text and/or graphic link from the Intuit Sites to
the Client's Site.
1.9 "Net Transaction Revenues" means the aggregate amount of transaction fees
received by Client during the Term from a New Customer for the purchase of
U.S. postage from Client by such New Customer, less amounts attributable to
taxes, shipping, returns, bad debt, handling, credit card charges and
similar charges (collectively, "Deductions"). Notwithstanding the
foregoing, such Deductions, with the exception of credit card charges,
shall not exceed an aggregate of [***] of such transaction fees.
---
1.10 "New Customer" means a User who (a) registers for Client's service using a
unique credit card number, electronic mail address or name not previously
received by Client, and (b) purchases U.S. postage from Client's service.
1.11 "Sponsor Client Graphic" means a Client Graphic which indicates Client as
a "Sponsor" with respect to the sale or delivery of electronic postage,
which graphics click-through to the Client Site, or such other address
mutually agreed upon by the parties from time to time.
1.12 "User" means any person or entity that accesses one or more pages on the
Intuit Sites and is transported via the World Wide Web from the Intuit Site
to the Client's Site.
2. SMALL BUSINESS CHANNEL PROMOTION
2.1 Promotions. Commencing on the Launch Date and continuing throughout the
----------
Term, Intuit shall promote Client on the "Small Business" Channel of the
Quicken.com Site, Excite Money & Investing Site and WebCrawler Money &
Investing Site as follows:
2.1.1 A Sponsor Client Graphic consisting of 160x40 pixels shall be
rotated amongst the following pages (or their successor pages, if
any): (1) "Starting a Business" page, (2) "Managing your Business"
page, (3) "Marketing" page, (4) "Legal Issues" page, and (5) "Taxes
& Accounting" page. Each such Sponsor Client Graphic shall be Above
the Fold.
2.1.2 A Sponsor Client Graphic of 88x31 pixels to be found at the bottom
of each page where a sponsorship strip exists.
2.1.3 A text Link to be located Above-the-Fold in a text sponsor bar on
the "Small Business" Channel home page of the Quicken.com Site,
Excite Money & Investing Site and WebCrawler Money & Investing Site.
2.1.4 A text Link on the "Products & Promos" area of the "Small Business"
Channel Home Page of the Quicken.com Site, Excite Money & Investing
Site and WebCrawler Money & Investing Site.
2.1.5 A Sponsor Client Graphic consisting of a minimum number of pixels
mutually agreed upon by the parties, will appear on the "Small
Business Mailing/Shipping, OnLine Postage" page in the "Small
Business" Channel, when such page is made publicly available on the
applicable Intuit Sites. Such graphic shall be displayed in a
position mutually agreed upon by the parties.
2.2 Email Promotions. Intuit will place a Sponsor Client Graphic consisting of
----------------
a minimum of 234x60 pixels, with a mutually agreed upon text in two (2)
mutually agreed upon, small business email newsletters sent by Intuit, to
all its registered small business users who have elected to receive such
newsletter ("Small Business Newsletters"). Client shall be the only
sponsor in each Small Business Newsletter. For the avoidance of doubt, it
is understood that the Small Business Newsletters shall not contain
advertisements
- -----------------------
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
2
<PAGE>
(excluding any editorial content or directory listings which include third
parties that are not Client Competitors) for any entity, other than Client.
2.3 Additional Banner Advertisements. Commencing on the Launch Date and
--------------------------------
continuing throughout the Term, Intuit will include on the Quicken.com
Site, Banner Advertisements consisting of 468x60 pixels.
2.4 Total Small Business Impressions. Intuit estimates but does not guarantee
--------------------------------
to deliver [***] Impressions of Client's Banner Advertisements, Client
---
Graphics and Links described in this Section 2 during the entire Term of
this Agreement. Intuit acknowledges it is Client's preference to have
Intuit deliver such Impressions as follows:
[***]
---
If Intuit fails to deliver such Impressions during the twelve (12) month
period following the Launch Date, Intuit agrees to run such promotions in
equivalent areas and placement, as mutually agreed upon by the parties,
until such Impressions have been delivered.
3. [***] PROMOTION
---
3.1 Promotions. Commencing on the day after the date on which the [***]
---------- ---
available and continuing throughout the Term, Intuit shall promote Client
on the [***] of the Quicken.com Site, Excite Money & Investing Site,
---
WebCrawler Money & Investing Site, and AOL.com Personal Finance Site as
follows:
3.1.1 A Sponsor Client Graphic of a pixel size mutually agreed upon by the
parties, shall be rotated throughout the "Features and Deals" area.
Each such Sponsor Client Graphic shall be Above the Fold.
3.1.2 A Sponsor Client Graphic of 88x31 pixels to be found at the bottom
of each page where a sponsorship strip exists.
3.2 Additional Banner Advertisements. Commencing on the Launch Date and
--------------------------------
continuing throughout the Term, Intuit will include on the Quicken.com
Site, Excite Money & Investing Site, WebCrawler Money & Investing Site, and
AOL.com Personal Finance Site, Banner Advertisements consisting of 468x60
pixels.
3.3 Total [***] Impressions. Intuit estimates but does not guarantee to deliver
-----------------------
[***] Impressions of Client's Banner Advertisements and Client Graphics
---
described in this Section 3 during the entire Term of this Agreement.
Intuit acknowledges it is Client's preference to have Intuit deliver such
Impressions as follows:
[***]
---
If Intuit fails to deliver such Impressions during the twelve (12) month
period following the Launch Date, Intuit agrees to run such promotions in
equivalent areas and placement, as mutually agreed upon by the parties,
until such Impressions have been delivered.
4. QUICKEN.COM SITE HOME PAGE PROMOTION
4.1 Promotions. Commencing on the Launch Date and continuing for a period of
----------
six (6) months throughout the Term, as mutually agreed by the parties,
Intuit shall promote Client on the Quicken.com Site home page, with a
Sponsor Client Graphic of 88x31 pixels to be found at the bottom of such
home page.
4.2 Total Impressions. Intuit estimates but does not guarantee to deliver [***]
----------------- ---
Impressions of Client's Sponsor Graphics described in this Section 4 during
the period agreed upon by the parties. If Intuit fails to deliver
- --------------------
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
3
<PAGE>
such Impressions during the agreed upon time period, Intuit agrees to run
such promotions in equivalent areas and placement, as mutually agreed upon
by the parties until such Impressions have been delivered.
5. QUOTES PLUS TAB EXCITE MONEY & INVESTING SITE PROMOTION
5.1 Promotions. Commencing on the Launch Date and continuing for a period of
----------
six (6) months throughout the Term, as mutually agreed by the parties,
Intuit shall promote Client on the "Quotes Plus" tab within the
"Investment" Channel of the Excite Money & Investing Site with a Sponsor
Client Graphic of 160x40 pixels will be included Above the Fold at each of
the following "Quotes Plus" page tabs: (1) "Insider Trading", (2)
"Comparison", (3) "Company Profile", (4) "Broker Research", (5) "Analysts",
and (6) "Alerts".
5.2 Total Impressions. Intuit estimates but does not guarantee to deliver [***]
----------------- ---
Impressions of Client's Sponsor Graphics described in this Section 5 during
the period agreed upon by the parties. If Intuit fails to deliver such
Impressions during the agreed upon time period, Intuit agrees to run such
promotions in equivalent areas and placement, as mutually agreed upon by
the parties until such Impressions have been delivered.
6. QUICKBOOKS SITE PROMOTION
6.1 Banner Advertisements. Commencing on the Launch Date and continuing
---------------------
throughout the Term, Intuit will include Banner Advertisements consisting
of 468x60 pixels on the QuickBooks Site.
6.2 Total Impressions: Intuit estimates but does not guarantee to deliver [***]
----------------- ---
Impressions of Banner Advertisements described in this Section 6 during the
Term of this Agreement. Intuit acknowledges it is Client's preference to
have Intuit deliver such Impressions as follows:
[***]
---
If Intuit fails to deliver such Impressions during the twelve (12) month
period following the Launch Date, Intuit agrees to run such promotions in
equivalent areas and placement, as mutually agreed upon by the parties,
until such Impressions have been delivered.
7. QUICKEN SOFTWARE PROMOTION
7.1 Banner Advertisements. Commencing on the Launch Date and continuing
---------------------
throughout the Term, Intuit will serve Banner Advertisements consisting of
468x60 pixels into the Quicken Software.
7.2 Total Impressions: Intuit estimates but does not guarantee to deliver [***]
----------------- ---
Impressions of Banner Advertisements described in this Section 7 during the
Term of this Agreement. Intuit acknowledges it is Client's preference to
have Intuit deliver such Impressions as follows:
[***]
---
If Intuit fails to deliver such Impressions during the twelve (12) month
period following the Launch Date, Intuit agrees to run such promotions in
equivalent areas and placement, as mutually agreed upon by the parties,
until such Impressions have been delivered.
8. LAUNCH DATE, RESPONSIBILITY FOR INTUIT SITES AND REPORTING
8.1 Client Obligations. Client will use reasonable efforts to assist Intuit in
------------------
implementing the promotional placements and advertising described in the
Agreement. The parties recognize that the Launch Date can be met only if
Client provides final versions of all Client Graphics, text, Banner
Advertisements and other promotional media and valid URL links necessary to
implement the promotional placements and
- ------------------
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE>
advertising described in this Agreement (collectively, "Impression
Material") to Intuit at least ten (10) days prior to the Launch Date.
8.2 Untimely Delivery Options. In the event that Client fails to provide the
-------------------------
Impression Material to Intuit at least ten (10) days in advance of the
Launch Date, Intuit may, at its sole discretion (i) reschedule the Launch
Date to the earliest practicable date according to the availability of
Intuit's engineering resources after delivery of the complete Impression
Material or (ii) commence delivery of Impressions based on Impression
Material in Intuit's possession at the time and/or reasonable placeholders
created by Intuit.
8.3 Intuit Sites. Intuit will have sole responsibility for providing, hosting
------------
and maintaining, at its expense, the Intuit Sites. Subject to the terms
and conditions set forth herein, including without limitation, the
obligations of Intuit set forth in Sections 2-7, Intuit will have sole
control over the "look and feel" of the Intuit Sites including, but not
limited to, the display, appearance and placement of the parties'
respective names and/or brands and the promotional links. Notwithstanding
the above, Client acknowledges that the Banner Advertisements may be served
by a third party authorized by Intuit ("Authorized Advertisement Server")
8.4 Reports. Intuit or its Authorized Advertisement Server will provide Client
-------
with monthly reports ("Usage Reports") substantiating the number of
Impressions of Client's Banner Advertisements, Client Graphics, Sponsor
Client Graphics and Links displayed on the Intuit Sites, the total number
of click-throughs generated by each such advertisement or graphic, and such
other information as the parties shall mutually agree.
8.5 Records/Audit. Intuit will maintain accurate records with respect to the
-------------
calculation of Impressions delivered pursuant to this Agreement. Client
may, upon no less than thirty (30) days prior written notice to Intuit,
cause an independent Certified Public Accountant to inspect all relevant
records of Intuit upon which the calculation of Impressions under the Usage
Reports are based during Client's normal business hours. The fees charged
by such Certified Public Accountant in connection with the inspection will
be paid by Client unless the number of Impressions are determined to have
been less than ninety-five percent (95%) of the Impressions due to Client,
in which case Client will be responsible for the payment of the reasonable
fees for such inspection. In addition, if the audit reveals such
shortfall in the number of Impressions generated, Intuit shall continue to
display Client's Banner Advertisements, Client Graphics, Sponsor Client
Graphics and Links on the Intuit Sites as set forth herein. The audit
rights set forth herein shall continue for one (1) year following the
termination of this Agreement for any reason. No such audit may occur more
than once a year during the Term.
9. EXCLUSIVITY
Throughout the Term Intuit will not place, and will not allow any party
acting on its behalf to place, any graphic, link or other form of
advertising or media on any page of the Quicken.com Site and/or on any page
on the AOL.com Personal Finance Site (other than the Channel Home Page),
which markets or promotes any electronic postage product, postage meter
and/or service ("Postage Products") offered by a Client Competitor.
Notwithstanding the above, Intuit may include editorial content or tools
about or from a Client Competitor and include Client Competitors in
directory listings.
10. FEES
10.1 Sponsorship, Advertising and Exclusivity Fees. Client will pay Intuit
---------------------------------------------
sponsorship and advertising fees of $2,644,010 and an exclusivity fee of
$661,003. Such fees shall be paid to Intuit as follows. An initial fee of
$[***] shall be due and payable on the Effective Date. The remaining
---
balance of $[***] shall be paid to Intuit in 12 equal monthly installments
---
of [***]. Each monthly installment should be payable in advance and due no
---
later than the fifth (5th) of the month.
- -------------------
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
5
<PAGE>
10.2 Transaction Fees. Separate and apart from the fees in Subsection 10.1
above, at such time as Client has acquired [***] New Customers (the
---
"Minimum Customer Number") Client will pay Intuit [***] of the Net
---
Transaction Revenues it receives from each New Customer acquired by Client
above the Minimum Customer Number ("Transaction Fee"). Within fifteen (15)
days after the end of each month, Client will provide a monthly report (the
"Transaction Fee Report") to Intuit. The Transaction Fee Report will report
the Net Transaction Revenue and Transaction Fees for such month. All
Transaction Fees due per the Transaction Fee Report will be paid with the
submission of such Report.
10.3 Records/Audit. Client will maintain accurate records with respect to the
-------------
calculation of all Transaction Fees due under this Agreement. Intuit may,
upon no less than thirty (30) days prior written notice to Client, cause an
independent Certified Public Accountant to inspect all relevant records of
Client upon which the calculation of such payments are based during
Client's normal business hours. The fees charged by such Certified Public
Accountant in connection with the inspection will be paid by Intuit unless
the payments made to Intuit are determined to have been less than ninety-
five percent (95%) of the payments actually owed to Intuit, in which case
Client will be responsible for the payment of the reasonable fees for such
inspection. In addition, Client shall immediately remit payment to Intuit
for the full amount of any disclosed shortfalls. The audit rights set
forth herein shall continue for one (1) year following the termination of
this Agreement for any reason. No such audit may occur more than once a
year during the Term.
10.4 Cost and Expenses. Unless otherwise provided in this Agreement, each
------------------
party shall bear its own costs and expenses in connection with its
activities performed under this Agreement.
11. PUBLICITY
Unless required by law, neither party will make any public statement, press
release or other announcement relating to the terms of or existence of this
Agreement without the prior written approval of the other. Notwithstanding
the foregoing, the parties agree to issue a mutually acceptable initial
press release regarding the relationship between Intuit and Client, within
thirty (30) days of the Effective Date unless agreed otherwise by the
parties.
12. TERM AND TERMINATION
12.1 Term. Unless otherwise terminated as specified in this Section 12, the
----
term of this Agreement shall begin on the Effective Date and will not end
until the later of (a) twelve (12) months from the Launch Date; or (2) the
date Intuit displays a total of 176,717,916 Impressions in accordance with
the terms set forth herein ("Term").
12.2 Termination. Either party may terminate this Agreement if the other party
-----------
materially breaches a material obligation hereunder and such breach remains
uncured for thirty (30) days following the notice to the breaching party of
the breach and the notifying party's intention to terminate. All
undisputed payments that have accrued prior to the termination or
expiration of this Agreement for any reason will be payable in full within
thirty (30) days thereof. In addition, upon the termination of this
Agreement by Client for any reason, a pro-rata amount of the Monthly
Payment Fee shall be refunded to Client calculated as follows: the Monthly
Payment Fee less the cost of the Impressions displayed for such month as of
the effective date of the termination, calculated on an average CPM basis.
12.3 Survival. The provisions of Section 6.5, Section 10.3, Section 12.3,
--------
Section 13.1, Section 14, Section 15, Section 16, Section 17, and Section
18 will survive any termination or expiration of this Agreement.
- ---------------------
[***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
6
<PAGE>
12.4 Renewal. If Intuit elects to provide advertising, sponsorship or other
-------
promotional space on all or any portion of the Intuit Sites for a Client
Competitor, Intuit agrees to negotiate with Client in good faith regarding
such promotional opportunity. In the event the parties fail to reach
agreement within ten (10) business days following the commencement of such
good faith negotiations (or such later date as the parties may agree to),
Intuit may offer the opportunity to any third party on terms and conditions
no less favorable then those offered to Client.
13. TRADEMARK OWNERSHIP AND LICENSE
13.1 Ownership. Client will retain all right, title and interest in and to its
---------
trademarks, service marks and trade names worldwide, subject to the limited
license granted to Intuit hereunder. Intuit will retain all right, title
and interest in and to its trademarks, service marks and trade names
worldwide, subject to the limited license granted to Client hereunder.
13.2 License. Each party hereby grants to the other a non-exclusive, limited
-------
license to use its trademarks, service marks or trade names only as
specifically described in this Agreement. All such use shall be in
accordance with each party's reasonable policies regarding advertising and
trademark usage as shall be established or changed from time to time in
each party's sole discretion. Upon the expiration or termination of this
Agreement, each party will cease using the trademarks, service marks and/or
trade names of the other except as the parties may agree in writing or to
the extent permitted by applicable law.
14. CONTENT OWNERSHIP
Client will retain all right, title and interest in and to the Client Site
worldwide including, but not limited to, ownership of all copyrights, look
and feel and other intellectual property rights therein. Intuit will
retain all right, title, and interest in and to the Intuit Sites worldwide
including, but not limited to, ownership of all copyrights, look and feel
and other intellectual property rights therein.
15. CONFIDENTIALITY AND USER DATA
15.1 Definition. For the purposes of this Agreement, "Confidential Information"
----------
means this Agreement, and all information about the disclosing party's (or
its suppliers') business or activities that is proprietary and
confidential, which shall include all business, financial, technical and
other information of a party marked or designated by such party as
"confidential or "proprietary" at the time of disclosure. In addition, the
Usage Reports are considered to be confidential to Intuit.
15.2 Exclusions. Confidential Information will not include information that (i)
----------
is in or enters the public domain without breach of this Agreement, (ii)
the receiving party lawfully receives from a third party without
restriction on disclosure and without breach of a nondisclosure obligation,
(iii) the receiving party rightfully knew prior to receiving such
information from the disclosing party or (iv) the receiving party develops
independent of any information originating from the disclosing party.
15.3 Restrictions. Each party agrees (i) that it will not disclose to any third
------------
party or use any Confidential Information disclosed to it by the other
except as expressly permitted in this Agreement and (ii) that it will take
all reasonable measures to maintain the confidentiality of all Confidential
Information of the other party in its possession or control, which will in
no event be less than the measures it uses to maintain the confidentiality
of its own information of similar importance.
15.4 User Data. All information and data provided to Intuit by users of the
---------
Intuit Sites or otherwise collected by Intuit relating to user activity on
the Intuit Sites shall be retained by and owned solely by Intuit. All
information and data provided to Client by users of the Client Site or
otherwise collected by Client relating to user activity on the Client Site
shall be retained by and owned solely by Client. Each party agrees to
usesuch information only as authorized by the user and shall not disclose,
sell, license, or otherwise transfer any such information to any third
party (except as required by law) or use the user information for the
transmission of "junk mail," "spam," or any other unsolicited mass
distribution of information.
7
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15.5 Limitations. Notwithstanding the foregoing, each party may disclose
-----------
Confidential Information (i) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required by
law or (ii) on a "need-to-know" basis under an obligation of
confidentiality to its legal counsel, accountants, banks and other
financing sources and their advisors.
16. WARRANTY/INDEMNITY/DISCLAIMER OF WARRANTIES
16.1 By Client. Client represents and warrants that (i) it has full power and
---------
authority to enter into this Agreement; (ii) entering into and performance
of this Agreement by Client does not violate, conflict with, or result in a
material default under any other contract or agreement to which Client is a
party, or by which it is bound; and (iii) it has the right to make
available the services on the Client Site.
16.2 By Intuit. Intuit represents and warrants that (i) it has full power and
---------
authority to enter into this Agreement; (ii) entering into and performance
of this Agreement by Intuit does not violate, conflict with, or result in a
material default under any other contract or agreement to which Intuit is a
party, or by which it is bound; and (iii) it has the right to make
available on the Intuit Sites the Banner Advertisements, Sponsor Client
Graphics, Links and other advertisements placed hereunder.
16.3 By Client. Client will defend and/or settle any third party claim brought
---------
against Intuit, its affiliates, officers, directors, employees, consultants
and agents arising from: (1) a breach of Client's representations or
warranties under Section 16.1; (2) any claim that Client's Impression
Materials infringe or violate any third party's copyright, U.S. patent,
trade secret, any patent outside of the US which Client has knowledge of,
or trademark; or (3) content provided by Client for the Client Site or the
products and services of Client offered on the Client Site, and will pay
resulting costs, damages and reasonable attorneys' fees finally awarded,
provided that Intuit promptly notified Client in writing of any and all
such claims. Client has sole control of the defense and all related
settlement negotiations and Intuit reasonably cooperates with Client with
the defense and/or settlement thereof, at Client's expense.
Notwithstanding the foregoing, Client shall not, without Intuit's prior
written consent (which consent shall not be unreasonably withheld or
delayed), make any such settlement that imposes any obligation, financial
or otherwise, upon Intuit. Intuit may not settle or compromise such claim,
action or allegation, except with the prior written consent of Client.
Intuit may have its own counsel in attendance at all proceedings and
substantive negotiations relating to such claim, action or allegation, at
Intuit's cost and expense.
16.4 By Intuit. Intuit will defend and and/or settle any third party claim
---------
brought against Client, its affiliates, officers, directors employees,
consultants and agents arising from (1) a breach of Intuit's
representations or warranties under Section 16.2; or (2) any claim arising
from the Intuit Sites other than content or services provided by Client,
and will pay resulting costs, damages and reasonable attorneys' fees
finally awarded, provided that Client promptly notifies Intuit in writing
of any and all such claims. Intuit has sole control of the defense and all
related settlement negotiations, and Client reasonably cooperates with
Intuit with the defense and/or settlement thereof at Intuit's expense.
Notwithstanding the foregoing, Intuit shall not, without Client's prior
written consent (which consent shall not be unreasonably withheld or
delayed), make any such settlement that imposes any obligations, financial
or otherwise, upon Client. Client may not settle or compromise such claim,
action or allegation, except with the prior written consent of Intuit.
Client may have its own counsel in attendance at all proceedings and
substantive negotiations relating to such claim, action or allegation, at
Client's costs and expense.
16.5 DISCLAIMER. EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
----------
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND HEREBY
DISCLAIMS ANY AND ALL IMPLIED WARRANTIES AND CONDITIONS, INCLUDING WITHOUT
LIMITATION ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE REGARDING SUCH SUBJECT MATTER.
17. LIMITATION OF LIABILITY
EXCEPT UNDER SECTIONS 15 AND 16, IN NO EVENT WILL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER
8
<PAGE>
BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE,
WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE. THE LIABILITY OF EITHER PARTY FOR DAMAGES OR ALLEGED DAMAGES
HEREUNDER (EXCEPT UNDER SECTIONS 15 AND 16), WHETHER IN CONTRACT, TORT OR
ANY OTHER LEGAL THEORY, IS LIMITED TO, AND WILL NOT EXCEED, THE AMOUNTS TO
BE PAID BY CLIENT TO INTUIT HEREUNDER.
18. GENERAL
18.1 Assignment. Neither party may assign this Agreement, in whole or in part,
----------
without the other party's written consent (which will not be unreasonably
withheld or delayed); provided however, that either party may assign its
rights and obligations hereunder in the event of a sale of all, or
substantially all of such party's assets related to this Agreement, whether
by merger, reorganization, operation of law or otherwise, or (2) either
party's assignment and/or delegation of its rights and responsibilities
hereunder to a wholly-owned subsidiary or joint venture in which the
assigning party holds an interest. Any attempt to assign this Agreement
other than as permitted above will be null and void. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the
benefit of both parties, their successors and permitted assigns.
18.2 Applicable Law and Jurisdiction. This Agreement and the performance of
-------------------------------
the parties under this Agreement shall be governed by and construed in
accordance with the laws of the State of California, U.S.A., except that
body of law concerning conflicts of laws. In any action relating to the
parties, the parties consent to jurisdiction in a state or federal court in
Santa Clara County, California.
18.3 Notice. Unless otherwise stated, all notices required under this Agreement
------
shall be in writing and shall be considered given (i) when delivered
personally, (ii) within five (5) days of mailing, certified mail, return
receipt requested and postage prepaid (iii) one (1) day after deposit with
a commercial overnight carrier, or (iv) when delivered by facsimile
transmission. All communications will be addressed as follows (unless
changed by notice):
To Client: Stamps.com
2900 31st Street, Suite 150
Santa Monica, CA 90405-3035
Attn: Vice President, Business Development
9
<PAGE>
To Intuit: If hand delivered or faxed:
--------------------------
Intuit Inc.
2535 Garcia Avenue MS 2550
Mountain View, California 94043
Attn: General Counsel
Phone: 650.944.6000
Fax: 650.944.5656
If mailed:
---------
Intuit Inc.
P.O. Box 7850 MS 2550
Mountain View, CA 94039-7850
Attn: General Counsel
18.4 No Agency. The parties are independent contractors and will have no power
---------
or authority to assume or create any obligation or responsibility on behalf
of each other. This Agreement will not be construed to create or imply any
partnership, agency or joint venture.
18.5 Force Majeure. Any delay in or failure of performance by either party
-------------
under this Agreement will not be considered a breach of this Agreement and
will be excused to the extent caused by any occurrence beyond the
reasonable control of such party including, but not limited to, acts of
God, power outages, failures of the Internet, and Client's failure to
obtain any necessary governmental approval required in connection with the
performance of its obligations hereunder.
18.6 Severability. In the event that any of the provisions of this Agreement
------------
are held to be unenforceable by a court or arbitrator, the remaining
portions of the Agreement will remain in full force and effect.
18.7 Entire Agreement. This Agreement is the complete and exclusive agreement
----------------
between the parties with respect to the subject matter hereof, superseding
any prior agreements and communications (both written and oral) regarding
such subject matter. This Agreement may only be modified, or any rights
under it waived, by a written document executed by both parties.
18.8 Counterparts. This Agreement may be executed in counterparts, each of
------------
which will serve to evidence the parties' binding agreement.
Client: Stamps.com Inc. Intuit Inc.
---------------
By: __________________________ By: _______________________
Name: __________________________ Name: _______________________
Title: __________________________ Title: _______________________
Date: __________________________ Date: _______________________
10
<PAGE>
EXHIBIT A
CLIENT COMPETITORS
E-Stamp
Pitney Bowes
Neopost
United States Postal Service
Francotype Postalia
Ascom
The parties shall meet on a quarterly basis to determine what, if any, changes
shall be made to the Client Competitor list. Notwithstanding the above, in the
event a Client Competitor is acquired by a third party which is involved in the
sales and/or marketing of goods and services outside of electronic postage
products, postage meters and/or postage services ("Non Postage Products"),
Intuit shall be restricted from promoting the Postage Products of such entity
but shall not be restricted from marketing and/or promoting the Non Postage
Products of such entity.
11
<PAGE>
EXHIBIT 10.19
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is made as of this 10th day of
December, 1998 (the "Effective Date"), by and between Stamps.com Inc., a
Delaware corporation with its principal place of business at 2900 31st Street,
Suite 150, Santa Monica, California 90405 ("Stamps.com") and Westvaco a Delaware
corporation with its principal place of business at 299 Park Avenue, New York,
New York 10171 (the "Distributor").
RECITALS
WHEREAS, Stamps.com develops and publishes software which enables end-users
to purchase postage stamps electronically through Stamps.com's network system;
and
WHEREAS, pursuant to the terms and conditions of this Agreement, Stamps.com
desires to appoint Distributor as an independent contractor to distribute such
software and Distributor desires to provide such distribution services.
NOW THEREFORE, in consideration of the mutual promises contained herein and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the meanings set
forth in this Article 1:
"Agreement" has the meaning given to that term in the preamble to this
---------
Agreement.
"Stamps.com" has the meaning given to that term in the preamble to this
----------
Agreement.
"Business Day" means any weekday, Monday through Friday, excluding national
------------
holidays.
"Calendar-Related" refers to date values based on the Gregorian calendar as
----------------
defined in Encyclopedia Britannica, 15th edition, 1982, page 602, and to all
uses of those date values described in the Software documentation.
"Century Compliant" means that the Software satisfies the requirements set
-----------------
forth in Section 9.3 below.
"Century Noncompliant" means any failure of the Software to be Century
--------------------
Compliant.
"Confidential Information" has the meaning given to that term in Section
------------------------
8.4 of this Agreement.
"Customers" means end-user licensees of Software.
---------
"Date Data" means any Calendar-Related data in the inclusive range January
---------
1, 1900 through December 31, 2050 that the Software uses in any manner.
"Distributor" has the meaning given to that term in the preamble of this
-----------
Agreement.
"Disputes" has the meaning given to that term in Section 17.4(i).
--------
"Documentation" means the user manuals and other documentation provided by
-------------
Stamps.com for use with Software. Unless expressly excluded, the term "Software"
as used herein shall include the applicable Documentation.
1
<PAGE>
"Effective Date" has the meaning given to that term in the preamble of this
--------------
Agreement.
"Exceptions" has the meaning given to that term in Section 11.
----------
"Excess Warranty" has the meaning given to this term in Section 12.
---------------
"Logo Program" has the meaning given to this term in Section 6.7.
------------
"Materials" has the meaning given to this term in Section 8.1.
---------
"OEM" means original equipment manufacturer.
---
"Service Fee Revenues" has the meaning given to this term in Section 5.2.
--------------------
"Software" means (i) the object code version of Stamps.com's software
---------
programs listed in Exhibit D, and (ii) the object code version of any updates,
modifications or revisions to such computer programs provided to Distributor
pursuant to the terms of this Agreement.
"Software License Agreement" means the agreement provided in Exhibit B.
--------------------------
"System Date" means any Calendar-Related date value in the inclusive range
-----------
from January 1, 1985 through December 31, 2035 (including the transition between
such values) that the Software will be able to use as its current date while
operating.
"Term" has the meaning given to that term in Section 16.1.
----
"Trademarks" means all then-current names, marks and designations used by
----------
Stamps.com.
"Warranty Period" has the meaning given to that term in Section 9.1.
---------------
2. APPOINTMENT OF DISTRIBUTOR.
--------------------------
2.1 Grant to Distributor. Subject to all the terms and conditions of this
--------------------
Agreement and the limitations set forth below, Stamps.com hereby grants and
Distributor hereby accepts, a non-transferable, exclusive right to market and
distribute copies of Software solely to Customers in the United States who
purchase the Stamps.com product through the Office Supply Channel including the
Office Superstores, Office Supply Wholesalers, Office Supply Dealer Buying
Groups, and Office Supply Contract Stationers. Such exclusivity only applies
with respect to the companies listed in Exhibit A, Section B, Number 4Stamps.com
may market and distribute the Software and other Stamps.com products through
other distributors in the Office Supply Channels discussed above. Furthermore,
this exclusivity is only offered in conjunction and connection with Columbian
Envelopes with the express purpose of cross merchandising and/or bundling
Columbian Envelopes with Stamps.com Software and other Stamps.com products.
Copies of Software are licensed for distribution and not sold. Distributor shall
not appoint, hire or otherwise engage subdealers to market or distribute
Software without the express written consent of Stamps.com.
2.2 Software License. Subject to all the terms and conditions of this
----------------
Agreement, Stamps.com hereby grants a non-exclusive, non-transferable, royalty-
free, sub-licensable and fully-paid-up license to Distributor, for so long as
this Agreement remains in effect, to use, reproduce and copy all Software and to
provide and make available to Customers, copies of all Software; provided that
-------------
the user of all such copies provided or made available to Customers shall be
subject to the terms of the applicable Software License Agreement between each
such Customer and Stamps.com. The foregoing license is provided by Stamps.com to
Distributor free of charge.
2
<PAGE>
2.3 Title and Ownership. Distributor hereby acknowledges that all right,
-------------------
title and interest in and to Software shall at all times remain that of
Stamps.com, including all rights in the nature of copyright, patent, trade-
secret and other intellectual property and proprietary rights with respect to
Software. Distributor shall have no right, title, or interest therein, and
Distributor is not authorized to grant any right or license with respect thereto
except as expressly set forth in, and permitted under, this Agreement.
3. DISTRIBUTOR'S OBLIGATIONS GENERALLY.
-----------------------------------
3.1 Distribution of Software. Distributor shall use its best efforts to
------------------------
distribute Software to Customers pursuant to the provisions set forth in Exhibit
A.
3.2 Copying/Reverse Engineering. In no event shall Distributor use, market
---------------------------
or distribute Software other than as provided herein. Distributor agrees not to
(i) disassemble, decompile or otherwise reverse engineer Software or otherwise
attempt to learn the source code, structure, algorithms or ideas underlying
Software, (ii) take any action contrary to Stamps.com's Software License
Agreement, except as expressly and unambiguously allowed under this Agreement,
(iii) alter or modify Software, (iv) attempt to disable any security devices or
codes incorporated in Software, or (v) allow or assist others to do any of the
foregoing.
3.3 Competing Products. Distributor agrees that it does not currently
------------------
represent, distribute or promote any software that competes with any Software.
The Distributor shall conduct its business in a manner that reflects favorably
on Stamps.com and its Software and shall not, during the Term, represent,
distribute, promote or otherwise try to sell any software that is used to sell,
purchase or otherwise distribute postage over the Internet without written
consent from Stamps.com.
3.4 Software Package; Software License Agreement. Subject to Exhibit A,
--------------------------------------------
Distributor shall ensure to the best of their ability that each copy of Software
distributed by or through Distributor to Customers shall include all components
of such Software as prepackaged by Stamps.com, including, without limitation,
(i) diskettes or other media bearing labels, (ii) Stamps.com's end user manuals
and Documentation, Stamps.com's Software License Agreement, and (iii) at the
option of Stamps.com, advertising and promotional materials supplied by
Stamps.com. The parties to each Software License Agreement shall be Stamps.com
and the Customer. The terms of the Software License Agreement shall be subject
to change by Stamps.com, at its sole discretion, upon reasonable notice to
Distributor. Stamps.com shall have the right to add to or discontinue any or all
Software, but only upon thirty (30) days' prior written notice to Distributor.
3.5 Third Party Infringement. Distributor shall notify Stamps.com promptly
------------------------
of any infringement of any copyrights, Trademarks, or other intellectual
property or proprietary rights relating to any Software. Stamps.com may, in its
sole discretion, take or not take whatever action it believes is appropriate in
connection with any such infringement. If Stamps.com elects to take any such
action, Distributor agrees to fully cooperate in connection therewith. If
Stamps.com initiates and prosecutes any action with respect to infringement of
any copyrights, Trademarks, or other proprietary rights relating to any
Software, Stamps.com shall be entitled to retain all amounts (including court
costs and attorneys' fees) awarded by way of judgment, settlement, or compromise
with respect thereto.
3.6 Compliance. Distributor shall ascertain and comply with all applicable
----------
state, federal and local laws and regulations and standards of industry or
professional conduct, including, without limitation, those applicable to product
claims, labeling, approvals, registrations and notifications, the Internic, the
Internet Assigned Numbers Authority and Internet community standards, and shall
also obtain Stamps.com's prior written consent before adding any product claim,
label, instructions, packaging or the like to any copy of Software.
3.7 Export Control. Distributor shall not export or re-export any Software
--------------
outside the United States without Stamps.com's express written consent. In the
event such consent is received, Distributor shall comply with the U.S. Foreign
Corrupt Practices Act and all export laws, restrictions, national security
controls and
3
<PAGE>
regulations of the United States and other applicable foreign agency or
authority, and shall not export or re-export, or allow the export or re-export
of Software, any component of Software, any other product or Confidential
Information or any copy or direct product of any of the foregoing in violation
of any such restrictions, laws or regulations, or to Cuba, Libya, North Korea,
Iran, Iraq, or Rwanda or to any Group D:1 or E:2 country (or any national of
such country) specified in the then current Supplement No. 1 to Part 740, or, in
violation of the embargo provisions in Part 746, of the U.S. Export
Administration Regulations (or any successor regulations or supplement), except
in compliance with and with all licenses and approvals required under applicable
export laws and regulations, including without limitation, those of the U.S.
Department of Commerce.
4. DELIVERY TO DISTRIBUTOR.
-----------------------
4.1 Delivery. Stamps.com shall deliver a master copy of all Software to
--------
Distributor in a format which shall enable Distributor to provide copies thereof
to Customers. Stamps.com shall provide sufficient copies of all Documentation to
Distributor to allow Distributor to include such Documentation to Customers with
Software pursuant to Distributor's obligations as set forth in Exhibit A.
5. PRICES, PAYMENTS, AND PAYMENT TERMS.
-----------------------------------
5.1 Distributor's Prices to Customers. Distributor shall provide or make
---------------------------------
available copies of Software free of charge to Customers and shall not charge
any fee or other consideration in connection with the delivery or distribution
of such copies.
5.2 Revenue Sharing. As full consideration for its services hereunder,
---------------
Stamps.com shall pay Distributor a quarterly fee equal to [***] of the Service
Fee Revenues paid by the Customer. The percentage paid to Distributor includes
all Service Fee Revenues received by Stamps.com attributable to purchases by
Customers using Software; provided that, if any such Customer previously
obtained any Software from any person other than Distributor, the Service Fee
Revenues attributable to purchases by such Customer shall not be included for
purposes of determining Distributor's quarterly fee.
All quarterly fees payable by Stamps.com to Distributor shall be paid
within forty-five (45) days after the end of the quarter in which Stamps.com
receives the Service Fee Revenues from which such fees are derived. As used
herein, the term "Service Fee Revenues" shall mean all service fees received by
Stamps.com from purchases of postage by Customers and shall specifically exclude
(a) the cost of the postage that is purchased and (b) any taxes with respect
thereto. Distributor may provide the Software to certain trade or partners to
distribute the Software through such partners' retail store or warehouse,
provided that Stamps.com gives prior written approval of any distribution of the
Software through any of Distributor's commerce or trade partners; and provided
--------
further that Stamps.com's total payment obligations under this Section 5.2 must
- -------
not exceed the quarterly fees payable to Distributor. Any and all compensation
payable to such trade or commerce partner shall be payable by Distributor.
6. MARKETING AND ADVERTISING.
-------------------------
6.1 Distributor's General Undertaking, Representation, and Warranty.
---------------------------------------------------------------
Distributor represents, warrants, and covenants to Stamps.com that all
advertising and marketing materials relating to Software and/or Stamps.com that
are developed by Distributor shall be accurate in all respects.
6.2 Distribution of Software. Distributor hereby agrees to advertise,
------------------------
market, sell and distribute Software solely as provided in Exhibit A. In its
distribution efforts, Distributor will use the Trademarks, but shall not
represent or imply that it is Stamps.com or is a part of Stamps.com; provided
--------
that all advertisements
- ----
____________________
[***]Confidential treatment has been requested for the bracketed portions.
The confidential portion has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE>
all advertisements and promotional materials, packaging and anything else
bearing a Trademark shall identify Stamps.com as the Trademark owner and
Software manufacturer; provided further that any use of the Trademarks shall be
----------------
governed by Section 8.3.
6.3 Marketing Materials. Stamps.com agrees to provide to Distributor, at
-------------------
no cost to Distributor, such promotional materials for Software in camera ready
or electronic format as Stamps.com generally makes available to its resellers
and distributors, including technical specifications, prices, drawings, and
advertisements. Distributor may reproduce such promotional materials as
reasonably required in connection with its promotional, advertising and/or
marketing activities in connection with Software, provided that all copyright,
-------------
trademark and other property markings of Stamps.com are reproduced. Such
promotional materials, including all copies and reproductions made by
Distributor, remain the property of Stamps.com and, except insofar as they are
distributed by Distributor in the course of its performance of its duties under
this Agreement, must be promptly returned to Stamps.com upon the expiration or
termination of this Agreement. Distributor may develop its own promotional
materials for Software, provided that Distributor shall submit any such
-------------
promotional materials to Stamps.com for Stamps.com's review, and Stamps.com
shall have the right to approve or reject any such promotional materials in
Stamps.com's sole discretion.
6.4 Web Sites.
---------
(i) Hypertext Links. Utilizing the future site of
---------------
www.ColumbianEnvelopes.com, (the "New Site"), each party shall establish
reciprocal hypertext link to their respective Web sites.. With respect to each
hypertext link, linking users of Distributor's New Site and Stamps.com's Web
site, neither party shall alter the look, feel, or functionality of the other
party's Web site and shall not act to prevent the look and feel of the other
party's Web site (including, without limitation, page format, navigational bars,
colors, fonts, each party's trademarks, all hyperlinks appearing on each party's
Web site or, in general, the overall design of the other party's Web site) from
being displayed .
(ii) Responsibilities. Each party shall be solely responsible for
----------------
the development, operation, and maintenance of its Web site and for all
materials that appear on its Web site, including without limitation, (i) the
technical operation of its Web site and all related equipment, (ii) the accuracy
and appropriateness of materials posted on its Web site, and (iii) ensuring that
materials posted on its Web site do not violate any law, rule, or regulation, or
infringe upon the rights of any third party and are not defamatory, obscene or
otherwise illegal. Each party disclaims all liability for all such matters with
respect to the other's Web site.
6.5 Advertising and Public Relations. Distributor may advertise Software
--------------------------------
in appropriate periodicals and in a manner insuring proper and adequate
publicity for Software. Each time Distributor places any such advertising in any
periodical, Distributor shall provide Stamps.com with notice (pursuant to
Section 17.8 below) that Distributor has done so, specifying the name and date
of the applicable periodical. Distributor shall engage in public relations
activities to encourage the publication, of articles and other publications
regarding Software.
6.6 Announcements. Within thirty (30) days following the Effective date,
-------------
Stamps.com and Distributor shall jointly issue a press release announcing
Distributor's appointment under this Agreement. Thereafter, each party shall
obtain the other party's prior written approval of all press releases that such
party issues with respect to this Agreement and the transactions contemplated by
this Agreement. Distributor also shall obtain Stamps.com's prior written
approval of all other press releases that Distributor issues with respect to
Software.
6.7 Logo Program. During the Term, upon mutual agreement of the parties,
------------
Distributor shall participate in a promotional logo program ("Logo Program") as
follows: Distributor shall be entitled to offer free postage to Customers for a
period of up to twelve months from the Effective Date; provided that, (a) the
amount of free postage to be given to any Customer shall not exceed five dollars
($5), (b) Stamps.com shall be entitled to immediately terminate the Logo Program
at its sole discretion. Distributor will only terminate the logo program
effective prior to Distributor's manufacturing process and will not be held
responsible to recall or terminate any
5
<PAGE>
existing offers already in distribution after the manufacturing process, (c)
Customers shall not be entitled to receive free postage until they have made an
initial purchase of postage from Stamps.com (d) Customers shall not be entitled
to receive free postage if they have previously obtained Software (whether from
Distributor or another person), (e) Distributor and Stamps.com shall mutually
agree on one or more logos which Distributor shall display on certain packaging
and marketing materials which are generally seen by Customers, which will
include but are not limited to external packaging and Web sites, and (f)
Distributor shall not alter any such logos and shall display such logos in
strict compliance with the parties' agreement with respect to color, location
and size and any other relevant criteria with respect to such logos without
written consent granted by Stamps.com. The logos used in the Logo Program shall
be deemed Trademarks for all purposes of this Agreement, including the license
granted by Stamps.com in Section 8.3.
7. INSTALLATION AND SUPPORT.
------------------------
Stamps.com shall be solely responsible for providing Customers with
installation, maintenance and technical integration support with respect to
Software. Distributor shall notify Stamps.com as soon as possible, and within no
more than twenty-four (24) hours or one (1) Business Day, whichever period is
longer, of Distributor's receipt of any Customer request for support or
assistance with respect to Software.
8. PROTECTION OF PROPRIETARY RIGHTS.
--------------------------------
8.1 Acknowledgment of Proprietary Materials. Distributor hereby
---------------------------------------
acknowledges that all Software, Documentation and technical support and training
materials provided to Distributor by Stamps.com (collectively, the "Materials")
are protected by the copyright laws of the United States and other countries and
that the Materials embody valuable confidential and trade secret information of
Stamps.com, the development of which required the expenditure of considerable
time and money by Stamps.com.
8.2 Proprietary Markings. Distributor hereby agrees to ensure that all
--------------------
copyright, trademark and other proprietary notices of Stamps.com affixed to or
displayed on Software and Documentation will not be removed, obscured or
modified.
8.3 Stamps.com Trademarks. Distributor acknowledges that Stamps.com is the
---------------------
owner of all right, title and interest in and to all the Trademarks set forth in
Exhibit C, together with any new or revised names, designs or designations that
Stamps.com may adopt to identify it or any Software during the Term, and
Distributor agrees not to adopt or use any of such Trademarks in any manner
whatsoever except as expressly provided in this Agreement.
Stamps.com hereby grants Distributor a license during the Term to use the
Trademarks, provided that (i) they are used solely in connection with the
-------------
marketing and distribution of Software and in accordance with Stamps.com's
specifications as to style, color and typeface set forth in Exhibit C (ii) such
use shall be subject to prior written approval of Stamps.com, which approval
shall not be unreasonably withheld, and, (iii) no other right to use any name or
designation is granted by this Agreement. Upon expiration or termination of this
Agreement, Distributor will take all action necessary to transfer and assign to
Stamps.com, or its nominee, any right, title or interest in or to any of the
Trademarks, and the goodwill related thereto, which Distributor may have
acquired in any manner as a result of the marketing and distribution of Software
under this Agreement, and Distributor shall cease using any Trademark.
Distributor hereby agrees to notify Stamps.com immediately upon Distributor
gaining knowledge of any infringement or potential infringement of any
Trademark.
Distributor agrees not to apply for registration of any Trademarks anywhere
in the world or for any mark confusingly similar thereto. Stamps.com may elect
to apply for registration of one or more of the Trademarks anywhere in the world
at its expense, and, in such event, Stamps.com shall so notify Distributor and
Distributor shall assist and cooperate with Stamps.com in connection therewith.
Distributor also agrees not to use or contest, during or after the term of this
Agreement, any Trademark, name, mark or designation used by
6
<PAGE>
Stamps.com anywhere in the world (or any name, mark or designation similar
thereto). Distributor acknowledges and agrees that all use of the Trademarks by
Distributor shall inure to the benefit of Stamps.com.
8.4 Confidential Information. Distributor hereby agrees to hold any
------------------------
information, materials and data made available to it by Stamps.com that
reasonably should be understood to be confidential (collectively, "Confidential
Information"), in confidence and agrees not to use, copy, or disclose, or permit
any of its personnel to use, copy, or disclose the same for any purpose that is
not specifically authorized herein. For the purposes of this Section 8.4, the
terms and conditions of this Agreement and the Materials are Confidential
Information. Stamps.com's Confidential Information shall not be deemed to
include any information that (i) is or becomes part of the public domain through
no act or omission of Distributor; (ii) Distributor can establish through
competent written evidence to have been lawfully in Distributor's possession
prior to its disclosure hereunder; (iii) is subsequently acquired by Distributor
from sources under no confidentiality obligation to Stamps.com; or (iv)
Distributor can establish through competent written evidence to have been
independently developed by Distributor without reference to the Confidential
Information.
9. WARRANTY.
--------
9.1 Limited Warranty of Performance. Stamps.com warrants to Distributor
-------------------------------
that all Software will, under normal use, conform to the limited warranty
contained in the Software License Agreement applicable to such Software during
the warranty period set forth in such Agreement (the "Warranty Period"). The
foregoing warranty will apply to any version of Software issued by Stamps.com
distributed by Westvaco. Provided Stamps.com makes available updated software at
no charge for those customers that need to obtain current versions, Stamps.com
will assume no responsibility for claims resulting from the distribution of
superseded, outdated, or uncorrected versions of Software. As long as good faith
distribution has been maintained, Stamps.com will replace any outdated software
included in the Westvaco Columbian brand promotions and distribution. In no way
is Westvaco held responsible for outdated, changed, updated, or defective
software distributed through Westvaco in behalf of Stamps.com.
9.2 Exclusive Remedy for Breach of Warranty to Customer. If a Customer
---------------------------------------------------
contacts Stamps.com during the Warranty Period claiming a breach of the warranty
set forth in the then-current Software License Agreement provided by Distributor
to that Customer, Stamps.com will use reasonable efforts to resolve the claim
directly with such Customer by correcting or replacing such Software. If a
Customer contacts Distributor during the Warranty Period claiming any such
breach of warranty, Distributor shall promptly refer the matter to Stamps.com.
DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF ANY SUCH CLAIM, IF
VERIFIED, IS EXPRESSLY LIMITED TO STAMPS.COM'S REASONABLE EFFORTS TO CORRECT OR
REPLACE SUCH DEFECTIVE SOFTWARE AND/OR DOCUMENTATION AT STAMPS.COM'S SOLE
EXPENSE.
9.3 Century Compliance.
------------------
Stamps.com represents that Calendar-Related processing by the Software of
the Date Data or of any System Date will not cause the Software to cease to
operate substantially in accordance with the Software documentation. Stamps.com
further represents that all data fields for the Date Data contained in the
Software are four-digit fields capable of indicating century and millennium and
that Stamps.com has verified through the testing procedures that no change in
the System Date (including the change from the year 1999 to the year 2000) will
cause the Software to cease to operate substantially in accordance with the
Software documentation. Notwithstanding any provision to the contrary set forth
in this Agreement, Stamps.com makes no representation or warranty that the
Software shall be Century Compliant when operating in conjunction with any
computer software, computer firmware, computer hardware, or any combination of
the foregoing supplied by third parties.
7
<PAGE>
9.4 Exclusive Century Noncompliance Remedy.
--------------------------------------
In the event that the Software is Century Noncompliant in any material
respect, Stamps.com shall use commercially reasonable efforts to modify or
replace the Software, or applicable component thereof, to correct the Century
Noncompliance. If Stamps.com is unable, through the use of commercially
reasonable efforts, to modify or replace the Software to correct the Century
Noncompliance, Stamps.com shall pay to Distributor an amount in accordance with
the limitation on liability set forth in Section 10.1 below as Distributor's
sole remedy for Century Noncompliance of the Software.
9.5 Disclaimer. No representation or other affirmation of fact not set
----------
forth herein, including, without limitation, statements regarding capacity,
compliance, suitability for use, or performance of any Software, shall be or be
deemed to be a warranty or representation by Stamps.com for any purpose, or give
rise to any liability or obligation of Stamps.com whatsoever. EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES EXPRESS
OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE, AND
NONINFRINGEMENT.
10. WARRANTY LIMITATION OF LIABILITY; INJUNCTIVE RELIEF.
---------------------------------------------------
10.1 NO CONSEQUENTIAL DAMAGES; LIMITATION OF LIABILITY. IN NO EVENT SHALL
-------------------------------------------------
EITHER PARTY BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT FOR
LOSS OF PROFITS, COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR
INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY.
EXCEPT WITH RESPECT TO A BREACH OF SECTION 8.4 OR SECTION 11 AND DISTRIBUTOR'S
INDEMNIFICATION OBLIGATIONS UNDER SECTION 12 BELOW, THE LIABILITY OF EITHER
PARTY FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL
NOT EXCEED THE AMOUNT PAID BY STAMPS.COM TO DISTRIBUTOR WITH RESPECT TO THE
SPECIFIC ITEMS OF SOFTWARE GIVING RISE TO SUCH CLAIM.
10.2 Injunctive Relief. Distributor acknowledges that any breach of its
-----------------
obligations under this Agreement with respect to the proprietary rights or
Confidential Information of Stamps.com will cause Stamps.com irreparable injury
for which there are inadequate remedies at law, and therefore Stamps.com will be
entitled to injunctive relief in addition to all other remedies provided by this
Agreement or available at law.
11. DEFENSE OF INTELLECTUAL PROPERTY CLAIMS.
---------------------------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Distributor based on a claim that Distributor's
distribution and/or use of Software infringes a third party's United States
patent, copyright or trademark or misappropriates a third party's trade secret,
and if given access by Distributor to any information Distributor has regarding
such alleged infringement, Stamps.com agrees to defend and hold harmless such in
such action at its expense and will pay any costs or damages finally awarded
against Distributor in any such action; provided that, Stamps.com shall have had
-------------
sole control of the defense of any such action and all negotiations for its
settlement or compromise. In the event that Stamps.com reasonably believes that
any Software infringes a copyright or trademark or misappropriates a trade
secret, Stamps.com may, at its option and at its expense, either procure for
Distributor the right to continue using any Software, modify the same so it
becomes non-infringing or allow the Distributor to terminate this Agreement
pursuant to Section 16.2(ii). Stamps.com shall not have any liability to
Distributor under any provision of this clause if any infringement, or claim
thereof, is based upon: (i) the use of Software in combination with other
computer hardware or software programs that Stamps.com has not approved for use
with such Software, (ii) Software that has been modified by Distributor, (iii)
Distributor's use of Software beyond the scope of the license granted to it by
Stamps.com hereunder, or (iv) Distributor's use after notice of infringement or
misappropriation. Distributor shall indemnify Stamps.com and hold it harmless
against any expense, judgment
8
<PAGE>
or loss for infringement of any patent or other intellectual property right
which results from the exceptions set forth in the immediately preceding
sentence of this Section 11 (collectively, "Exceptions"). No costs or expenses
shall be incurred for the account of Stamps.com without the prior written
consent of Stamps.com. THE FOREGOING STATES THE ENTIRE LIABILITY OF STAMPS.COM
WITH RESPECT TO INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY ANY SOFTWARE, OR ANY PART THEREOF, OR BY ITS
OPERATION.
12. DISTRIBUTOR'S INDEMNITY.
-----------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Stamps.com based on a claim arising from (i)
infringement of any patent or other intellectual property right which results
from the Exceptions; (ii) Distributor's grant of a warranty to any Customer
exceeding the limited warranty set forth in Section 9.1 of this Agreement (an
"Excess Warranty"), (iii) Distributor's material breach of this Agreement, or
(iv) Distributor's negligence or willful misconduct, Distributor shall indemnify
Stamps.com and hold Stamps.com harmless from and against any judgment, damage,
liability, or expenses, including reasonable attorney's fees, arising out of any
claim with respect to the breach or alleged breach of such Excess Warranty or
this Agreement or such negligence or willful misconduct; provided that
-------------
Distributor shall have had sole control of the defense of any such action and
all negotiations for its settlement or compromise; and, provided further, that
----------------
no cost or expense shall be incurred for the account of Distributor without
Distributor's prior written consent.
13. REPORTS AND RECORDS.
-------------------
13.1 Reports. Distributor shall keep complete records concerning all
-------
copies of Software and/or Stamps.com marketing material provided to, or
downloaded by, Distributor's retail or wholesale customers. Within ten (10)
Business Days of the close of each month during the Term, Distributor shall
complete and forward to Stamps.com a monthly report containing a summary setting
forth the number of copies of the Stamps.com Software or Stamps.com marketing
material provided to, Distributor's retail or wholesale customers.
13.2 Audit. Distributor agrees to maintain copies of all documentation
-----
relating to the distribution of Software under this Agreement. If requested in
writing by Stamps.com, Distributor shall permit Stamps.com to have access to
such documentation at Distributor's place of business during ordinary business
hours. Distributor agrees to keep for three (3) years after termination of this
Agreement records of all copies of Software provided to or downloaded by
Customers, as the case may be, in each case sufficient to adequately administer
a recall of any Software and to fully cooperate in any decision by Stamps.com to
recall, retrieve and/or replace any Software. Stamps.com agrees to maintain
copies of all documentation relating to Service Fee Revenues from Customer
purchases using Software distributed by Distributor hereunder. Within fifteen
(15) days after the end of each month, Stamps.com shall provide a report to
Distributor setting forth the revenues received by Stamps.com for such month
which are attributable to purchases from Customers using such Software. If
requested in writing by Distributor, Stamps.com shall permit, at Distributor's
sole expense, Distributor's independent certified public accountants, subject to
a non-disclosure agreement with Stamps.com, up to once per calendar year, to
have access solely to such documentation as is reasonably necessary for such
accountants to verify the amount of revenues set forth on such report; provided,
in no event shall such access include access to Stamps.com's servers. For a
period of three (3) years after termination of this Agreement, Stamps.com agrees
to keep records of all Customer purchases made pursuant to Software distributed
by Distributor hereunder.
14. RELATIONSHIP OF PARTIES.
-----------------------
Distributor is an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as a partner, joint
venturer, co-owner, employee, or agent of the other party, and neither party
shall hold itself out as such. Neither party has any right or authority to
incur, assume or create, in writing or otherwise, any warranty, liability or
other obligation of any kind, express or implied, in the name of or on
9
<PAGE>
behalf of the other party, it being intended by both Distributor and Stamps.com
that each shall remain an independent contractor responsible for its own
actions. Distributor agrees to indemnify and hold Stamps.com harmless from and
against any damage or expenses, including reasonable attorney's fees, arising
out of Distributor's breach of the provisions of this Section 14.
15. ASSIGNMENT.
----------
Distributor shall not assign, transfer or otherwise dispose of this
Agreement in whole or in part to any individual, corporation or other entity
without the prior written consent of Stamps.com.
16. TERM OF AGREEMENT; TERMINATION.
------------------------------
16.1 Term. This Agreement shall be effective as of the Effective Date and
----
shall have an initial term of one (1) year Upon the expiration of such term (or
any renewal term), this Agreement shall automatically renew for additional one
(1) year periods unless either party notifies the other party at least sixty
(60) days prior to the applicable renewal date of its intention to not renew the
Agreement (the initial term and any renewal term shall be collectively referred
to as the "Term").
16.2 Events of Termination.
---------------------
(i) Bankruptcy/Reorganization. Either party may terminate this
-------------------------
Agreement immediately upon written notice to the other party if the other party
becomes insolvent, seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, proceedings
in bankruptcy or insolvency are instituted against the other party, or a
receiver is appointed, or if any substantial part of the other party's assets is
the object of attachment, sequestration or other type of comparable proceeding,
and such proceeding is not vacated or terminated within thirty (30) days after
its commencement or institution.
(ii) Default. Either party may terminate this Agreement if the other
-------
party commits a material breach of any of the material terms or provisions of
this Agreement and does not cure such breach within thirty (30) days after
receipt of written notice given by the other party. Notwithstanding the
foregoing, Stamps.com may immediately terminate this Agreement in the event
Distributor breaches its obligations under Section 2.1, 3.2, 8.3 or 8.4.
(iii) Licenses. Either party may terminate this Agreement immediately
--------
if it or the other party is unable to obtain or renew any permit, license or
other governmental approval necessary to carry on the business contemplated
under this Agreement.
16.3 Termination for Convenience. Either party may terminate this Agreement
---------------------------
at any time with or without cause upon thirty (30) days' prior written notice to
Distributor.
16.4 Rights Upon Termination. Upon termination of this Agreement by
-----------------------
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any moneys due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under Sections 2.3, 3.2, 3.7, 8.1, 8.3 (first and third paragraphs only), 8.4,
9.2, 9.3, 10.1, 10.2, 11, 12, 13.1, 13.2, 14, 15, 16.4, 16.5, and 17.1 - 17.9.
Without limiting the foregoing, upon termination of this Agreement, all licenses
granted to Distributor hereunder shall terminate and each party shall remove any
links from its Web site to the other party's Web site.
16.5 Existing Licenses. All Software License Agreements in effect as of the
-----------------
date of termination or expiration of this Agreement shall survive such
termination or expiration and continue in effect until terminated in accordance
with their terms.
10
<PAGE>
17. MISCELLANEOUS.
-------------
17.1 Force Majeure. If the performance of any obligation (other than
-------------
payment and confidentiality obligations) under this Agreement is prevented,
restricted or interfered with by reason of war, revolution, civil commotion,
acts of public enemies, blockade, embargo, strikes, outage of the Internet, law,
order, proclamation, regulation, ordinance, demand, or requirement having a
legal effect of any government or any judicial authority or representative of
any such government, or any other act whatsoever, whether similar or dissimilar
to those referred to in this Section 17.1, which is beyond the reasonable
control of the party affected, then the party so affected shall, upon giving
prior written notice to the other party, be excused from such performance to the
extent of such prevention, restriction, or interference, provided that the party
so affected shall use reasonable commercial efforts to avoid or remove such
causes of nonperformance, and shall continue performance hereunder with
reasonable dispatch whenever such causes are removed. The parties agree and
acknowledge that the foregoing shall include Stamps.com's failure to obtain any
necessary governmental approval required in connection with the use of any
Software, including without limitation any postal service approval.
17.2 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto and supersedes all previous negotiations,
agreements and commitments with respect thereto, and shall not be released,
discharged, changed or modified in any manner except by instruments signed by
duly authorized officers or representatives of each of the parties hereto. No
course of prior dealing between the parties and no usage of the trade shall be
relevant to supplement or explain any term used herein. Acceptance or
acquiescence in a course of performance rendered hereunder shall not be relevant
to determine the meaning of these terms and conditions even though the accepting
or acquiescing party has knowledge of the performance and opportunity for
objection.
17.3 Applicable Law. Any claim or controversy relating in any way to
--------------
this Agreement shall be governed and interpreted exclusively in accordance with
the laws of the State of California and the United States without regard to the
United Nations Convention on Contracts for the International Sale of Goods. This
Agreement shall be deemed to have been made in, and shall be construed under,
the internal laws of the State of California, without regard to the principles
of conflicts of laws thereof and the United Nations Convention on Contracts for
the International Sale of Goods. In addition, Stamps.com and Distributor
acknowledge and agree that the courts located in such state shall have exclusive
jurisdiction in any action or proceedings with respect to this Agreement,
including the federal district courts located in such state.
17.4 Dispute Resolution. All disputes arising in connection with this
------------------
Agreement shall be resolved as follows:
(i) General Intent. Stamps.com and Distributor intend that all
--------------
problems and disputes relating to this Agreement or arising from the
transactions contemplated hereby ("Disputes") shall be resolved through the
procedures of this Section 17.4; provided, however, that neither party shall be
-------- -------
under any obligation to proceed in accordance with this Section 17.4 with
respect to Disputes concerning any alleged breach of Section 2.3, 3.2, 8.1, 8.2,
8.3 or 8.4 of this Agreement, as to which a party may take any legal action in a
court of law or equity (without the necessity of posting any bond) to assert or
enforce a claim that it has against the other party under this Agreement. The
procedures in this Section 17.4 shall not replace or supersede any other remedy
to which a party is entitled under this Agreement or under applicable law.
(ii) Informal Resolution Efforts. Stamps.com and Distributor
---------------------------
initially shall attempt to resolve Disputes through informal negotiations
conducted by the president or any vice president of Stamps.com and the president
or any vice president of Distributor.
(iii) Mediation. If a Dispute cannot be resolved under subsection
---------
17.4(ii), the Dispute shall be submitted to mediation by written notice of the
party seeking mediation to the other party. In the mediation process, Stamps.com
and Distributor shall attempt in good faith to resolve their differences
voluntarily with the
11
<PAGE>
aid of an impartial mediator, who will attempt to facilitate negotiations. The
mediator shall be selected by mutual agreement of Stamps.com and Distributor. If
Stamps.com and Distributor cannot agree on a mediator, the American Arbitration
Association or shall designate a mediator at the request of either party. Any
mediator so designated must be acceptable to both parties. The mediation shall
be confidential, and the mediator may not testify for either party in any later
proceeding relating to the Dispute. Each party shall bear its own costs in the
mediation. The fees and expenses of the mediator shall be shared equally by the
parties.
(iv) Court Actions. If Stamps.com and Distributor cannot resolve a
-------------
Dispute through mediation pursuant to Section 17.4(iii) above, either party may
seek further redress by taking legal action in a court of law or equity to
assert or enforce a claim that it has against the other party under this
Agreement.
17.5 Statute of Limitations. Any action by either party for breach of
----------------------
these terms and conditions must be commenced within one (1) year after the cause
of action has accrued.
17.6 Partial Illegality. If any provision of this Agreement or the
------------------
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event, the
parties shall use their best efforts to replace the invalid or unenforceable
provisions by a provision that, to the extent permitted by the applicable law,
achieves the purposes intended under the invalid or unenforceable provision. Any
deviation by either party from the terms and provisions of this Agreement to the
limited extent necessary to comply with applicable laws, rules or regulations
shall not be considered a breach of this Agreement.
17.7 Waiver of Compliance. Any failure by any party hereto to enforce at
--------------------
any time any term or condition under this Agreement shall not be considered a
waiver of that party's right thereafter to enforce each and every item and
condition of this Agreement.
17.8 Notices. All notices and other communications in connection with this
-------
Agreement shall be in writing and shall be sent to the respective parties at
addresses set forth below in this Section 17.8, or to such other addresses as
may be designated by the parties in writing from time to time in accordance with
this Section 17.8, by registered or certified air mail, postage prepaid, or by
express courier service, service fee prepaid, or by telefax with a hard copy to
follow via air mail or express courier service in accordance with this Section
17.8. All notices shall be deemed received (i) if given by hand, immediately,
(ii) if given by air mail, five (5) business days after posting, (iii) if given
by express courier service, three (3) business days after delivery to courier
service, or (iv) if given by telefax, upon receipt thereof by the recipient's
telefax machine as indicated either in the sender's identification line produced
by the recipient's telefax machine or in the sender's transmission confirmation
report as produced electronically by the sender's telefax machine.
To Stamps.com: Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
Attention: President
Facsimile: (310) 450-7337
12
<PAGE>
With a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce R. Hallett, Esq.
Facsimile: (949) 790-6301
To Distributor: ______________________
______________________
______________________
Attention: ___________
With a copy to:
______________________
______________________
______________________
17.9 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duty authorized representative as of the Effective Date.
STAMPS.COM INC.
By:______________________
Name:____________________
Title:___________________
DISTRIBUTOR
_________________________
By:______________________
Name:____________________
Title:___________________
13
<PAGE>
EXHIBIT A
A. Distributor obligations under the Agreement are as follows:
1. Distributor shall present retail promotional concepts to Westvaco's
superstore partners (Office Depot and Officemax) and other office products
channel customers mentioned below.
2. Distributor shall offer beta versions of the Stamps.com software during
Phase III beta testing with the United States Postal Service using a link
from its website (ColumbianEnvelopes.com).
3. Distributor shall begin development of products in conjunction with new
Internet postage uses such as an IBIP compliant three window envelope. In
the event that Distributor is unwilling or unable to produce such a
compliant envelope, Stamps.com has the right to solicit bids from other
envelope manufacturers.
4. Distributor shall have the exclusive right to promote the Stamps.com
Internet postage product and services in Columbian's distribution channels.
These channels include: (1) Office Depot, (2) Officemax, (3) Staples, (4)
SP Richards, (5) United Stationers, (6) BPGI, (7) Independent Stationers,
(8) NPA, (9) USOP, (10) UDI, (11) Corporate Express and (12) Boise Cascade.
5. Distributor agrees that designated consumer packages of Columbian brand
product will contain advertising bursts announcing the Stamps.com product
offering. Stamps.com will supply all materials included in designated
packages at no charge to Westvaco.
B. Stamps.com's obligations under this Agreement are as follows:
1. Stamps.com shall grant Columbian brand of envelopes and products the
exclusive right to advertise, market and promote Stamps.com's products and
services to the following companies in office products superstore,
wholesale, dealer and contract stationer markets: (1) Office Depot, (2)
Officemax, (3) Staples, (4) SP Richards, (5) United Stationers, (6) BPGI,
(7) Independent Stationers, (8) NPA, (9) USOP, (10) UDI, (11) Corporate
Express and (12) Boise Cascade.
2. Stamps.com specifically excludes from the Agreement any pre-existing or
future agreements with the Southworth Company.
3. Stamps.com shall at it sole discretion, from time to time, grant Westvaco
at Distributor's expense the opportunity to participate in on-going
Stamps.com marketing activities not covered in this contract, such as print
and email advertising campaigns.
4. Stamps.com shall not enter into a similar relationship with Quality Park,
Inc., Ampad, Inc., Mailwell, Inc., or Mead.
5. Stamps.com will track and catalog all customer transactions originating
from promotions executed in conjunction with Distributor using a series of
tracking numbers. These numbers will be either embedded in the software, if
software is distributed, or included in the advertising material provided
to customers. The numbers will be the basis of the reports that Stamps.com
will generate as part of Section 13.2. All Distributor's customers
registered with Stamps.com must have a tracking number in order for
Distributor to receive credit for such customer. Stamps.com will use
reasonable efforts with all it's customers to determine the source of the
customer for Distributor credit.
6. Stamps.com will provide the hypertext logo link described in Section 6.4
and will provide to Distributor ongoing advertising/public relations
positioning as a partner on Stamps.com Web Site with attention given to
Distributor's brand.
<PAGE>
EXHIBIT B
STANDARD SOFTWARE LICENSE AGREEMENT
-----------------------------------
STAMPS.COM, INC. END-USER SOFTWARE LICENSE AGREEMENT FOR STAMPS.COM INTERNET
POSTAGE SINGLE-USER VERSION
IMPORTANT: READ CAREFULLY
BEFORE OPENING THE SEALED ENVELOPE
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY MATERIAL,
THE USE OF WHICH IS SUBJECT TO THIS END-USER SOFTWARE LICENSE AGREEMENT. OPENING
THE SEALED ENVELOPE CONSTITUTES YOUR AND (IF APPLICABLE) YOUR COMPANY'S ASSENT
TO AND ACCEPTANCE OF THIS END-USER SOFTWARE LICENSE AGREEMENT (THE "LICENSE" OR
"AGREEMENT"). IF YOU DO NOT AGREE WITH ALL OF THE TERMS, YOU MUST NOT USE THIS
PRODUCT. WRITTEN APPROVAL IS NOT A PREREQUISITE TO THE VALIDITY OR
---
ENFORCEABILITY OF THIS AGREEMENT, AND NO SOLICITATION OF SUCH WRITTEN APPROVAL
BY OR ON BEHALF OF STAMPS.COM, INC. ("STAMPS.COM") SHALL BE CONSTRUED AS AN
INFERENCE TO THE CONTRARY. IF THESE TERMS ARE CONSIDERED AN OFFER BY STAMPS.COM,
ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
LICENSE AND WARRANTY:
The Software which accompanies this License (the "Software") is the property of
Stamps.com, and is protected by state, federal, and international copyright law.
Although Stamps.com continues to own the Software, you will have certain rights
to use the Software after your acceptance of this License. Except as may be
modified by a license addendum which accompanies this License, your rights and
obligations with respect to the use of this Software are as follows:
1. YOU MAY:
A. Use only one copy of any version of the Software contained on the enclosed
CD-ROM or floppy disk or downloaded from the Internet or any other online source
on a single computer;
B. Install the Software from its original distribution medium onto another
computer so long as any other copies of the Software are deleted or otherwise
made irreversibly inoperative;
C. Make one copy of the Software for archival purposes; and
D. Distribute unmodified and unregistered copies of the Software on the
original distribution medium for non-commercial use.
2. YOU MAY NOT:
A. Use the Software to purchase or print evidence of United States postage
until and unless you have been issued a Postal Meter License by the United
States Postal Service;
B. Sublicense, rent or lease any portion of the Software;
C. Reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative works
from the Software;
D. Copy or move any version of the Software after it has been installed and/or
registered to another computer;
E. Use the Software to commit or attempt to commit any form of fraud against or
engage in any form of criminal activity involving the United States Postal
Service or related agencies and organizations;
F. Authorize or allow other persons or entities to use the Software unless such
persons are members of your immediate family or household;
<PAGE>
G. Make known or allow to be made known information relating to Software serial
numbers, accounts, passwords, device identification numbers, or any other
information that could reveal or jeopardize the integrity of your Stamps.com
account; or
H. Install or use the Software on a computer located outside the United States
of America or its territories and possessions.
3. Warranty
Stamps.com warrants that the tangible media on which the Software is distributed
will be free from defects sixty (60) days from the date of delivery of the
Software to you. Your sole remedy in the event of a breach of this warranty will
be that Stamps.com will, at its option, replace any defective media returned to
Stamps.com within the warranty period. Stamps.com does not warrant that the
Software will not meet your requirements or that operation of the Software will
be uninterrupted or that the Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR
REPRESENTATION AS TO (1) THE ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE
VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999
THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES,
TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (2) WHETHER ANY OR ALL DATA
FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF
INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
THIS ABOVE WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS,
WHICH VARY FROM STATE TO STATE.
4. Disclaimer of Damages
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL STAMPS.COM BE LIABLE TO YOU FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST
DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF STAMPS.COM
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES. SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
IN NO CASE SHALL STAMPS.COM 'S LIABILITY EXCEED THE PURCHASE PRICE FOR THE
SOFTWARE. The disclaimers and limitations set forth above will apply regardless
of whether you accept the Software.
5. U.S. Government Restricted Rights:
If your company is an agency of the United States government, as defined in FAR
section 2.101, DFAR section 252.227-7014(a)(1) and DFAR section 252.227-
7014(a)(5) or otherwise, all software and accompanying documentation provided in
connection with this Agreement are "commercial items," "commercial computer
software," and/or "commercial computer software documentation." Consistent with
DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, disclosure or distribution thereof
by or for the United States government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement.
USE, DUPLICATION, OR DISCLOSURE BY THE UNITED STATES GOVERNMENT IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN SUBPARAGRAPH (C) (1) (II) OF THE RIGHTS IN
TECHNICAL DATA AND COMPUTER SOFTWARE CLAUSE AT DFARS 252.227-7013 OR
SUBPARAGRAPHS (C) (1) AND (2) OF THE COMMERCIAL COMPUTER SOFTWARE RESTRICTED
RIGHTS CLAUSE AT 48 CFR 52.227-19, AS APPLICABLE.
<PAGE>
6. Export:
You may not export or re-export the Software outside the United States without
Stamps.com's express written consent. In the event such consent is received, you
must comply with the U.S. Foreign Corrupt Practices Act and all export laws,
restrictions, national security controls and regulations of the United States
and other applicable foreign agency or authority. You shall not export or re-
export, or allow the export or re-export of the Software, any component of
Software, or any copy of the Software in violation of any such restrictions,
laws or regulations, or to Cuba, Libya, North Korea, Iran, Iraq, or Rwanda or to
any Group D:1 or E:2 country (or any national of such country) specified in the
then current Supplement No. 1 to Part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
7. General
This Agreement will be governed by the laws of the State of California and any
applicable federal law or Postal Regulations. This Agreement may only be
modified by a license addendum which accompanies this License or by a written
document which has been signed by both you and Stamps.com. Should you have any
questions concerning this Agreement, or if you desire to contact Stamps.com for
any reason, please write:
Stamps.com, Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405.
<PAGE>
EXHIBIT C
STAMPS.COM'S TRADEMARKS
-----------------------
1. "S" Design
2. "S" Design with "Internet Postage"
3. "StampFX"
4. "stamps.com"
5. "Stamps for Home"
6. "Stamps for Office"
7. "Stamps for Networks"
8. "Stamps2000"
9. "Essurance"
*Free Postage Logo and trademark to be provided by Stamps.com
<PAGE>
EXHIBIT D
SOFTWARE PROGRAMS
-----------------
1. USPS approved Stamps.com software
<PAGE>
Exhibit 10.20
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is made as of this 15th day of
January, 1999 (the "Effective Date"), by and between Stamps.com Inc., a Delaware
corporation with its principal place of business at 2900 31st Street, Suite 150,
Santa Monica, California 90405 ("Stamps.com") and Office Depot, Inc., a Delaware
corporation with its principal place of business at 2200 Old Germantown Road,
Delrey Beach, FL 33445 (the "Distributor").
RECITALS
WHEREAS, Stamps.com develops and publishes software which enables end-users
to purchase postage stamps electronically through Stamps.com's network system;
and
WHEREAS, pursuant to the terms and conditions of this Agreement, Stamps.com
desires to appoint Distributor as an independent contractor to distribute such
software and Distributor desires to provide such distribution services.
NOW THEREFORE, in consideration of the mutual promises contained herein and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the meanings set
forth in this Article 1:
"Agreement" has the meaning given to that term in the preamble to this
---------
Agreement.
"Stamps.com" has the meaning given to that term in the preamble to this
----------
Agreement.
"Business Day" means any weekday, Monday through Friday, excluding national
------------
holidays.
Calendar-Related" refers to date values based on the Gregorian calendar as
----------------
defined in Encyclopedia Britannica, 15th edition, 1982, page 602, and to all
uses of those date values described in the Software documentation.
"Century Compliant" means that the Software satisfies the requirements set
-----------------
forth in Section 9.3 below.
"Century Noncompliant" means any failure of the Software to be Century
--------------------
Compliant.
"Confidential Information" has the meaning given to that term in Section
------------------------
8.4 of this Agreement.
"Customers" means end-user licensees of Software.
---------
"Date Data" means any Calendar-Related data in the inclusive range January
---------
1, 1900 through December 31, 2050 that the Software uses in any manner.
"Distributor" has the meaning given to that term in the preamble of this
------------
Agreement.
"Disputes" has the meaning given to that term in Section 17.4(i).
"Documentation" means the user manuals and other documentation provided by
Stamps.com for use with Software. Unless expressly excluded, the term "Software"
as used herein shall include the applicable Documentation.
1
<PAGE>
"Effective Date" has the meaning given to that term in the preamble of this
--------------
Agreement.
"Exceptions" has the meaning given to that term in Section 11.
----------
"Excess Warranty" has the meaning given to this term in Section 12.
---------------
"Logo Program" has the meaning given to this term in Section 6.7.
------------
"Materials" has the meaning given to this term in Section 8.1.
---------
"OEM" means original equipment manufacturer.
---
"Service Fee Revenues" has the meaning given to this term in Section 5.2.
--------------------
"Software" means (i) the object code version of Stamps.com's software
---------
programs listed in Exhibit D, and (ii) the object code version of any updates,
modifications or revisions to such computer programs provided to Distributor
pursuant to the terms of this Agreement, all as unmodified by any party other
than Stamps.com.
"Software License Agreement" means the agreement provided in Exhibit B.
--------------------------
"System Date" means any Calendar-Related date value in the inclusive range
-----------
from January 1, 1985 through December 31, 2035 (including the transition between
such values) that the Software will be able to use as its current date while
operating.
"Term" has the meaning given to that term in Section 16.1.
----
"Trademarks" means all then-current names, marks and designations used by
----------
Stamps.com.
"Warranty Period" has the meaning given to that term in Section 9.1.
---------------
2. APPOINTMENT OF DISTRIBUTOR.
---------------------------
2.1 Grant to Distributor. Subject to all the terms and conditions of this
--------------------
Agreement and the limitations set forth below, Stamps.com hereby grants and
Distributor hereby accepts, a non-transferable, non-exclusive right to market
and distribute copies of Software solely to Customers in the United States.
Copies of Software are licensed for distribution and not sold. Distributor shall
not appoint, hire or otherwise engage subdealers to market or distribute
Software without the express written consent of Stamps.com.
2.2 Software License. Subject to all the terms and conditions of this
----------------
Agreement, Stamps.com hereby grants a non-exclusive, non-transferable, royalty-
free, sub-licensable and fully-paid-up license to Distributor, for so long as
this Agreement remains in effect, to use, reproduce and copy all Software and to
provide and make available to Customers, copies of all Software; provided that
-------------
the user of all such copies provided or made available to Customers shall be
subject to the terms of the applicable Software License Agreement between each
such Customer and Stamps.com. The foregoing license is provided by Stamps.com to
Distributor free of charge.
2.3 Title and Ownership. Distributor hereby acknowledges that all right,
-------------------
title and interest in and to Software shall at all times remain that of
Stamps.com, including all rights in the nature of copyright, patent, trade-
secret and other intellectual property and proprietary rights with respect to
Software. Distributor shall have no right, title, or interest therein, and
Distributor is not authorized to grant any right or license with respect thereto
except as expressly set forth in, and permitted under, this Agreement.
2
<PAGE>
3. DISTRIBUTOR'S OBLIGATIONS GENERALLY.
----------------------------------
3.1 Distribution of Software. Distributor shall use its commercially
------------------------
reasonable efforts to distribute Software to Customers pursuant to the
provisions set forth in Exhibit A.
3.2 Copying/Reverse Engineering. In no event shall Distributor use, market
---------------------------
or distribute Software other than as provided herein. Distributor agrees not to
(i) disassemble, decompile or otherwise reverse engineer Software or otherwise
attempt to learn the source code, structure, algorithms or ideas underlying
Software, (ii) take any action contrary to Stamps.com's Software License
Agreement, except as expressly and unambiguously allowed under this Agreement,
(iii) alter or modify Software, (iv) attempt to disable any security devices or
codes incorporated in Software, or (v) allow or assist others to do any of the
foregoing.
3.3 Competing Products. Distributor agrees that it does not currently
------------------
represent, distribute or promote any software that competes with any Software.
Distributor shall conduct its business in a manner that reflects favorably on
Stamps.com and Software.
3.4 Software Package; Software License Agreement. Subject to Exhibit A,
----------------
Distributor shall ensure that each copy of Software distributed by or through
Distributor to Customers shall include all components of such Software as
prepackaged by Stamps.com, including, without limitation, (i) diskettes or other
media bearing labels, (ii) Stamps.com's end user manuals and Documentation,
Stamps.com's Software License Agreement, and (iii) at the option of Stamps.com,
advertising and promotional materials supplied by Stamps.com. The parties to
each Software License Agreement shall be Stamps.com and the Customer. The terms
of the Software License Agreement shall be subject to change by Stamps.com, at
its sole discretion, upon reasonable notice to Distributor. Stamps.com shall
have the right to add to or discontinue any or all Software, but only upon
thirty (30) days' prior written notice to Distributor.
3.5 Third Party Infringement. Distributor shall notify Stamps.com promptly
------------------------
of any infringement of any copyrights, Trademarks, or other intellectual
property or proprietary rights relating to any Software. Stamps.com may, in its
sole discretion, take or not take whatever action it believes is appropriate in
connection with any such infringement. If Stamps.com elects to take any such
action, Distributor agrees to reasonably cooperate, at no expense to
Distributor, in connection therewith. If Stamps.com initiates and prosecutes any
action with respect to infringement of any copyrights, Trademarks, or other
proprietary rights relating to any Software, Stamps.com shall be entitled to
retain all amounts (including court costs and attorneys' fees) awarded by way of
judgment, settlement, or compromise with respect thereto.
3.6 Compliance. Distributor shall ascertain and comply with all applicable
----------
state, federal and local laws and regulations and standards of industry or
professional conduct, including, without limitation, those applicable to product
claims, labeling, approvals, registrations and notifications, the Internic, the
Internet Assigned Numbers Authority and Internet community standards, and shall
also obtain Stamps.com's prior written consent before adding any product
claim,label, instructions, packaging or the like to any copy of Software.
3.7 Export Control. Distributor shall not export or re-export any Software
--------------
outside the United States without Stamps.com's express written consent. In the
event such consent is received, Distributor shall comply with the U.S. Foreign
Corrupt Practices Act and all export laws, restrictions, national security
controls and regulations of the United States and other applicable foreign
agency or authority, and shall not export or re-export, or allow the export or
re-export of Software, any component of Software, any other product or
Confidential Information or any copy or direct product of any of the foregoing
in violation of any such restrictions, laws or regulations, or to Cuba, Libya,
North Korea, Iran, Iraq, or Rwanda or to any Group D:1 or E:2 country (or any
national of such country) specified in the then current Supplement No. 1 to Part
740, or, in violation of the embargo provisions in Part 746, of the U.S. Export
Administration Regulations (or any successor regulations or supplement), except
in compliance with and with all licenses and approvals required
3
<PAGE>
under applicable export laws and regulations, including without limitation,
those of the U.S. Department of Commerce.
4. DELIVERY TO DISTRIBUTOR.
-----------------------
4.1 Delivery. Stamps.com shall deliver a master copy of all Software to
--------
Distributor in a format which shall enable Distributor to provide copies thereof
to Customers. Stamps.com shall provide sufficient copies of all Documentation to
Distributor to allow Distributor to include such Documentation to Customers with
Software pursuant to Distributor's obligations as set forth in Exhibit A.
5. PRICES, PAYMENTS, AND PAYMENT TERMS.
-----------------------------------
5.1 Distributor's Prices to Customers. Distributor shall provide or make
---------------------------------
available copies of Software free of charge to Customers and shall not charge
any fee or other consideration in connection with the delivery or distribution
of such copies.
5.2 Revenue Sharing. As full consideration for its services hereunder,
---------------
Stamps.com shall pay Distributor a quarterly fee equal to [***]/*/ of all
Service Fee Revenues received by Stamps.com attributable to purchases by
Customers using Software; provided that, if any such Customer previously
-------------
obtained any Software from any person other than Distributor, the Service Fee
Revenues attributable to purchases by such Customer shall not be included for
purposes of determining Distributor's quarterly fee. All quarterly fees payable
by Stamps.com to Distributor shall be paid within forty-five (45) days after the
end of the quarter in which Stamps.com receives the Service Fee Revenues from
which such fees are derived. As used herein, the term "Service Fee Revenues"
shall mean all service fees received by Stamps.com from purchases of postage by
Customers and shall specifically exclude (a) the cost of the postage that is
purchased and (b) any taxes with respect thereto.
6. MARKETING AND ADVERTISING.
-------------------------
6.1 Distributor's General Undertaking, Representation, and Warranty.
---------------------------------------------------------------
Distributor represents, warrants, and covenants to Stamps.com that in all
advertising and marketing materials relating to Software and/or Stamps.com that
are developed by Distributor, Distributor shall endeavor to be accurate in all
respects.
6.2 Distribution of Software. Distributor hereby agrees to advertise,
------------------------
market, sell and distribute Software solely as provided in Exhibit A. In its
distribution efforts, Distributor will use the Trademarks, but shall not
represent or imply that it is Stamps.com or is a part of Stamps.com; provided
--------
that all advertisements and promotional materials, packaging and anything else
- ----
bearing a Trademark shall identify Stamps.com as the Trademark owner and
Software manufacturer; provided further that any use of the Trademarks shall be
----------------
governed by Section 8.3.
6.3 Marketing Materials. Stamps.com agrees to provide to Distributor, at
-------------------
no cost to Distributor, such promotional materials for Software in camera ready
or electronic format as Stamps.com generally makes available to its resellers
and distributors, including technical specifications, prices, drawings, and
advertisements. Distributor may reproduce such promotional materials as
reasonably required in connection with its promotional, advertising and/or
marketing activities in connection with Software, provided that all copyright,
-------------
trademark and other property markings of Stamps.com are reproduced. Such
promotional materials, including all copies and reproductions made by
Distributor, remain the property of Stamps.com and, except insofar as they are
distributed by Distributor in the course of its performance of its duties under
this Agreement, must be promptly returned to Stamps.com upon the expiration or
termination of this Agreement. Distributor may develop its own promotional
materials for Software, provided that Distributor shall submit any such
-------------
__________________
* Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission
4
<PAGE>
promotional materials to Stamps.com for Stamps.com's review, and Stamps.com
shall have the right to approve or reject any such promotional materials in
Stamps.com's sole discretion.
6.4 Web Sites.
---------
(i) Hypertext Links. If Distributor has a World Wide Web site ("Web
---------------
site"), Distributor shall establish a hypertext link to Stamps.com's Web site
within thirty (30) days of the Effective Date. With respect to each hypertext
link linking users of Distributor's Web site to Stamps.com's Web site,
Distributor shall not alter the look, feel, or functionality of Stamps.com's Web
site and shall not act to prevent the look and feel of Stamps.com's Web site
(including, without limitation, page format, navigational bars, colors, fonts,
Stamps.com's trademarks, all hyperlinks appearing on Stamps.com's Web site or,
in general, the overall design of Stamps.com's Web site) from being displayed.
(ii) Responsibilities. Each party shall be solely responsible for
----------------
the development, operation, and maintenance of its Web site and for all
materials that appear on its Web site, including without limitation, (i) the
technical operation of its Web site and all related equipment, (ii) the accuracy
and appropriateness of materials posted on its Web site, and (iii) ensuring that
materials posted on its Web site do not violate any law, rule, or regulation, or
infringe upon the rights of any third party and are not defamatory, obscene or
otherwise illegal. Each party disclaims all liability for all such matters with
respect to the other's Web site.
6.5 Advertising and Public Relations. Distributor may advertise Software
--------------------------------
in appropriate periodicals and in a manner insuring proper and adequate
publicity for Software. Each time Distributor places any such advertising in any
periodical, Distributor shall provide Stamps.com with notice (pursuant to
Section 17.8 below) that Distributor has done so, specifying the name and date
of the applicable periodical. Distributor shall engage in public relations
activities to encourage the publication, of articles and other publications
regarding Software.
6.6 Announcements. Within thirty (30) days following the Effective date,
-------------
Stamps.com and Distributor shall jointly issue a press release announcing
Distributor's appointment under this Agreement. Thereafter, each party shall
obtain the other party's prior written approval of all press releases that such
party issues with respect to this Agreement and the transactions contemplated by
this Agreement. Distributor also shall obtain Stamps.com's prior written
approval of all other press releases that Distributor issues with respect to
Software.
6.7 Logo Program. During the Term, upon mutual agreement of the parties,
------------
Distributor shall participate in a promotional logo program ("Logo Program") as
follows: Distributor shall be entitled to offer free postage to Customers for a
period of up to twelve months from the Effective Date; provided that, (a) the
amount of free postage to be given to any Customer shall not exceed ten dollars
($10), (b) Stamps.com shall be entitled to immediately terminate the Logo
Program at its sole discretion, (c) Customers shall not be entitled to receive
free postage until they have made an initial purchase of postage from Stamps.com
(d) Customers shall not be entitled to receive free postage if they have
previously obtained Software (whether from Distributor or another person), (e)
Distributor and Stamps.com shall mutually agree on one or more logos which
Distributor shall display on all of its packaging and marketing materials which
are generally seen by Customers, including but not limited to external packaging
and Web sites, and (f) Distributor shall not alter any such logos and shall
display such logos in strictly compliance with the parties' agreement with
respect to size, color, location and any other relevant criteria with respect to
such logos. The logos used in the Logo Program shall be deemed Trademarks for
all purposes of this Agreement, including the license granted by Stamps.com in
Section 8.3 Section 8.3.
7. INSTALLATION AND SUPPORT.
------------------------
Stamps.com shall be solely responsible for providing Customers with
installation, maintenance and technical integration support with respect to
Software. Distributor shall notify Stamps.com as soon as possible, and within no
more than twenty-four (24) hours or one (1) Business Day, whichever period is
longer, of Distributor's receipt of any Customer request for support or
assistance with respect to Software.
5
<PAGE>
8. PROTECTION OF PROPRIETARY RIGHTS.
--------------------------------
8.1 Acknowledgment of Proprietary Materials. Distributor hereby
---------------------------------------
acknowledges that all Software, Documentation and technical support and training
materials provided to Distributor by Stamps.com (collectively, the "Materials")
are protected by the copyright laws of the United States and other countries and
that the Materials embody valuable confidential and trade secret information of
Stamps.com, the development of which required the expenditure of considerable
time and money by Stamps.com.
8.2 Proprietary Markings. Distributor hereby agrees to ensure that all
--------------------
copyright, trademark and other proprietary notices of Stamps.com affixed to or
displayed on Software and Documentation will not be removed, obscured or
modified by Distributor.
8.3 Stamps.com Trademarks. Distributor acknowledges that Stamps.com is the
---------------------
owner of all right, title and interest in and to all the Trademarks set forth in
Exhibit C, together with any new or revised names, designs or designations that
Stamps.com may adopt to identify it or any Software during the Term, and
Distributor agrees not to adopt or use any of such Trademarks in any manner
whatsoever except as expressly provided in this Agreement.
Stamps.com hereby grants Distributor a license during the Term to use the
Trademarks, provided that (i) they are used solely in connection with the
-------------
marketing and distribution of Software and in accordance with Stamps.com's
specifications as to style, color and typeface set forth in Exhibit C (ii) such
use shall be subject to prior written approval of Stamps.com, which approval
shall not be unreasonably withheld, and, (iii) no other right to use any name or
designation is granted by this Agreement. Upon expiration or termination of this
Agreement, Distributor will take all action necessary to transfer and assign to
Stamps.com, or its nominee, any right, title or interest in or to any of the
Trademarks, and the goodwill related thereto, which Distributor may have
acquired in any manner as a result of the marketing and distribution of Software
under this Agreement, and Distributor shall cease using any Trademark.
Distributor hereby agrees to notify Stamps.com immediately upon Distributor
gaining knowledge of any infringement or potential infringement of any
Trademark.
Distributor agrees not to apply for registration of any Trademarks anywhere
in the world or for any mark confusingly similar thereto. Stamps.com may elect
to apply for registration of one or more of the Trademarks anywhere in the world
at its expense, and, in such event, Stamps.com shall so notify Distributor and
Distributor shall assist and cooperate with Stamps.com in connection therewith.
Distributor also agrees not to use or contest, during or after the term of this
Agreement, any Trademark, name, mark or designation used by Stamps.com anywhere
in the world (or any name, mark or designation similar thereto). Distributor
acknowledges and agrees that all use of the Trademarks by Distributor shall
inure to the benefit of Stamps.com.
8.4 Confidential Information. Distributor hereby agrees to hold any
------------------------
information, materials and data made available to it by Stamps.com that
reasonably should be understood to be confidential (collectively, "Confidential
Information"), in confidence and agrees not to use, copy, or disclose, or permit
any of its personnel to use, copy, or disclose the same for any purpose that is
not specifically authorized herein. For the purposes of this Section 8.4, the
terms and conditions of this Agreement and the Materials are Confidential
Information of Stamps.com.
9. WARRANTY.
--------
9.1 Limited Warranty of Performance. 9.1.1 Stamps.com warrants to
-------------------------------
Distributor, for a period of ninety (90) days following delivery to a Customer
(the "Warranty Period"), that the Software will substantially conform to the
Documentation and that the media on which the Software is provided is free from
material defects. The foregoing warranty will apply only to the most current
version of Software issued by Stamps.com from time to time. Stamps.com assumes
no responsibility for claims resulting from the distribution of superseded,
outdated, or uncorrected versions of Software.
6
<PAGE>
9.1.2 Stamps.com warrants that Calendar-Related processing by the Software
of the Date Data or of any System Date will not cause the Software to cease to
operate substantially in accordance with the Documentation. Stamps.com further
warrants that all data fields for the Date Data contained in the Software are
four-digit fields capable of indicating century and millennium and that
Stamps.com has verified through the testing procedures that no change in the
System Date (including the change from the year 1999 to the year 2000) will
cause the Software to cease to operate substantially in accordance with the
Documentation. Notwithstanding any provision to the contrary set forth in this
Agreement, Stamps.com makes no representation or warranty as to that the
Software will be Century Compliant when it is used with any Century Noncompliant
computer software, computer firmware, computer hardware, or any combination of
the foregoing supplied by third parties.
9.2 Exclusive Remedy. Software supplied by Stamps.com hereunder which does
----------------
not comply with the warranties set forth in (i) Section 9.1.1 and is returned
(by Distributor only) to Stamps.com during the Warranty Period (with proof of
the date of purchase) or (ii) Section 9.1.2 and is returned (by Distributor
only) to Stamps.com will be corrected or replaced at no expense to Distributor,
provided Distributor returns the Software in its original packaging (if
applicable) and bears the shipping cost of returning the Software to Stamps.com
(except in the event the defective Software was downloaded by the end-user from
Stamps.com's Web site, in which case Stamps.com will advise the end-user to
contact Stamps.com directly for warranty claims). Stamps.com will bear the
shipping cost of replacement Software to Distributor. If Stamps.com cannot, or
determines that it is not commercially practical to, correct or replace the
returned Software, Stamps.com will refund the purchase price of the returned
Software paid by Distributor. The warranty set forth in Section 9.1 shall not
apply to any version of the Software which has been discontinued or superseded
or updated by a new version or release made available to Distributor (or
Distributor's end-user customer) by Stamps.com for distribution hereunder.
DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF ANY WARRANTY CLAIM, IF
VERIFIED, IS EXPRESSLY LIMITED TO STAMPS.COM'S REASONABLE EFFORTS TO CORRECT OR
REPLACE SUCH DEFECTIVE SOFTWARE AND/OR DOCUMENTATION AT STAMPS.COM'S SOLE
EXPENSE OR REFUND THE PRICE PAID BY DISTRIBUTOR.
9.3 Disclaimer. No representation or other affirmation of fact not set
----------
forth herein, including, without limitation, statements regarding capacity,
compliance, suitability for use, or performance of any Software, shall be or be
deemed to be a warranty or representation by Stamps.com for any purpose, or give
rise to any liability or obligation of Stamps.com whatsoever. EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES EXPRESS
OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE, AND NON
INFRINGEMENT, OR CENTURY COMPLIANCE.
10. LIMITATION OF LIABILITY; INJUNCTIVE RELIEF.
------------------------------------------
10.1 No Consequential Damages; Limitation of Liability. IN NO EVENT SHALL
-------------------------------------------------
EITHER PARTY BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT FOR
LOSS OF PROFITS, COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR
INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY.
EXCEPT WITH RESPECT TO A BREACH OF SECTION 8.4 AND THE INDEMNIFICATION
OBLIGATIONS UNDER SECTION 12 BELOW, THE LIABILITY OF EITHER PARTY FOR ANY CLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE AMOUNT
PAID BY STAMPS.COM TO DISTRIBUTOR WITH RESPECT TO THE SPECIFIC ITEMS OF SOFTWARE
GIVING RISE TO SUCH CLAIM.
10.2 Injunctive Relief. Distributor acknowledges that any breach of its
-----------------
obligations under this Agreement with respect to the proprietary rights or
Confidential Information of Stamps.com will cause
7
<PAGE>
Stamps.com irreparable injury for which there are inadequate remedies at law,
and therefore Stamps.com will be entitled to injunctive relief in addition to
all other remedies provided by this Agreement or available at law.
11. DEFENSE OF INTELLECTUAL PROPERTY CLAIMS.
---------------------------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Distributor based on a claim that Distributor's
distirbution and/or use of Software infringes a third party's copyright or
trademark or misappropriates a third party's trade secret, and if given access
by Distributor to any information Distributor has regarding such alleged
infringement, Stamps.com agrees to defend and hold harmless Distributor in such
action at its expense and will pay any costs or damages finally awarded against
Distributor in any such action; provided that, Stamps.com shall have had sole
-------------
control of the defense of any such action and all negotiations for its
settlement or compromise. In the event that Stamps.com reasonably believes that
any Software infringes a copyright or trademark or misappropriates a trade
secret, Stamps.com may, at its option and at its expense, either procure for
Distributor the right to continue using any Software, modify the same so it
becomes non-infringing or allow the Distributor to terminate this Agreement
pursuant to Section 16.2(ii). Stamps.com shall not have any liability to
Distributor under any provision of this clause if any infringement, or claim
thereof, is based upon: (i) the Distributor's use of Software in combination
with other computer hardware or software programs that Stamps.com has not
approved for use with such Software, (ii) Software that has been modified by
Distributor, (iii) Distributor's use of Software beyond the scope of the license
granted to it by Stamps.com hereunder, (iv) Distributor's use after notice of
infringement or misappropriation, or (v) Infringement by the Distributor
relating solely to the use of Software but not the Software itself. Distributor
shall indemnify Stamps.com and hold it harmless against any expense, judgment or
loss for infringement of any patent or other intellectual property right which
results from the exceptions set forth in the immediately preceding sentence of
this Section 11 (collectively, "Exceptions"). No costs or expenses shall be
incurred for the account of Stamps.com without the prior written consent of
Stamps.com. THE FOREGOING STATES THE ENTIRE LIABILITY OF STAMPS.COM WITH RESPECT
TO INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER INTELLECTUAL
PROPERTY RIGHTS BY ANY SOFTWARE, OR ANY PART THEREOF, OR BY ITS OPERATION.
12. INDEMNITY.
---------
12.1 Distributor's Indemnity. If notified promptly in writing of any
-----------------------
action (and all prior claims relating to such action) against Stamps.com based
on a claim arising from (i) infringement of any patent or other intellectual
property right which results from the Exceptions; (ii) Distributor's grant of a
warranty to any Customer exceeding the limited warranty set forth in Section 9.1
of this Agreement (an "Excess Warranty"), (iii) Distributor's material breach of
this Agreement, or (iv) Distributor's negligence or willful misconduct,
Distributor shall indemnify Stamps.com and hold Stamps.com harmless from and
against any judgment, damage, liability, or expenses, including reasonable
attorney's fees, arising out of any claim with respect to the breach or alleged
breach of such Excess Warranty or this Agreement or such negligence or willful
misconduct; provided that Distributor shall have had sole control of the defense
-------------
of any such action and all negotiations for its settlement or compromise; and,
provided further, that no cost or expense shall be incurred for the account of
- ----------------
Distributor without Distributor's prior written consent.
12.2 Stamps.com's Indemnity. If notified promptly in writing of any action
----------------------
(and all prior claims relating to such action) against Distributor based on a
claim arising from (i) Stamps.com's material breach of this Agreement, or (ii)
Stamps.com's negligence or willful misconduct, Stamps.com shall indemnify
Distributor and hold Distributor harmless from and against any judgment, damage,
liability, or expenses, including reasonable attorney's fees, arising out of any
claim with respect to the breach or alleged breach of this Agreement or such
negligence or willful misconduct; provided that Stamps.com shall have had sole
-------------
control of the defense of any such action and all negotiations for its
settlement or compromise; and, provided further, that no cost or expense shall
----------------
be incurred for the account of Stamps.com without Stamps.com's prior written
consent.
8
<PAGE>
13. REPORTS AND RECORDS.
-------------------
13.1 Reports. Distributor shall keep complete records concerning all
-------
copies of Software provided to, or downloaded by, Customers, as the case may be.
Within ten (10) Business Days of the close of each month during the Term,
Distributor shall complete and forward to Stamps.com a monthly report containing
a summary setting forth the number of copies of Software provided to, or
downloaded by, Customers, as the case may be.
13.2 Audit. Distributor agrees to maintain copies of all documentation
-----
relating to the distribution of Software under this Agreement. If requested in
writing by Stamps.com, Distributor shall permit Stamps.com to have access to
such documentation at Distributor's place of business during ordinary business
hours. Distributor agrees to keep for three (3) years after termination of this
Agreement records of all copies of Software provided to or downloaded by
Customers, as the case may be, in each case sufficient to adequately administer
a recall of any Software and to fully cooperate in any decision by Stamps.com to
recall, retrieve and/or replace any Software. Stamps.com agrees to maintain
copies of all documentation relating to Service Fee Revenues from Customer
purchases using Software distributed by Distributor hereunder. Within fifteen
(15) days after the end of each month, Stamps.com shall provide a report to
Distributor setting forth the revenues received by Stamps.com for such month
which are attributable to purchases from Customers using such Software. If
requested in writing by Distributor, Stamps.com shall permit, at Distributor's
sole expense, Distributor's independent certified public accountants, subject to
a non-disclosure agreement with Stamps.com, up to once per calendar year, to
have access solely to such documentation as is reasonably necessary for such
accountants to verify the amount of revenues set forth on such report; provided,
in no event shall such access include access to Stamps.com's servers. For a
period of three (3) years after termination of this Agreement, Stamps.com agrees
to keep records of all Customer purchases made pursuant to Software distributed
by Distributor hereunder.
14. RELATIONSHIP OF PARTIES.
-----------------------
Distributor is an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as a partner, joint
venturer, co-owner, employee, or agent of the other party, and neither party
shall hold itself out as such. Neither party has any right or authority to
incur, assume or create, in writing or otherwise, any warranty, liability or
other obligation of any kind, express or implied, in the name of or on behalf of
the other party, it being intended by both Distributor and Stamps.com that each
shall remain an independent contractor responsible for its own actions.
Distributor agrees to indemnify and hold Stamps.com harmless from and against
any damage or expenses, including reasonable attorney's fees, arising out of
Distributor's breach of the provisions of this Section 14.
15. ASSIGNMENT.
----------
Distributor shall not assign, transfer or otherwise dispose of this
Agreement in whole or in part to any individual, corporation or other entity
without the prior written consent of Stamps.com, except that Distributor may
assign or transfer this Agreement to an affiliate or parent of Distributor at
Distributor's discretion without the necessity of any consent requirement,
provided that Distributor shall continue to remain obligated to Stamps.com for
the assignee's performance or breach of Distributor's duties and obligations
hereunder.
16. TERM OF AGREEMENT; TERMINATION.
------------------------------
16.1 Term. This Agreement shall be effective as of the Effective Date
----
and shall have an initial term of two (2) years. Upon the expiration of such
term (or any renewal term), this Agreement shall automatically renew for
additional one (1) year periods unless either party notifies the other party at
least sixty (60) days prior to the applicable renewal date of its intention to
not renew the Agreement (the initial term and any renewal term shall be
collectively referred to as the "Term").
9
<PAGE>
16.2 Events of Termination.
---------------------
(i) Bankruptcy/Reorganization. Either party may terminate this
-------------------------
Agreement immediately upon written notice to the other party if the other party
becomes insolvent, seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, proceedings
in bankruptcy or insolvency are instituted against the other party, or a
receiver is appointed, or if any substantial part of the other party's assets is
the object of attachment, sequestration or other type of comparable proceeding,
and such proceeding is not vacated or terminated within thirty (30) days after
its commencement or institution.
(ii) Default. Either party may terminate this Agreement if the other
-------
party commits a material breach of any of the material terms or provisions of
this Agreement and does not cure such breach within thirty (30) days after
receipt of written notice given by the other party. Notwithstanding the
foregoing, Stamps.com may immediately terminate this Agreement in the event
Distributor breaches its obligations under Section 2.1, 3.2, 8.3 or 8.4.
(iii) Licenses. Either party may terminate this Agreement immediately
--------
if it or the other party is unable to obtain or renew any permit, license or
other governmental approval necessary to carry on the business contemplated
under this Agreement.
16.3 Termination for Convenience. Notwithstanding anything herein to the
---------------------------
contrary, either party may terminate this Agreement at any time with or without
cause upon thirty (30) days' prior written notice.
16.4 Rights Upon Termination. Upon termination of this Agreement by
-----------------------
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any moneys due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under Sections 2.3, 3.2, 3.3, 3.7, 8.1, 8.3 (first and third paragraphs only),
8.4, 9.2, 9.3, 10.1, 10.2, 11, 12, 13.1, 13.2, 14, 15, 16.4, 16.5, and 17.1 -
17.9. Without limiting the foregoing, upon termination of this Agreement, all
licenses granted to Distributor hereunder shall terminate and each party shall
remove any links from its Web site to the other party's Web site.
16.5 Existing Licenses. All Software License Agreements in effect as of the
-----------------
date of termination or expiration of this Agreement shall survive such
termination or expiration and continue in effect until terminated in accordance
with their terms.
17. MISCELLANEOUS.
-------------
17.1 Force Majeure. If the performance of any obligation (other than
-------------
payment and confidentiality obligations) under this Agreement is prevented,
restricted or interfered with by reason of war, revolution, civil commotion,
acts of public enemies, blockade, embargo, strikes, outage of the Internet, law,
order, proclamation, regulation, ordinance, demand, or requirement having a
legal effect of any government or any judicial authority or representative of
any such government, or any other act whatsoever, whether similar or dissimilar
to those referred to in this Section 17.1, which is beyond the reasonable
control of the party affected, then the party so affected shall, upon giving
prior written notice to the other party, be excused from such performance to the
extent of such prevention, restriction, or interference, provided that the party
so affected shall use reasonable commercial efforts to avoid or remove such
causes of nonperformance, and shall continue performance hereunder with
reasonable dispatch whenever such causes are removed. The parties agree and
acknowledge that the foregoing shall include Stamps.com's failure to obtain any
necessary governmental approval required in connection with the use of any
Software, including without limitation any postal service approval.
17.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all previous negotiations, agreements
and commitments with respect thereto, and shall not be released, discharged,
changed or modified in any manner except by instruments signed by duly
authorized
10
<PAGE>
officers or representatives of each of the parties hereto. No course of prior
dealing between the parties and no usage of the trade shall be relevant to
supplement or explain any term used herein. Acceptance or acquiescence in a
course of performance rendered hereunder shall not be relevant to determine the
meaning of these terms and conditions even though the accepting or acquiescing
party has knowledge of the performance and opportunity for objection.
17.3 Applicable Law. Any claim or controversy relating in any way to this
--------------
Agreement shall be governed and interpreted exclusively in accordance with the
laws of the State of California and the United States without regard to the
United Nations Convention on Contracts for the International Sale of Goods. This
Agreement shall be deemed to have been made in, and shall be construed under,
the internal laws of the State of California, without regard to the principles
of conflicts of laws thereof and the United Nations Convention on Contracts for
the International Sale of Goods. Any mediation under Section 17.4(iii) below
shall be conducted in Los Angeles County, California. In addition, Stamps.com
and Distributor acknowledge and agree that the courts located in such county
shall have exclusive jurisdiction in any action or proceedings with respect to
this Agreement, including the federal district courts located in such county.
17.4 Dispute Resolution. All disputes arising in connection with this
------------------
Agreement shall be resolved as follows:
(i) General Intent. Stamps.com and Distributor intend that all
--------------
problems and disputes relating to this Agreement or arising from the
transactions contemplated hereby ("Disputes") shall be resolved through the
procedures of this Section 17.4; provided, however, that neither party shall be
-----------------
under any obligation to proceed in accordance with this Section 17.4 with
respect to Disputes concerning any alleged breach of Section 2.3, 3.2, 8.1, 8.2,
8.3 or 8.4 of this Agreement, as to which a party may take any legal action in a
court of law or equity (without the necessity of posting any bond) to assert or
enforce a claim that it has against the other party under this Agreement. The
procedures in this Section 17.4 shall not replace or supersede any other remedy
to which a party is entitled under this Agreement or under applicable law.
(ii) Informal Resolution Efforts. Stamps.com and Distributor
---------------------------
initially shall attempt to resolve Disputes through informal negotiations
conducted by the president or any vice president of Stamps.com and the president
or any vice president of Distributor.
(iii) Mediation. If a Dispute cannot be resolved under subsection
---------
17.4(ii), the Dispute shall be submitted to mediation by written notice of the
party seeking mediation to the other party. In the mediation process, Stamps.com
and Distributor shall attempt in good faith to resolve their differences
voluntarily with the aid of an impartial mediator, who will attempt to
facilitate negotiations. The mediator shall be selected by mutual agreement of
Stamps.com and Distributor. If Stamps.com and Distributor cannot agree on a
mediator, the American Arbitration Association or JAMS/Endispute shall designate
a mediator at the request of either party. Any mediator so designated must be
acceptable to both parties. The mediation shall be confidential, and the
mediator may not testify for either party in any later proceeding relating to
the Dispute. Each party shall bear its own costs in the mediation. The fees and
expenses of the mediator shall be shared equally by the parties.
(iv) Court Actions. If Stamps.com and Distributor cannot resolve a
-------------
Dispute through mediation pursuant to Section 17.4(iii) above, either party may
seek further redress by taking legal action in a court of law or equity to
assert or enforce a claim that it has against the other party under this
Agreement.
17.5 Statute of Limitations. Any action by the Distributor for breach of
----------------------
these terms and conditions must be commenced within one (1) year after the cause
of action has accrued.
17.6 Partial Illegality. If any provision of this Agreement or the
------------------
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, the remainder of this Agreement shall be valid
11
<PAGE>
and enforceable to the extent permitted by applicable law. In such event, the
parties shall use their best efforts to replace the invalid or unenforceable
provisions by a provision that, to the extent permitted by the applicable law,
achieves the purposes intended under the invalid or unenforceable provision. Any
deviation by either party from the terms and provisions of this Agreement to the
limited extent necessary to comply with applicable laws, rules or regulations
shall not be considered a breach of this Agreement.
17.7 Waiver of Compliance. Any failure by any party hereto to enforce at
--------------------
any time any term or condition under this Agreement shall not be considered a
waiver of that party's right thereafter to enforce each and every item and
condition of this Agreement.
17.8 Notices. All notices and other communications in connection with
-------
this Agreement shall be in writing and shall be sent to the respective parties
at addresses set forth below in this Section 17.8, or to such other addresses as
may be designated by the parties in writing from time to time in accordance with
this Section 17.8, by registered or certified air mail, postage prepaid, or by
express courier service, service fee prepaid, or by telefax with a hard copy to
follow via air mail or express courier service in accordance with this Section
17.8. All notices shall be deemed received (i) if given by hand, immediately,
(ii) if given by air mail, five (5) business days after posting, (iii) if given
by express courier service, three (3) business days after delivery to courier
service, or (iv) if given by telefax, upon receipt thereof by the recipient's
telefax machine as indicated either in the sender's identification line produced
by the recipient's telefax machine or in the sender's transmission confirmation
report as produced electronically by the sender's telefax machine.
To Stamps.com: Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
Attention: President
Facsimile: (310) 450-7337
With a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce R. Hallett, Esq.
Fax: (949) 790-6301
To Distributor: Office Depot, Inc.
818 Mission Street, 4th Floor
San Francisco, CA 94103
Attention: Mr. Keith Butler, Executive Director
Fax: (415) 974-1001
With a copy to:
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL. 33445
Attn: Legal Department: Brian D. Dan, Esq. Senior
Corporate Counsel
Fax: (561) 438-4464
17.9 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duty authorized representative as of the Effective Date.
STAMPS.COM INC.
By:______________________________
Name:____________________________
Title:___________________________
DISTRIBUTOR:
_______________________________
By:______________________________
Name:____________________________
Title:___________________________
13
<PAGE>
EXHIBIT A
DISTRIBUTION OBLIGATIONS
------------------------
Distributor obligations under the Agreement are as follows:
1. Distributor shall promote the Software and Stamps.com during Phase III of
Stamps.com's beta-testing program.
2. Distributor shall market and make available for downloading the Software on
Distributor's World Wide Web site (the "Officedepot Site").
3. Distributor shall use good faith efforts to negotiate with Stamps.com the
terms of a point of purchase ("POP") advertising campaign in all of
Distributor's retail stores. As part of such POP advertising campaign,
Stamps.com will provide copies of a co-branded version of the Software on
CD-ROM to be used for distribution in Distributor's retail stores at no
charge. Stamps.com will provide the free postage offer that is described in
Section 6.7 of the Agreement (the "Free Postage Offer") will all such CD-
ROMs.
4. Distributor shall provide Stamps.com with preferred positioning of its
"Free Postage" logo hypertext link on the top half of the home page of the
Officedepot Site and promote Stamps.com as Distributor's preferred postage
provider. Distributor shall also place the "Free Postage" logo on each
other page of the Officedepot Site on which a reference to Stamps.com, the
Software, or both appears.
5. Distributor shall provide Stamps.com with the exclusive right to direct
market the Software and other products, via e-mail or direct mail, to
registered users of the Officedepot Site once per calendar quarter during
the Term (the "Campaign"). Distributor must approve the Campaign, which
approval will not be unreasonably withheld, and shall at all times maintain
control of, and access to, Distributor's list of registered users.
Stamps.com must submit all marketing materials to Distributor for
distribution to its registered users.
6. Distributor shall have the right to market Free Postage Offer as a special
promotion that Distributor secured on behalf of its customer base.
Stamps.com will provide Distributor's Customers with the Free Postage Offer
during the Term.
7. Distributor shall use commercially reasonable and good faith efforts to
promote the Software at appropriate trade and promotional events during the
Term.
8. Distributor shall negotiate with Stamps.com in good faith to develop a
comprehensive program for the distribution of the Software throughout
Distributor's existing retail and e-commerce fulfillment networks.
Stamps.com's obligations under this Agreement are as follows:
1. Stamps.com shall provide Distributor with Revenue Sharing fees, as
described in Section 5.2 of this Agreement, at a percentage no less than
the percentage Stamps.com pays to either Staples or Officemax from time to
time during the Term.
2. Stamps.com shall include Distributor's logo graphic on all postage printed
from the Software by Distributor's Customers.
3. Stamps.com shall provide and maintain a hypertext link from the Stamps.com
World Wide Web site (the "Stamps.com Site") to the Officedepot Site.
4. Stamps.com shall provide Distributor the right to market, once per calendar
quarter, Distributor's special discounted product offerings (the
"Offerings") in a Stamps.com promotional e-mail (the "Promotion")
distributed from time to time during the Term to its customer base who has
opted into the Promotion. Distributor's Offerings must be equivalent to a
$10 value and are subject to Stamps.com's approval. Stamps.com shall at all
times maintain control of, and access to, Stamps.com's list of registered
users.
A-1
<PAGE>
EXHIBIT B
STANDARD SOFTWARE LICENSE AGREEMENT
-----------------------------------
STAMPS.COM, INC. END-USER SOFTWARE LICENSE AGREEMENT FOR STAMPS.COM INTERNET
POSTAGE SINGLE-USER VERSION
IMPORTANT: READ CAREFULLY
BEFORE OPENING THE SEALED ENVELOPE
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY MATERIAL,
THE USE OF WHICH IS SUBJECT TO THIS END-USER SOFTWARE LICENSE AGREEMENT.
OPENING THE SEALED ENVELOPE CONSTITUTES YOUR AND (IF APPLICABLE) YOUR COMPANY'S
ASSENT TO AND ACCEPTANCE OF THIS END-USER SOFTWARE LICENSE AGREEMENT (THE
"LICENSE" OR "AGREEMENT"). IF YOU DO NOT AGREE WITH ALL OF THE TERMS, YOU MUST
NOT USE THIS PRODUCT. WRITTEN APPROVAL IS NOT A PREREQUISITE TO THE VALIDITY OR
---
ENFORCEABILITY OF THIS AGREEMENT, AND NO SOLICITATION OF SUCH WRITTEN APPROVAL
BY OR ON BEHALF OF STAMPS.COM, INC. ("STAMPS.COM") SHALL BE CONSTRUED AS AN
INFERENCE TO THE CONTRARY. IF THESE TERMS ARE CONSIDERED AN OFFER BY
STAMPS.COM, ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
LICENSE AND WARRANTY:
The Software which accompanies this License (the "Software") is the property of
Stamps.com, and is protected by state, federal, and international copyright law.
Although Stamps.com continues to own the Software, you will have certain rights
to use the Software after your acceptance of this License. Except as may be
modified by a license addendum which accompanies this License, your rights and
obligations with respect to the use of this Software are as follows:
1. YOU MAY:
A. Use only one copy of any version of the Software contained on the enclosed
CD-ROM or floppy disk or downloaded from the Internet or any other online
source on a single computer;
B. Install the Software from its original distribution medium onto another
computer so long as any other copies of the Software are deleted or
otherwise made irreversibly inoperative;
C. Make one copy of the Software for archival purposes; and
D. Distribute unmodified and unregistered copies of the Software on the
original distribution medium for non-commercial use.
2. YOU MAY NOT:
A. Use the Software to purchase or print evidence of United States postage
until and unless you have been issued a Postal Meter License by the United
States Postal Service;
B. Sublicense, rent or lease any portion of the Software;
C. Reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative
works from the Software;
B-1
<PAGE>
D. Copy or move any version of the Software after it has been installed and/or
registered to another computer;
E. Use the Software to commit or attempt to commit any form of fraud against
or engage in any form of criminal activity involving the United States
Postal Service or related agencies and organizations;
F. Authorize or allow other persons or entities to use the Software unless
such persons are members of your immediate family or household;
G. Make known or allow to be made known information relating to Software
serial numbers, accounts, passwords, device identification numbers, or any
other information that could reveal or jeopardize the integrity of your
Stamps.com account; or
H. Install or use the Software on a computer located outside the United States
of America or its territories and possessions.
3. Warranty
Stamps.com warrants that the tangible media on which the Software is distributed
will be free from defects sixty (60) days from the date of delivery of the
Software to you. Your sole remedy in the event of a breach of this warranty will
be that Stamps.com will, at its option, replace any defective media returned to
Stamps.com within the warranty period. Stamps.com does not warrant that the
Software will not meet your requirements or that operation of the Software will
be uninterrupted or that the Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR
REPRESENTATION AS TO (1) THE ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE
VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999
THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES,
TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (2) WHETHER ANY OR ALL DATA
FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF
INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
THIS ABOVE WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS,
WHICH VARY FROM STATE TO STATE.
4. Disclaimer of Damages
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL STAMPS.COM BE LIABLE TO YOU FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST
DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF STAMPS.COM
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES. SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
B-2
<PAGE>
IN NO CASE SHALL STAMPS.COM 'S LIABILITY EXCEED THE PURCHASE PRICE FOR THE
SOFTWARE. The disclaimers and limitations set forth above will apply regardless
of whether you accept the Software.
5. U.S. Government Restricted Rights:
If your company is an agency of the United States government, as defined in FAR
section 2.101, DFAR section 252.227-7014(a)(1) and DFAR section 252.227-
7014(a)(5) or otherwise, all software and accompanying documentation provided in
connection with this Agreement are "commercial items," "commercial computer
software," and/or "commercial computer software documentation." Consistent with
DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, disclosure or distribution thereof
by or for the United States government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement.
USE, DUPLICATION, OR DISCLOSURE BY THE UNITED STATES GOVERNMENT IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN SUBPARAGRAPH (C) (1) (II) OF THE RIGHTS IN
TECHNICAL DATA AND COMPUTER SOFTWARE CLAUSE AT DFARS 252.227-7013 OR
SUBPARAGRAPHS (C) (1) AND (2) OF THE COMMERCIAL COMPUTER SOFTWARE RESTRICTED
RIGHTS CLAUSE AT 48 CFR 52.227-19, AS APPLICABLE.
6. Export:
You may not export or re-export the Software outside the United States without
Stamps.com's express written consent. In the event such consent is received,
you must comply with the U.S. Foreign Corrupt Practices Act and all export laws,
restrictions, national security controls and regulations of the United States
and other applicable foreign agency or authority. You shall not export or re-
export, or allow the export or re-export of the Software, any component of
Software, or any copy of the Software in violation of any such restrictions,
laws or regulations, or to Cuba, Libya, North Korea, Iran, Iraq, or Rwanda or to
any Group D:1 or E:2 country (or any national of such country) specified in the
then current Supplement No. 1 to Part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
7. General
This Agreement will be governed by the laws of the State of California and any
applicable federal law or Postal Regulations. This Agreement may only be
modified by a license addendum which accompanies this License or by a written
document which has been signed by both you and Stamps.com. Should you have any
questions concerning this Agreement, or if you desire to contact Stamps.com for
any reason, please write:
Stamps.com, Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405.
B-3
<PAGE>
EXHIBIT C
STAMPS.COM'S TRADEMARKS
-----------------------
1. "S" Design
2. "S" Design with "Internet Postage"
3. "StampFX"
4. "stamps.com"
5. "Stamps for Home"
6. "Stamps for Office"
7. "Stamps for Networks"
8. "Stamps2000"
9. "Essurance"
*Free Postage Logo and trademark to be provided by Stamps.com
C-1
<PAGE>
EXHIBIT D
SOFTWARE PROGRAMS
-----------------
1. USPS approved Stamps.com software
D-1
<PAGE>
EXHIBIT 10.21
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is made as of this 31st
day of March 1999 (the "Effective Date"), by and between Stamps.com Inc., a
Delaware corporation, with its principal place of business at 2900 31st Street,
Suite 150, Santa Monica, California 90405 ("Stamps.com") and Seiko Instruments
USA, Inc., a California corporation, with its principal place of business at
1130 Ringwood Ct., San Jose, CA 95131 (the "Distributor").
RECITALS
WHEREAS, Stamps.com develops and publishes software which enables end-
users to purchase postage electronically through Stamps.com's network system;
and
WHEREAS, pursuant to the terms and conditions of this Agreement,
Stamps.com desires to appoint Distributor as an independent contractor to
distribute such software and Distributor desires to provide such distribution
services.
NOW THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the meanings
set forth in this Article 1:
"Agreement" has the meaning given to that term in the preamble to this
---------
Agreement.
"Stamps.com" has the meaning given to that term in the preamble to
----------
this Agreement.
"Business Day" means any weekday, Monday through Friday, excluding
------------
national holidays.
"Confidential Information" has the meaning given to that term in
------------------------
Section 8.4 of this Agreement.
"Customers" means end-user licensees of Software.
---------
"Distributor" has the meaning given to that term in the preamble of
-----------
this Agreement.
"Disputes" has the meaning given to that term in Section 17.4(i).
--------
"Documentation" means the user manuals and other documentation
-------------
provided by Stamps.com for use with Software. Unless expressly
excluded, the term "Software" as used herein shall include the
applicable Documentation.
"Effective Date" has the meaning given to that term in the preamble
--------------
of this Agreement.
"Exception" has the meaning given to that term in Section 11.
---------
"Excess Warranty" has the meaning given to this term in Section 12.
---------------
"Logo Program" has the meaning given to this term in Section 6.7.
------------
1
<PAGE>
"Materials" has the meaning given to this term in Section 8.1.
---------
"OEM" means original equipment manufacturer.
---
"Service Fee Revenues" has the meaning given to this term in Section
--------------------
5.2.
"Software" means (i) the object code version of Stamps.com's software
--------
programs listed in Exhibit D, and (ii) the object code version of any
updates, modifications or revisions to such computer programs provided
to Distributor pursuant to the terms of this Agreement.
"Software License Agreement" means the agreement provided in Exhibit
--------------------------
B.
"Term" has the meaning given to that term in Section 16.1.
----
"Trademarks" means all then-current names, marks and designations
----------
used by Stamps.com.
"Warranty Period" has the meaning given to that term in Section 9.1.
---------------
2. APPOINTMENT OF DISTRIBUTOR.
--------------------------
2.1 Grant to Distributor. Subject to all the terms and conditions of
--------------------
this Agreement and the limitations set forth below, Stamps.com hereby grants and
Distributor hereby accepts, a non-transferable, non-exclusive right to market
and distribute copies of Software solely to Customers in the United States.
Copies of Software are licensed for distribution solely with Distributor's
products and not sold.
2.2 Software License. Subject to all the terms and conditions of this
----------------
Agreement, Stamps.com hereby grants a non-exclusive, nontransferable, royalty-
free, sub-licensable and fully-paid-up license to Distributor, for so long as
this Agreement remains in effect, to use, reproduce and copy all Software and to
provide and make available to Customers, copies of all Software; provided that
-------------
the user of all such copies provided or made available to Customers shall be
subject to the terms of the applicable Software License Agreement between each
such Customer and Stamps.com. The foregoing license is provided by Stamps.com to
Distributor free of charge.
2.3 Title and Ownership. Distributor hereby acknowledges that all
-------------------
right, title and interest in and to Software shall at all times remain that of
Stamps.com, including all rights in the nature of copyright, patent, trade-
secret and other intellectual property and proprietary rights with respect to
Software. Distributor shall have no right, title, or interest therein, and
Distributor is not authorized to grant any right or license with respect thereto
except as expressly set forth in, and permitted under, this Agreement.
3. DISTRIBUTOR'S OBLIGATIONS GENERALLY.
-----------------------------------
3.1 Distribution of Software. Distributor shall use its best efforts
------------------------
to distribute Software to Customers pursuant to the provisions set forth in
Exhibit A.
3.2 Copying/Reverse Engineering. In no event shall Distributor use,
---------------------------
market or distribute Software other than as provided herein. Distributor agrees
not to (i) disassemble, decompile or otherwise reverse engineer Software or
otherwise attempt to learn the source code, structure, algorithms or ideas
underlying Software, (ii) take any action contrary to Stamps.com's Software
License Agreement, except as expressly and unambiguously allowed under this
Agreement, (iii) alter or modify Software, (iv) attempt to disable any security
devices or codes incorporated in Software, or (v) allow or assist others to do
any of the foregoing.
2
<PAGE>
3.3 Distributor's Procurement of USPS Approval. Distributor must
------------------------------------------
obtain final US Postal Service ("USPS") certification and approval on or prior
to sixty (60) days from the Effective Date for all products in which it plans to
include Stamps.com software. Such certification must be evidenced in writing
from the USPS to Distributor or such other appropriate proof of certification
acceptable to Stamps.com.
3.4 Software Package; Software License Agreement. Subject to Exhibit
--------------------------------------------
A, Distributor shall ensure that each copy of Software distributed by or through
Distributor to Customers shall include all components of such Software as
prepackaged by Stamps.com, including, without limitation, (i) diskettes or other
media bearing labels, (ii) Stamps.com's end user manuals and Documentation,
Stamps.com's Software License Agreement, and (iii) at the option of Stamps.com,
advertising and promotional materials supplied by Stamps.com. The parties to
each Software License Agreement shall be Stamps.com and the Customer. The terms
of the Software License Agreement shall be subject to change by Stamps.com, at
its sole discretion, upon reasonable notice to Distributor. Stamps.com shall
have the right to add to or discontinue any or all Software, but only upon
thirty (30) days' prior written notice to Distributor.
3.5 Third Party Infringement. Distributor shall notify Stamps.com
------------------------
promptly of any infringement of any copyrights, Trademarks, or other
intellectual property or proprietary rights relating to any Software. Stamps.com
may, in its sole discretion, take or not take whatever action it believes is
appropriate in connection with any such infringement. If Stamps.com elects to
take any such action, Distributor agrees to fully cooperate in connection
therewith. If Stamps.com initiates and prosecutes any action with respect to
infringement of any copyrights, Trademarks, or other proprietary rights relating
to any Software, Stamps.com shall be entitled to retain all amounts (including
court costs and attorneys' fees) awarded by way of judgment, settlement, or
compromise with respect thereto.
3.6 Compliance. Distributor shall ascertain and comply with all
----------
applicable state, federal and local laws and regulations and standards of
industry or professional conduct, including, without limitation, those
applicable to product claims, labeling, approvals, registrations and
notifications, the Internic, the Internet Assigned Numbers Authority and
Internet community standards, and shall also obtain Stamps.com's prior written
consent before adding any product claim, label, instructions, packaging or the
like to any copy of Software.
3.7 Export Control. Distributor shall not export or re-export any
--------------
Software outside the United States without Stamps.com's express written consent.
In the event such consent is received, Distributor shall comply with the U.S.
Foreign Corrupt Practices Act and all export laws, restrictions, national
security controls and regulations of the United States and other applicable
foreign agency or authority, and shall not export or re-export, or allow the
export or re-export of Software, any component of Software, any other product or
Confidential Information or any copy or direct product of any of the foregoing
in violation of any such restrictions, laws or regulations, or to Cuba, Libya,
North Korea, Iran, Iraq, or Rwanda or to any Group D:I or E:2 country (or any
national of such country) specified in the then current Supplement No. 1 to Part
740, or, in violation of the embargo provisions in Part 746, of the U.S. Export
Administration Regulations (or any successor regulations or supplement), except
in compliance with and with all licenses and approvals required under applicable
export laws and regulations, including without limitation, those of the U.S.
Department of Commerce.
4. DELIVERY TO DISTRIBUTOR.
-----------------------
4.1 Delivery. Stamps.com shall deliver a master copy of all Software
--------
to Distributor in a format which shall enable Distributor to provide copies
thereof to Customers. Stamps.com shall provide sufficient copies of all
Documentation to Distributor to allow Distributor to include such Documentation
to Customers with Software pursuant to Distributor's obligations as set forth in
Exhibit A.
3
<PAGE>
5. PRICES, PAYMENTS, AND PAYMENT TERMS.
-----------------------------------
5.1 Distributor's Prices to Customers. Distributor shall provide or
---------------------------------
make available copies of Software free of charge to Customers and shall not
charge any fee or other consideration in connection with the delivery or
distribution of such copies.
5.2 Revenue Sharing. As full consideration for its services
---------------
hereunder, Stamps.com shall pay Distributor a quarterly fee equal to [***]* of
all Service Fee Revenues received by Stamps.com attributable to purchases by
Customers using Software; provided that if any such Customer previously obtained
-------------
any Software from any person other than Distributor, the Service Fee Revenues
attributable to purchases by such Customer shall not be included for purposes of
determining Distributor's quarterly fee. All quarterly fees payable by
Stamps.com to Distributor shall be paid within forty-five (45) days after the
end of the quarter in which Stamps.com receives the Service Fee Revenues from
which such fees are derived. As used herein, the term "Service Fee Revenues"
shall mean all service fees received by Stamps.com from purchases of postage by
Customers and shall specifically exclude (a) the cost of the postage that is
purchased and (b) any taxes with respect thereto.
6. MARKETING AND ADVERTISING.
-------------------------
6.1 Distributor's General Undertaking, Representation, and Warranty.
---------------------------------------------------------------
Distributor represents, warrants, and covenants to Stamps.com that all
advertising and marketing materials relating to Software and/or Stamps.com that
are developed by Distributor shall be accurate in all respects.
6.2 Distribution of Software. Distributor hereby agrees to
------------------------
advertise, market sell and distribute Software solely as provided in Exhibit A.
In its distribution efforts, Distributor will use the Trademarks, but shall not
represent or imply that it is Stamps.com or is a part of Stamps.com; provided
--------
that all advertisements and promotional materials, packaging and anything else
- ----
bearing a Trademark shall identify Stamps.com as the Trademark owner and
Software manufacturer; provided further that any use of the Trademarks shall be
----------------
governed by Section 8.3.
6.3 Marketing Materials. Stamps.com agrees to provide to
-------------------
Distributor, at no cost to Distributor, such promotional materials for Software
in camera ready or electronic format as Stamps.com generally makes available to
its resellers and distributors, including technical specifications, prices,
drawings, and advertisements. Distributor may reproduce such promotional
materials as reasonably required in connection with its promotional, advertising
and/or marketing activities in connection with Software, provided that all
-------------
copyright, trademark and other property markings of Stamps.com are reproduced.
Such promotional materials, including all copies and reproductions made by
Distributor, remain the property of Stamps.com and, except insofar as they are
distributed by Distributor in the course of its performance of its duties under
this Agreement, must be promptly returned to Stamps.com upon the expiration or
termination of this Agreement. Distributor may develop its own promotional
materials for Software, provided that Distributor shall submit any such
-------------
promotional materials to Stamps.com for Stamps.com's review, and Stamps.com
shaft have the right to approve or reject any such promotional materials in
Stamps.com's sole discretion.
6.4 Web Sites.
---------
(i) Hypertext Links. If Distributor has a World Wide Web
---------------
site ("Web site"), Distributor shall establish a hypertext link to Stamps.com's
Web site within thirty (30) days of the
____________________
* [***]Confidential treatment has been requested for the bracketed
portions. The confidential portion has been omitted and filed separately with
the Securities and Exchange Commission.
4
<PAGE>
Effective Date. With respect to each hypertext link linking users of
Distributor's Web site to Stamps.com's Web site, Distributor shall not alter the
look, feel, or functionality of Stamps.com's Web site and shall not act to
prevent the look and feel of Stamps.com's Web site (including, without
limitation, page format, navigational bars, colors, fonts, Stamps.com's
trademarks, all hyperlinks appearing on Stamps.com's Web site or, in general,
the overall design of Stamps.com's Web site) from being displayed.
(ii) Responsibilities. Each party shall be solely
----------------
responsible for the development, operation, and maintenance of its Web site and
for all materials that appear on its Web site, including without limitation, (i)
the technical operation of its Web site and all related equipment, (ii) the
accuracy and appropriateness of materials posted on its Web site, and (iii)
ensuring that materials posted on its Web site do not violate any law, rule, or
regulation, or infringe upon the rights of any third party and are not
defamatory, obscene or otherwise illegal. Each party disclaims all liability for
all such matters with respect to the other's Web site.
6.5 Advertising and Public Relations. Distributor may advertise
--------------------------------
Software in appropriate periodicals and in a manner insuring proper and adequate
publicity for Software. Each time Distributor places any such advertising in any
periodical, Distributor shall provide Stamps.com with notice (pursuant to
Section 17.8 below) that Distributor has done so, specifying the name and date
of the applicable periodical. Distributor shall engage in public relations
activities to encourage the publication, of articles and other publications
regarding Software.
6.6 Announcements. Within thirty (30) days following the Effective
-------------
date, Stamps.com and Distributor shall jointly issue a press release announcing
Distributor's appointment under this Agreement. Thereafter, each party shall
obtain the other party's prior written approval of all press releases that such
party issues with respect to this Agreement and the transactions contemplated by
this Agreement. Distributor also shall obtain Stamps.com's prior written
approval of all other press releases that Distributor issues with respect to
Software.
6.7 Logo Program. During the Term, upon mutual agreement of the
------------
Parties, Distributor shall participate in a promotional logo program ("Logo
Program") as follows: Distributor shall be entitled to offer free postage to
Customers for a period of up to twelve months from the Effective Date; provided
that (a) the amount of free postage to be given to any Customer shall not exceed
ten dollars ($10), (b) Stamps.com shall be entitled to immediately terminate the
Logo Program at its sole discretion, (c) Customers shall not be entitled to
receive free postage until they have made an initial purchase of postage from
Stamps. com, (d) Customers shall not be entitled to receive free postage if they
have previously obtained Software (whether from Distributor or another person),
(e) Distributor and Stamps.com shall mutually agree on one or more logos which
Distributor shall display on all of its packaging and marketing materials which
are generally seen by Customers, including but not limited to external packaging
and Web sites, and (f) Distributor shall not alter any such logos and shall
display such logos in strict compliance with the parties' agreement with respect
to size, color, location and any other relevant criteria with respect to such
logos. The logos used in the Logo Program shall be deemed Trademarks for all
purposes of this Agreement, including the license granted by Stamps.com in
Section 8.3.
5
<PAGE>
7. INSTALLATION AND SUPPORT. Stamps.com shall be solely responsible for
------------------------
providing Customers with installation, maintenance and technical integration
support with respect to Software. Distributor shall immediately refer all of the
Distributor's customers who contact the Distributor via telephone regarding
technical support for the Software to stamps.com technical support department
all other technical support requests to the Distributor received via mail,
email, or fax, from the Distributor's Customers shall be forwarded to stamps.com
within no more than twenty-four (24) hours or one (1) Business Day, whichever
period is longer.
8. PROTECTION OF PROPRIETARY RIGHTS.
--------------------------------
8.1 Acknowledgment of Proprietary Materials. Distributor hereby
---------------------------------------
acknowledges that all Software, Documentation and technical support and training
materials provided to Distributor by Stamps.com (collectively, the "Materials")
are protected by the copyright laws of the United States and other countries and
that the Materials embody valuable confidential and trade secret information of
Stamps.com, the development of which required the expenditure of considerable
time and money by Stamps.com.
8.2 Proprietary Markings. Distributor hereby agrees to ensure that
--------------------
all copyright, trademark and other proprietary notices of Stamps.com affixed to
or displayed on Software and Documentation will not be removed, obscured or
modified.
8.3 Stamps.com Trademarks. Distributor acknowledges that Stamps.com
---------------------
is the owner of all right, title and interest in and to all the Trademarks set
forth in Exhibit C, together with any new or revised names, designs or
designations that Stamps.com may adopt to identify it or any Software during the
Term, and Distributor agrees not to adopt or use any of such Trademarks in any
manner whatsoever except as expressly provided in this Agreement.
Stamps.com hereby grants Distributor a license during the Term to use
the Trademarks, provided that (i) they are used solely in connection with the
-------------
marketing and distribution of Software and in accordance with Stamps.com's
specifications as to style, color and typeface set forth in Exhibit C, (ii) such
use shall be subject to prior written approval of Stamps.com, which approval
shall not be unreasonably withheld, and, (iii) no other right to use any name or
designation is granted by this Agreement. Upon expiration or termination of this
Agreement, Distributor will take all action necessary to transfer and assign to
Stamps.com, or its nominee, any right, title or interest in or to any of the
Trademarks, and the goodwill related thereto, which Distributor may have
acquired in any manner as a result of the marketing and distribution of Software
under this Agreement, and Distributor shall cease using any Trademark.
Distributor hereby agrees to notify Stamps.com immediately upon Distributor
gaining knowledge of any infringement or potential infringement of any
Trademark.
Distributor agrees not to apply for registration of any Trademarks
anywhere in the world or for any mark confusingly similar thereto. Stamps.com
may elect to apply for registration of one or more of the Trademarks anywhere in
the world at its expense, and, in such event, Stamps.com shall so notify
Distributor and Distributor shall assist and cooperate with Stamps.com in
connection therewith. Distributor also agrees not to use or contest, during or
after the term of this Agreement, any Trademark, name, mark or designation used
by Stamps.com anywhere in the world (or any name, mark or designation similar
thereto). Distributor acknowledges and agrees that all use of the Trademarks by
Distributor shall inure to the benefit of Stamps.com.
8.4 Confidential Information. Distributor hereby agrees to hold any
------------------------
information, materials and data made available to it by Stamps.com that
reasonably should be understood to be confidential (collectively, "Confidential
Information"), in confidence and agrees not to use, copy, or disclose, or
6
<PAGE>
permit any of its personnel to use, copy, or disclose the same for any purpose
that is not specifically authorized herein. For the purposes of this Section
8.4, the terms and conditions of this Agreement and the Materials are
Confidential Information of Stamps.com.
9. WARRANTY.
--------
9.1 Limited Warranty of Performance. Stamps.com warrants to
-------------------------------
Distributor that all Software will, under normal use, conform to the limited
warranty contained in the Software License Agreement applicable to such Software
during the warranty period set forth in such Agreement (the "Warranty Period").
The foregoing warranty will apply only to the most current version of Software
issued by Stamps.com from time to time. Stamps.com assumes no responsibility for
claims resulting from the distribution of superseded, outdated, or uncorrected
versions of Software.
9.2 Exclusive Remedy. If a Customer contacts Stamps.com during the
----------------
Warranty Period claiming a breach of the warranty set forth in the then-current
Software License Agreement provided by Distributor to that Customer, Stamps.com
will use reasonable efforts to resolve the claim directly with such Customer by
correcting or replacing such Software. If a Customer contacts Distributor during
the Warranty Period claiming any such breach of warranty, Distributor shall
promptly refer the matter to Stamps.com. DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY
IN THE EVENT OF ANY SUCH CLAIM, IF VERIFIED, IS EXPRESSLY LIMITED TO
STAMPS.COM'S REASONABLE EFFORTS TO CORRECT OR REPLACE SUCH DEFECTIVE SOFTWARE
AND/OR DOCUMENTATION AT STAMPS.COM'S SOLE EXPENSE.
9.3 Disclaimer. No representation or other affirmation of fact not
----------
set forth herein, including, without limitation, statements regarding capacity,
compliance, suitability for use, or performance of any Software, shall be or be
deemed to be a warranty or representation by Stamps.com for any purpose, or give
rise to any liability or obligation of Stamps.com whatsoever. EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES EXPRESS
OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE, AND NON-
INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR REPRESENTATION AS TO (Y) THE
ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE VALUES, INCLUDING BUT NOT
LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999 THROUGH AND BEYOND JANUARY
1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES, TO OPERATE IN ACCORDANCE
WITH THE DOCUMENTATION, OR (Z) WHETHER ANY OR ALL DATA FIELDS FOR CALENDAR DATE
VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF INDICATING CENTURY AND
MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
10. LIMITATION OF LIABILITY; INJUNCTIVE RELIEF.
------------------------------------------
10.1 No Consequential Damages; Limitation of Liabilities. IN NO EVENT
---------------------------------------------------
SHALL EITHER PARTY BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT FOR LOSS OF PROFITS, COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, OR INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR
DAMAGES UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY. EXCEPT WITH RESPECT TO A BREACH OF SECTION 8.4 AND
DISTRIBUTOR'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 12 BELOW, THE LIABILITY
OF EITHER PARTY FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT SHALL NOT EXCEED THE AMOUNT PAID BY STAMPS.COM TO
7
<PAGE>
DISTRIBUTOR WITH RESPECT TO THE SPECIFIC ITEMS OF SOFTWARE GIVING RISE TO SUCH
CLAIM.
10.2 Injunctive Relief. Distributor acknowledges that any breach of
-----------------
its obligations under this Agreement with respect to the proprietary rights or
Confidential Information of Stamps.com will cause Stamps.com irreparable injury
for which there are inadequate remedies at law, and therefore Stamps.com will be
entitled to injunctive relief in addition to all other remedies provided by this
Agreement or available at law.
11. DEFENSE OF INTELLECTUAL PROPERTY CLAIMS.
---------------------------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Distributor based on a claim that Distributor's
distribution and/or use of Software infringes a third party's copyright or
trademark or misappropriates a third party's trade secret, and if given access
by Distributor to any information Distributor has regarding such alleged
infringement, Stamps.com agrees to defend and hold harmless Distributor in such
action at its expense and will pay any costs or damages finally awarded against
Distributor in any such action; provided that Stamps.com shall have had sole
-------------
control of the defense of any such action and all negotiations for its
settlement or compromise. In the event that Stamps.com reasonably believes that
any Software infringes a copyright or trademark or misappropriates a trade
secret, Stamps.com may, at its option and at its expense, either procure for
Distributor the right to continue using any Software, modify the same so it
becomes non-infringing or allow the Distributor to terminate this Agreement
pursuant to Section 16.2(ii). Stamps.com shall not have any liability to
Distributor under any provision of this clause if any infringement, or claim
thereof, is based upon: (i) the use of Software in combination with other
computer hardware or software programs that Stamps.com has not approved for use
with such Software, (ii) Software that has been modified by Distributor, (iii)
Distributor's use of Software beyond the scope of the license granted to it by
Stamps. com hereunder, (iv) Distributor's use after notice of infringement or
misappropriation, or (v) Infringement relating solely to the use of Software but
not the Software itself. Distributor shall indemnify Stamps.com and hold it
harmless against any expense, judgment or loss for infringement of any patent or
other intellectual property right which results from the exceptions set forth in
the immediately preceding sentence of this Section 11 (collectively,
"Exceptions"). No costs or expenses shall be incurred for the account of
Stamps.com without the prior written consent of Stamps.com. THE FOREGOING STATES
THE ENTIRE LIABILITY OF STAMPS.COM WITH RESPECT TO INFRINGEMENT OF PATENTS,
COPYRIGHTS, TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY ANY SOFTWARE, OR
ANY PART THEREOF, OR BY ITS OPERATION.
12. DISTRIBUTOR'S INDEMNITY.
-----------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Stamps.com based on a claim arising from (i)
infringement of any patent or other intellectual property right which results
from the Exceptions; (ii) Distributor's grant of a warranty to any Customer
exceeding the limited warranty set forth in Section 9.1 of this Agreement (an
"Excess Warranty"), (iii) Distributor's material breach of this Agreement, or
(iv) Distributor's negligence or willful misconduct, Distributor shall indemnify
Stamps.com and hold Stamps.com harmless from and against any judgment, damage,
liability, or expenses, including reasonable attorney's fees, arising out of any
claim with respect to the breach or alleged breach of such Excess Warranty or
this Agreement or such negligence or willful misconduct; provided that
-------------
Distributor shall have had sole control of the defense of any such action and
all negotiations for its settlement or compromise; and, provided further that no
-----------------
cost or expense shall be incurred for the account of Distributor without
Distributor's prior written consent.
8
<PAGE>
13. REPORTS AND RECORDS.
-------------------
13.1 Reports. Distributor shall keep complete records concerning the
-------
number of copies of Software provided with Distributor's products, or downloaded
by, Customers, as the case may be. Within ten (10) Business Days of the close of
each month during the Term, Distributor shall complete and forward to Stamps.com
a monthly report containing a summary setting forth the number of copies of
Software provided with the Distributor's products, or downloaded by, Customers,
as the case may be. Distributor shall also provide as part of this report the
name and location of all Distributor's Customers who completed the Distributor's
product registration.
13.2 Audit. Distributor agrees to maintain copies of all documentation
-----
relating to the distribution of Software under this Agreement. If requested in
writing by Stamps.com, Distributor shall permit Stamps.com and its independent
certified public accountants to have access to such documentation at
Distributors place of business during ordinary business hours. Distributor
agrees to keep for three (3) years after termination of this Agreement records
of all copies of Software provided to or downloaded by Customers, as the case
may be, in each case sufficient to adequately administer a recall of any
Software and to fully cooperate in any decision by Stamps.com to recall,
retrieve and/or replace any Software. Stamps.com agrees to maintain copies of
all documentation relating to Service Fee Revenues from Customer purchases using
Software distributed by Distributor hereunder. Within fifteen (15) days after
the end of each month, Stamps.com shall provide a report to Distributor setting
forth the revenues received by Stamps.com for such month which are attributable
to purchases from Customers using such Software. If requested in writing by
Distributor, Stamps.com shall permit at Distributor's sole expense,
Distributor's independent certified public accountants, subject to a non-
disclosure agreement with Stamps.com, up to once per calendar year, to have
access solely to such documentation as is reasonably necessary for such
accountants to verify the amount of revenues set forth on such report; provided,
in no event shall such access include access to Stamps.com's servers. For a
period of three (3) years after termination of this Agreement, Stamps.com agrees
to keep records of all Customer purchases made pursuant to Software distributed
by Distributor hereunder.
14. RELATIONSHIP OF PARTIES.
-----------------------
Distributor is an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as a partner, joint
venturer, co-owner, employee, or agent of the other party, and neither party
shall hold itself out as such. Neither party has any right or authority to
incur, assume or create, in writing or otherwise, any warranty, liability or
other obligation of any kind, express or implied, in the name of or on behalf of
the other party, it being intended by both Distributor and Stamps.com that each
shall remain an independent contractor responsible for its own actions.
Distributor agrees to indemnify and hold Stamps.com harmless from and against
any damage or expenses, including reasonable attorney's fees, arising out of
Distributor's breach of the provisions of this Section 14.
15. ASSIGNMENT.
----------
Distributor shall not assign, transfer or otherwise dispose of this
Agreement in whole or in part to any individual, corporation or other entity
without the prior written consent of Stamps.com.
16. TERM OF AGREEMENT; TERMINATION.
------------------------------
16.1 Term. This Agreement shall be effective as of the Effective Date
----
and shall have an initial term of two (2) years. Upon the expiration of such
term (or any renewal term), this Agreement shall automatically renew for
additional one (1) year periods unless either party notifies the other party at
least
9
<PAGE>
sixty (60) days prior to the applicable renewal date of its intention to not
renew the Agreement (the initial term and any renewal term shall be collectively
referred to as the "Term").
16.2 Events of Termination.
---------------------
(i) Bankruptcy/Reorganization. Either party may terminate this
-------------------------
Agreement immediately upon written notice to the other party if the other party
becomes insolvent, seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, proceedings
in bankruptcy or insolvency are instituted against the other party, or a
receiver is appointed, or if any substantial part of the other party's assets is
the object of attachment, sequestration or other type of comparable proceeding,
and such proceeding is not vacated or terminated within thirty (30) days after
its commencement or institution.
(ii) Default. Either party may terminate this Agreement if the
-------
other party commits a material breach of any of the material terms or provisions
of this Agreement and does not cure such breach within thirty (30) days after
receipt of written notice given by the other party. Notwithstanding the
foregoing, Stamps.com may immediately terminate this Agreement in the event
Distributor breaches its obligations under Section 2.1, 3.2, 8.3 or 8.4.
(iii) Licenses. Either party may terminate this Agreement
--------
immediately if it or the other party is unable to obtain or renew any permit,
license or other governmental approval necessary to carry on the business
contemplated under this Agreement.
(iv) USPS Certification for Distributor. Stamps.com may
----------------------------------
terminate this Agreement immediately upon written notice to Distributor in the
event Distributor fails to obtain USPS certification in accordance with Section
3.4 hereof
16.3 Termination for Convenience. Stamps.com may terminate this
---------------------------
Agreement at any time with or without cause upon thirty (30) days' prior written
notice to Distributor. In the event Stamps.com terminates this Agreement
pursuant to this Section 16.3, Distributor may not sell any inventory containing
the Software or Stamps.com's logos on or after one hundred and twenty (120) days
after the termination date of this Agreement.
16.4 Rights Upon Termination. Upon termination of this Agreement by
-----------------------
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any moneys due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under Sections 2.3, 3.2, 3.8, 8.1, 8.3 (first and third paragraphs only), 8.4,
9.2, 9.3, 10.1, 10.2, 11, 12, 13.1, 13.2, 14, 15, 16.4, 16.5, and 17.1 - 17.9.
Without limiting the foregoing, upon termination of this Agreement, all licenses
granted to Distributor hereunder shall terminate and each party shall remove any
links from its Web site to the other party's Web site.
16.5 Existing Licenses. All Software License Agreements in effect as
-----------------
of the date of termination or expiration of this Agreement shall survive such
termination or expiration and continue in effect until terminated in accordance
with their terms.
17. MISCELLANEOUS.
-------------
17.1 Force Majeure. If the performance of any obligation (other than
-------------
payment and confidentiality obligations) under this Agreement is prevented,
restricted or interfered with by reason of war, revolution, civil commotion,
acts of public enemies, blockade, embargo, strikes, outage of the
10
<PAGE>
Internet, law, order, proclamation, regulation, ordinance, demand, or
requirement having a legal effect of any government or any judicial authority or
representative of any such government, or any other act whatsoever, whether
similar or dissimilar to those referred to in this Section 17.1, which is beyond
the reasonable control of the party affected, then the party so affected shall,
upon giving prior written notice to the other party, be excused from such
performance to the extent of such prevention, restriction, or interference,
provided that the party so affected shall use reasonable commercial efforts to
avoid or remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed. The parties
agree and acknowledge that the foregoing shall include Stamps.com's failure to
obtain any necessary governmental approval required in connection with the use
of any Software, including without limitation any postal service approval.
17.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all previous negotiations, agreements
and commitments with respect thereto, and shall not be released, discharged,
changed or modified in any manner except by instruments signed by duly
authorized officers or representatives of each of the parties hereto. No course
of prior dealing between the parties and no usage of the trade shall be relevant
to supplement or explain any term used herein. Acceptance or acquiescence in a
course of performance rendered hereunder shall not be relevant to determine the
meaning of these terms and conditions even though the accepting or acquiescing
party has knowledge of the performance and opportunity for objection.
17.3 Applicable Law. Any claim or controversy relating in any way to
--------------
this Agreement shall be governed and interpreted exclusively in accordance with
the laws of the State of California and the United States without regard to the
United Nations Convention on Contracts for the International Sale of Goods. This
Agreement shall be deemed to have been made in, and shall be construed under,
the internal laws of the State of California, without regard to the principles
of conflicts of laws thereof and the United Nations Convention on Contracts for
the International Sale of Goods. Any mediation under Section 17.4(iii) below
shall be conducted in Los Angeles County, California. In addition, Stamps.com
and Distributor acknowledge and agree that the courts located in such county
shall have exclusive jurisdiction in any action or proceedings with respect to
this Agreement, including the federal district courts located in such county.
17.4 Dispute Resolution. All disputes arising in connection with this
------------------
Agreement shall be resolved as follows:
(i) General Intent. Stamps.com and Distributor intend that all
--------------
problem and disputes relating to this Agreement or arising from the transactions
contemplated hereby ("Disputes") shall be resolved through the procedures of
this Section 17.4; provided, however, that neither party shall be under any
-----------------
obligation to proceed in accordance with this Section 17.4 with respect to
Disputes concerning any alleged breach of Section 2.3, 3.2, 8.1, 8.2, 8.3 or 8.4
of this Agreement, as to which a party may take any legal action in a court of
law or equity (without the necessity of posting any bond) to assert or enforce a
claim that it has against the other party under this Agreement. The procedures
in this Section 17.4 shall not replace or supersede any other remedy to which a
party is entitled under this Agreement or under applicable law.
(ii) Informal Resolution Efforts. Stamps.com and Distributor
---------------------------
initially shall attempt to resolve Disputes through informal negotiations
conducted by the president or any vice president of Stamps.com and the president
or any vice president of Distributor.
(iii) Mediation. If a Dispute cannot be resolved under
---------
subsection 17.4(ii), the Dispute shall be submitted to mediation by written
notice of the party seeking mediation to the other party. In the mediation
process, Stamps.com and Distributor shall attempt in good faith to resolve their
differences
11
<PAGE>
voluntarily with the aid of an impartial mediator, who will attempt to
facilitate negotiations. The mediator shall be selected by mutual agreement of
Stamps.com and Distributor. If Stamps.com and Distributor cannot agree on a
mediator, the American Arbitration Association or JAMS/Endispute shall designate
a mediator at the request of either party. Any mediator so designated must be
acceptable to both parties. The mediation shall be confidential, and the
mediator may not testify for either party in any later proceeding relating to
the Dispute. Each party shall bear its own costs in the mediation. The fees and
expenses of the mediator shall be shared equally by the parties.
(iv) Court Actions. If Stamps.com and Distributor cannot
-------------
resolve a Dispute through mediation pursuant to Section 17.4(iii) above, either
party may seek further redress by taking legal action in a court of law or
equity to assert or enforce a claim that it has against the other party under
this Agreement
17.5 Statute of Limitations. Any action by the Distributor for
----------------------
breach of these terms and conditions must be commenced within one (1) year after
the cause of action has accrued.
17.6 Partial Illegality. If any provision of this Agreement or the
------------------
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event the parties
shall use their best efforts to replace the invalid or unenforceable provisions
by a provision that, to the extent permitted by the applicable law, achieves the
purposes intended under the invalid or unenforceable provision. Any deviation by
either party from the terms and provisions of this Agreement to the limited
extent necessary to comply with applicable laws, rules or regulations shall not
be considered a breach of this Agreement.
17.7 Waiver of Compliance. Any failure by any party hereto to
--------------------
enforce at any time any term or condition under this Agreement shall not be
considered a waiver of that party's right thereafter to enforce each and every
item and condition of this Agreement.
17.8 Notices. All notices and other communications in connection with
-------
this Agreement shall be in writing and shall be sent to the respective parties
at addresses set forth below in this Section 17.8, or to such other addresses as
may be designated by the parties in writing from time to time in accordance with
this Section 17.8, by registered or certified air mail, postage prepaid, or by
express courier service, service fee prepaid, or by telefax with a hard copy to
follow via air mail or express courier service in accordance with this Section
17.8. All notices shall be deemed received (i) if given by hand, immediately,
(ii) if given by air mail, five (5) business days after posting, (iii) if given
by express courier service, three (3) business days after delivery to courier
service, or (iv) if given by telefax, upon receipt thereof by the recipient's
telefax machine as indicated either in the sender's identification line produced
by the recipient's telefax machine or in the sender's transmission confirmation
report as produced electronically by the sender's telefax machine.
To Stamps.com: Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
Attention: President
Facsimile: (310) 450-7337
12
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With a copy to: Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, CA 92618
Attention: Bruce R. Hallet, Esq.
Facsimile: (949) 790-6301
To Distributor: Seiko Instruments USA Inc.
1130 Ringwood Ct.
San Jose, CA 95131-1726
Attention: Lynn W. Keyser
With a copy to: ___________________________________________
___________________________________________
___________________________________________
17.9 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representative as of the Effective
Date.
STAMPS.COM INC.
By:_________________________________
Name:_______________________________
Title:______________________________
DISTRIBUTOR:
SEIKO INSTRUMENTS USA INC.
By:_________________________________
Name:_______________________________
Title:______________________________
13
<PAGE>
EXHIBIT A
DISTRIBUTION OBLIGATIONS
------------------------
Distributor shall:
1. obtain USPS certification in accordance with Section 3.4 of this Agreement
prior to distributing the Software with any of Distributor's products.
2. apply the Stamps.com "Free Postage" logo (the "Logo") on the external
packaging of all Distributor products, including all retail and catalog
stock keeping units ("SKUs"), with which the Software is bundled in
accordance with this Agreement. The Logo shall be applied in accordance
with logo usage guidelines to be provided under separate cover by
Stamps.com from time to time during the Term.
3. promote the Software and the Logo in all print media advertising and other
forms of media advertising, when advertising space permits, in accordance
with Section 6 of this Agreement and with logo usage guidelines to be
provided under separate cover by Stamps.com from time to time during the
Term.
4. bundle and distribute the Software on (a) all Seiko Smart Label Printer CD-
ROMS to be included in all Seiko Smart Label Printer (the "Printer")
product boxes. Any offers for free postage by Distributor must be made in
accordance with Section 6.7 of this Agreement,
5. promote, market, and provide an executable graphical interface for
installation of the Software on the main Seiko SmartLabel Software
Installation Splash Screen.
6. provide end of installation option to end user to install the Software if
the Software is not installed as part of the initial installation of
Printer software, or if the Software was not previously installed on end
user's computer or server.
7. include the Software and "Free Postage" offer in all product offerings to
existing customer base,
8. Distributor shall provide Stamps.com the right to direct market the
Software, including e-mail and direct mail, to Distributor's existing U.S.
customers, at least once per calendar quarter during the Term. Distributor
shall at all times maintain control of, and access to, Distributor's list
of registered users. Stamps.com must submit all marketing materials to
Distributor for distribution to its registered users.
9. create a hypertext link to Stamps.com's World Wide Web site (the
"Stamps.com Site") located as of the Effective Date at the uniform resource
locator ("URL") address www.stamps.com from the home page of Distributor's
---------------
World Wide Web site (the "SeikoSmart Site") and each other page of the
SeikoSmart Site on which a reference to Stamps.com, the Software or both
appears.
10. promote Software on the SeikoSmart Site, including the sections of the
SeikoSmart Site that may be accessed by clicking the "Label Printer" and
"Software" buttons on the home page of the SeikoSmart Site, and place a
prominent, easily viewable Logo on all appropriate sections of the
SeikoSmart Site.
11. demonstrate and/or promote the Software with the Printer, and other related
or similar products, at all trade shows attended by Distributor during the
Term.
12. include Stamps.com in discussions regarding integration of the Software
into Distributor's Smart Label Printer software program.
14
<PAGE>
EXHIBIT B
STANDARD SOFTWARE LICENSE AGREEMENT
-----------------------------------
STAMPS.COM, INC. END-USER SOFTWARE LICENSE AGREEMENT FOR STAMPS.COM INTERNET
POSTAGE SINGLE-USER VERSION
IMPORTANT: READ CAREFULLY
BEFORE OPENING THE SEALED ENVELOPE
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY MATERIAL,
THE USE OF WHICH IS SUBJECT TO THIS END-USER SOFTWARE LICENSE AGREEMENT. OPENING
THE SEALED ENVELOPE CONSTITUTES YOUR AND (IF APPLICABLE) YOUR COMPANY'S ASSENT
TO AND ACCEPTANCE OF THIS END-USER SOFTWARE LICENSE AGREEMENT (THE "LICENSE" OR
"AGREEMENT"). IF YOU DO NOT AGREE WITH ALL OF THE TERMS, YOU MUST NOT USE THIS
PRODUCT. WRITTEN APPROVAL IS NOT A PREREQUISITE TO THE VALIDITY OR
---
ENFORCEABILITY OF THIS AGREEMENT, AND NO SOLICITATION OF SUCH WRITTEN APPROVAL
BY OR ON BEHALF OF STAMPS.COM, INC. ("STAMPS.COM") SHALL BE CONSTRUED AS AN
INFERENCE TO THE CONTRARY. IF THESE TERMS ARE CONSIDERED AN OFFER BY STAMPS.COM,
ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
LICENSE AND WARRANTY:
The Software which accompanies this License (the "Software") is the property of
Stamps.com, and is protected by state, federal, and international copyright law.
Although Stamps.com continues to own the Software, you will have certain rights
to use the Software after your acceptance of this License. Except as may be
modified by a license addendum which accompanies this License, your rights and
obligations with respect to the use of this Software are as follows:
1. YOU MAY:
A. Use only one copy of any version of the Software contained on the enclosed
CD-ROM or floppy disk or downloaded from the Internet or any other online source
on a single computer;
B. Install the Software from its original distribution medium onto another
computer so long as any other copies of the Software are deleted or otherwise
made irreversibly inoperative;
C. Make one copy of the Software for archival purposes; and
D. Distribute unmodified and unregistered copies of the Software on the
original distribution medium for non-commercial use.
2. YOU MAY NOT:
A. Use the Software to purchase or print evidence of United States postage
until and unless you have been issued a Postal Meter License by the United
States Postal Service;
B. Sublicense, rent or lease any portion of the Software;
C. Reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative works
from the Software;
15
<PAGE>
D. Copy or move any version of the Software after it has been installed and/or
registered to another computer;
E. Use the Software to commit or attempt to commit any form of fraud against
or engage in any form of criminal activity involving the United States Postal
Service or related agencies and organizations;
F. Authorize or allow other persons or entities to use the Software unless
such persons are members of your immediate family or household;
G. Make known or allow to be made known information relating to Software
serial numbers, accounts, passwords, device identification numbers, or any other
information that could reveal or jeopardize the integrity of your Stamps.com
account; or
H. Install or use the Software on a computer located outside the United States
of America or its territories and possessions.
3. Warranty
Stamps.com warrants that the tangible media on which the Software is distributed
will be free from defects sixty (60) days from the date of delivery of the
Software to you. Your sole remedy in the event of a breach of this warranty will
be that Stamps.com will, at its option, replace any defective media returned to
Stamps.com within the warranty period. Stamps.com does not warrant that the
Software will not meet your requirements or that operation of the Software will
be uninterrupted or that the Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR
REPRESENTATION AS TO (1) THE ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE
VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999
THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES,
TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (2) WHETHER ANY OR ALL DATA
FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF
INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
THIS ABOVE WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS,
WHICH VARY FROM STATE TO STATE.
4. Disclaimer of Damages
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL STAMPS.COM BE LIABLE TO YOU FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST
DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF STAMPS.COM
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES. SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
16
<PAGE>
IN NO CASE SHALL STAMPS.COM 'S LIABILITY EXCEED THE PURCHASE PRICE FOR THE
SOFTWARE. The disclaimers and limitations set forth above will apply regardless
of whether you accept the Software.
5. U.S. Government Restricted Rights:
If your company is an agency of the United States government, as defined in FAR
section 2.101, DFAR section 252.227-7014(a)(1) and DFAR section 252.227-
7014(a)(5) or otherwise, all software and accompanying documentation provided in
connection with this Agreement are "commercial items," "commercial computer
software," and/or "commercial computer software documentation." Consistent with
DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, disclosure or distribution thereof
by or for the United States government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement.
USE, DUPLICATION, OR DISCLOSURE BY THE UNITED STATES GOVERNMENT IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN SUBPARAGRAPH (C) (1) (II) OF THE RIGHTS IN
TECHNICAL DATA AND COMPUTER SOFTWARE CLAUSE AT DFARS 252.227-7013 OR
SUBPARAGRAPHS (C) (1) AND (2) OF THE COMMERCIAL COMPUTER SOFTWARE RESTRICTED
RIGHTS CLAUSE AT 48 CFR 52.227-19, AS APPLICABLE.
6. Export:
You may not export or re-export the Software outside the United States without
Stamps.com's express written consent. In the event such consent is received, you
must comply with the U.S. Foreign Corrupt Practices Act and all export laws,
restrictions, national security controls and regulations of the United States
and other applicable foreign agency or authority. You shall not export or re-
export, or allow the export or re-export of the Software, any component of
Software, or any copy of the Software in violation of any such restrictions,
laws or regulations, or to Cuba, Libya, North Korea, Iran, Iraq, or Rwanda or to
any Group D:1 or E:2 country (or any national of such country) specified in the
then current Supplement No. 1 to Part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
7. General
This Agreement will be governed by the laws of the State of California and any
applicable federal law or Postal Regulations. This Agreement may only be
modified by a license addendum which accompanies this License or by a written
document which has been signed by both you and Stamps.com. Should you have any
questions concerning this Agreement, or if you desire to contact Stamps.com for
any reason, please write:
Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405.
17
<PAGE>
EXHIBIT C
STAMPS.COM'S TRADEMARKS
-----------------------
1. "S" Design
2. "S" Design with "Internet Postage"
3. "StampFX"
4. "stamps.com"
5. "Stamps for Home"
6. "Stamps for Office"
7. "Stamps for Networks"
8. "Stamps2000"
9. "Essurance"
10. "Postage Service"
*Free Postage Logo and trademark to be provided by Stamps.com
18
<PAGE>
EXHIBIT D
SOFTWARE PROGRAMS
-----------------
11. USPS approved Stamps.com software
19
<PAGE>
EXHIBIT 10.22
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is made as of this 30th day of
March, 1999 (the "Effective Date"), by and between Stamps.com, Inc., a Delaware
corporation with its principal place of business at 2900 31st Street, Suite 150,
Santa Monica, California 90405, ("Stamps.com") and Avery Dennison Office
Products Company, a Nevada corporation having its principal place of business at
50 Pointe Drive, Brea, California 92821 (the "Distributor").
RECITALS
WHEREAS, Stamps.com develops and publishes software which enables end-users
to purchase postage stamps electronically through Stamps.com's network system;
and
WHEREAS, pursuant to the terms and conditions of this Agreement, Stamps.com
desires to appoint Distributor as an independent contractor to distribute such
software via distributor's World Wide Web site ("Web Site") or bundled with
distributor's software products and Distributor desires to provide such
distribution services.
NOW THEREFORE, in consideration of the mutual promises contained herein and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the meanings set
forth in this Article 1:
"Agreement" has the meaning given to that term in the preamble to this
---------
Agreement.
"Stamps.com" has the meaning given to that term in the preamble to this
----------
Agreement.
"Business Day" means any weekday, Monday through Friday, excluding national
------------
holidays.
"Confidential Information" has the meaning given to that term in Section
------------------------
7.4 of this Agreement.
"Customers" means end-user licensees of Software.
---------
"Disclosing Party" has the meaning given to this term in Section 7.4.
----------------
"Distributor" has the meaning given to that term in the preamble of this
-----------
Agreement.
"Disputes" has the meaning given to that term in Section 16.4(i)
--------
"Documentation" means the user manuals and other documentation provided by
-------------
Stamps.com for use with Software. Unless expressly excluded, the term "Software"
as used herein shall include the applicable Documentation.
"Effective Date" has the meaning given to that term in the preamble of this
--------------
Agreement.
"Exceptions" has the meaning given to that term in Section 10.
----------
"Excess Warranty" has the meaning given to this term in Section 11.
---------------
1
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"Logo Program" has the meaning given to this term in Section 5.8.
------------
"Materials" has the meaning given to this term in Section 7.1.
---------
"OEM" means original equipment manufacturer.
---
"Receiving Party" has the meaning given to this term in Section 7.4
---------------
"Service Fee Revenues" has the meaning given to this term in Section 5.2.
--------------------
"Software" means (i) the object code version of Stamps.com's software
--------
programs listed in Exhibit D, and (ii) the object code version of any updates,
modifications or revisions to such computer programs provided to Distributor
pursuant to the terms of this Agreement.
"Software License Agreement" means the agreement provided in Exhibit B.
--------------------------
"Term" has the meaning given to that term in Section 15.1.
----
"Trademarks" means all then-current names, marks and designations used by
----------
Stamps.com.
"Warranty Period" has the meaning given to that term in Section 8.1.
---------------
2. APPOINTMENT OF DISTRIBUTOR.
--------------------------
2.1 Grant to Distributor. Subject to all the terms and conditions of this
--------------------
Agreement and the limitations set forth below, Stamps.com hereby grants and
Distributor hereby accepts, a non-transferable, non-exclusive right to market
and distribute copies of Software solely to Customers in the United States and
Canada. Notwithstanding Stamps.com's grant to Distributor of the right to market
and distribute copies of Software in Canada, Distributor acknowledges and agrees
that Software is not capable of providing Canadian postage and Distributor shall
not represent to any Customer or prospective Customer that Software may be used
for such purpose. Copies of Software are licensed for distribution and not sold.
Distributor shall not appoint, hire or otherwise engage subdealers to market or
distribute Software without the express written consent of Stamps.com.
2.2 Software License. Subject to all the terms and conditions of this
-----------------
Agreement, Stamps.com hereby grants a non-exclusive, non-transferable, royalty-
free, sub-licensable and fully-paid-up license to Distributor, for so long as
this Agreement remains in effect, to use, reproduce and copy all Software and to
provide and make available to Customers, copies of all Software; provided that
the user of all such copies provided or made available to Customers shall be
subject to the terms of the applicable Software License Agreement between each
such Customer and Stamps.com. The foregoing license is provided by Stamps.com to
Distributor free of charge.
2.3 Title and Ownership. Distributor hereby acknowledges that all right,
-------------------
title and interest in and to Software shall at all times remain that of
Stamps.com, including all rights in the nature of copyright, patent, trade
secret and other intellectual property and proprietary rights with respect to
Software. Distributor shall have no right, title, or interest therein, and
Distributor is not authorized to grant any right or license with respect thereto
except as expressly set forth in, and permitted under, this Agreement.
2
<PAGE>
3. DISTRIBUTOR'S OBLIGATIONS GENERALLY.
-----------------------------------
3.1 Distribution of Software. Distributor shall use its best efforts to
------------------------
distribute Software to Customers pursuant to the provisions set forth in Exhibit
A.
3.2 Copying/Reverse Engineering. In no event shall Distributor use, market
---------------------------
or distribute Software other than as provided herein. Distributor agrees not to
(i) disassemble, decompile or otherwise reverse engineer Software or otherwise
attempt to learn the source code, structure, algorithms or ideas underlying
Software, (ii) take any action contrary to Stamps.com's Software License
Agreement, except as expressly and unambiguously allowed under this Agreement,
(iii) alter or modify Software, (iv) attempt to disable any security devices or
codes incorporated in Software, or (v) allow or assist others to do any of the
foregoing.
3.3 Software Package; Software License Agreement. Subject to Exhibit A,
--------------------------------------------
Distributor shall ensure that each copy of Software distributed by or through
Distributor to Customers shall include all components of such Software as
prepackaged by Stamps.com, including, without limitation, (i) pursuant to 3.3 of
Exhibit A hereto, diskettes or other media bearing labels, (ii) Stamps.com's end
user manuals and Documentation, Stamps.com's Software License Agreement, and
(iii) at the option of Stamps.com, advertising and promotional materials
supplied by Stamps.com. The parties to each Software License Agreement shall be
Stamps.com and the Customer. The terms of the Software License Agreement shall
be subject to change by Stamps.com, at its sole discretion, upon reasonable
notice to Distributor. Stamps.com shall have the right to add to or to
discontinue Software (hereinafter referred to as "Existing Software") after
providing Distributor with written notice of such addition or discontinuance.
Following receipt of such written notice, Distributor shall promptly cease
bundling Existing Software with Distributor's software product(s) and, if
Stamps.com requests Distributor to do so, shall cease distributing Distributor's
inventories of Existing Software as soon as reasonably possible following
Distributor's receipt of Stamps.com's request. Stamps.com shall reimburse
Distributor for the cost to Distributor of all bundles of the Existing Software
and Distributor's software product(s) that remain in Distributor's inventory at
the time that Distributor ceases distribution of such bundled software in
response to Stamps.com's request; provided, however, that Distributor shall use
commercially reasonable efforts to salvage and reuse all reusable components of
such bundled software, such as packaging and software media.
3.4 Third Party Infringement. Distributor shall notify Stamps.com
------------------------
promptly of any infringement of which Distributor becomes aware of any
copyrights, Trademarks, or other intellectual property or proprietary rights
relating to any Software. Stamps.com may, in its sole discretion, take or not
take whatever action it believes is appropriate in connection with any such
infringement. If Stamps.com elects to take any such action, Distributor agrees
to provide to Stamps.com all reasonable cooperation, at Stamps.com's expense, in
connection therewith. If Stamps.com initiates and prosecutes any action with
respect to infringement of any copyrights, Trademarks, or other proprietary
rights relating to any Software, Stamps.com shall be entitled to retain all
amounts (including court costs and attorneys' fees) awarded by way of judgment,
settlement, or compromise with respect thereto.
3.5 Export Control. Distributor shall not export or re-export any
--------------
Software outside the United States without Stamps.com's express written consent.
In the event such consent is received Distributor shall comply with the U.S.
Foreign Corrupt Practices Act and all export laws, restrictions, national
security controls and regulations of the United States and other applicable
foreign agency or authority, and shall not export or re-export, or allow the
export or re-export of Software, any component of Software, any other product or
Confidential Information or any copy or direct product of any of the foregoing
in violation of any such restrictions, laws or regulations, or to Cuba, Libya,
North Korea, Iran, Iraq, or Rwanda or to any Group D:1 or E:2 country (or any
national of such country) specified in the
3
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then current Supplement No. I to Part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
4. DELIVERY TO DISTRIBUTOR.
-----------------------
4.1 Delivery. Stamps.com shall deliver a master copy of all Software to
--------
Distributor in a format which shall enable Distributor to provide copies thereof
to Customers. Stamps.com shall provide sufficient copies of all Documentation to
Distributor to allow Distributor to include such Documentation to Customers with
Software.
5. PRICES, PAYMENTS, AND PAYMENT TERMS.
-----------------------------------
5.1 Distributor's Prices to Customers. Distributor shall provide or make
---------------------------------
available copies of Software free of charge to Customers and shall not charge
any fee or other consideration in connection with the delivery or distribution
of such copies.
5.2 Revenue Sharing. As full consideration for its services hereunder,
---------------
Stamps.com shall pay Distributor a quarterly fee equal to [***]/./ of all
---
Service Fee Revenues received by Stamps.com attributable to purchases by
Customers using Software; provided that, if any such Customer previously
-------------
obtained any Software from any person other than Distributor, the Service Fee
Revenues attributable to purchases by such Customer shall not be included for
purposes of determining Distributor's quarterly fee. All quarterly fees payable
by Stamps.com to Distributor shall be paid within forty-five (45) days after the
end of the quarter in which Stamps.com receives the Service Fee Revenues from
which such fees are derived. As used herein, the term "Service Fee Revenues"
shall mean all service fees received by Stamps.com from purchases of postage by
Customers and shall specifically exclude (a) the cost of the postage that is
purchased and (b) any taxes with respect thereto.
5.3 Advertising of Software. Distributor hereby agrees to advertise,
-----------------------
market, sell and distribute Software solely as provided in Exhibit A. In its
distribution efforts, Distributor will use the Trademarks, but shall not
represent or imply that it is Stamps.com or is a part of Stamps.com; provided
--------
that all advertisements and promotional materials, packaging and anything else
- ----
bearing a Trademark shall identify Stamps.com as the Trademark owner and
Software manufacturer; provided further that any use of the Trademarks shall be
----------------
governed by Section 8.3.
5.4 Marketing Materials. Stamps.com agrees to provide to Distributor, at
-------------------
no cost to Distributor, such promotional materials for Software in camera ready
or electronic format as Starrips.com. generally makes available to its resellers
and distributors, including technical specifications, prices, drawings, and
advertisements. Distributor may reproduce such promotional materials as
reasonably required in connection with its promotional, advertising and/or
marketing activities in connection with Software, provided that all copyright,
-------------
trademark and other property markings of Stamps.com are reproduced. Such
promotional materials, including all copies and reproductions made by
Distributor, remain the property of Stamps.com and, except insofar as they are
distributed by Distributor in the course
____________________
. [***]Confidential treatment has been requested for the bracketed
portions. The confidential portion has been omitted and filed separately with
the Securiti es and Exchange Commission.
4
<PAGE>
of its performance of its duties under this Agreement, must be promptly returned
to Stamps.com upon the expiration or termination of this Agreement. Distributor
may develop its own promotional materials for Software, provided that
-------------
Distributor shall submit any such promotional materials to Stamps.com for
Stamps.com's review, and Stamps.com shall have the right to approve or reject
any such promotional materials in Stamps.com's sole discretion.
5.5 Web Sites. Each party shall be solely responsible for the development
---------
operation, and maintenance of its Web site and for all materials that appear on
its Web site, including without limitation, (i) the technical operation of its
Web site and all related equipment, (ii) the accuracy and appropriateness of
materials posted on its Web site, and (iii) ensuring that materials posted on
its Web site do not violate any law, rule, or regulation, or infringe upon the
rights of any third party and are not defamatory, obscene or otherwise illegal.
Each party disclaims all liability for all such matters with respect to the
other's Web site.
5.6 Advertising and Public Relations. Distributor may advertise Software
--------------------------------
in appropriate periodicals and in a manner insuring proper and adequate
publicity for Software. Each time Distributor places any such advertising in any
periodical, Distributor shall provide Stamps.com with notice (pursuant to
Section 16.7 below) that Distributor has done so, specifying the name and date
of the applicable periodical. Distributor may engage in public relations
activities to encourage the publication, of articles and other publications
regarding Software.
5.7 Announcements. Each party shall obtain the other party's prior
-------------
written approval of all press releases that such party issues with respect to
this Agreement and the transactions contemplated by this Agreement.
5.8 Logo Program. During the Term, upon mutual agreement of the parties,
------------
Distributor shall participate in a promotional logo program ("Logo Program") as
follows: Distributor shall be entitled to offer free postage to Customers for a
period of up to twelve months from the Effective Date; provided that, (i) the
amount of free postage to be given to any Customer shall not exceed Ten Dollars
($10), (ii) Stamps.com, shall be entitled to immediately terminate the Logo
Program at its sole discretion, (iii) Customers shall not be entitled to receive
free postage until they have made an initial purchase of postage from
Stamps.com, (iv) Customers shall not be entitled to receive free postage if they
have previously obtained Software (whether from Distributor or another person),
(v) Distributor and Stamps.com shall mutually agree on one or more logos which
Distributor shall display on all of its packaging for Software bundled with
Distributor's software product(s) and marketing materials with respect to such
bundled Software which are generally seen by Customers, including but not
limited to external packaging and Web sites, and (vi) Distributor shall not
alter any such logos and shall display such logos in strict compliance with the
parties' agreement with respect to size, color, location and any other relevant
criteria with respect to such logos. The logos used in the Logo Program shall be
deemed Trademarks for all purposes of this Agreement, including the license
granted by Stamps.com in Section 7. If Stamps.com wishes to have adhesive
"burst" logos externally applied to any packaging for Software bundled with
Distributor's software product(s), Stamps.com shall supply such adhesive "burst"
logos to Distributor.
6. INSTALLATION AND SUPPORT.
------------------------
Stamps.com shall be solely responsible for providing Customers with
installation, maintenance and technical integration support with respect to
Stamps.com Software. Distributor shall use all reasonable efforts to notify
Stamps.com as soon as reasonably possible of Distributor's receipt of any
Customer request for support or assistance with respect to Software.
7. PROTECTION OF PROPRIETARY RIGHTS.
--------------------------------
5
<PAGE>
7.1 Acknowledgment of Proprietary Materials. Distributor hereby
---------------------------------------
acknowledges that all Software, Documentation and technical support and training
materials provided to Distributor by Stamps.com (collectively, the "Materials")
are protected by the copyright laws of the United States and other countries and
that the Materials embody valuable confidential and trade secret information of
Stamps.com, the development of which required the expenditure of considerable
time and money by Stamps.com.
7.2 Proprietary Markings. Distributor hereby agrees to ensure that all
--------------------
copyright, trademark and other proprietary notices of Stamps.com affixed to or
displayed on Software and Documentation will not be removed, obscured or
modified by Distributor.
7.3 Stamps.com Trademarks. Distributor acknowledges that Stamps.com is
---------------------
the owner of all right, title and interest in and to all the Trademarks set
forth in Exhibit C, together with any new or revised names, designs or
designations that Stamps.com may adopt to identify it or any Software during the
Term, and Distributor agrees not to adopt or use any of such Trademarks in any
manner whatsoever except as expressly provided in this Agreement.
Stamps.com hereby grants Distributor a license during the Term to use the
Trademarks, provided that (i) they are used solely in connection with the
-------------
marketing and distribution of Software and in accordance with Stamps.com's
specifications as to style, color and typeface set forth in Exhibit C (ii) such
use shall be subject to prior written approval of Stamps.com, which approval
shall not be unreasonably withheld, and, (iii) no other right to use any name or
designation is granted by this Agreement. Upon expiration or termination of this
Agreement, Distributor will take all action necessary to transfer and assign to
Stamps.com, or its nominee, any right, title or interest in or to any of the
Trademarks, and the goodwill related thereto, which Distributor may have
acquired in any manner as a result of the marketing and distribution of Software
under this Agreement, and Distributor shall cease using any Trademark.
Distributor hereby agrees to notify Stamps.com, immediately upon Distributor
gaining knowledge of any infringement or potential infringement of any
Trademark.
Distributor agrees not to apply for registration of any Trademarks anywhere
in the world or for any mark confusingly similar thereto. Distributor also
agrees not to use or contest, during or after the term of this Agreement, any
Trademark, name, mark or designation used by Stamps.com anywhere in the world
(or any name, mark or designation confusingly similar thereto). Distributor
acknowledges and agrees that all use of the Trademarks by Distributor shall
inure to the benefit of Stamps.com.
7.4 Confidential Information. Each party (the "Receiving Party") hereby
------------------------
agrees to hold any information, materials and data made available to the
Receiving Party by the other party hereto (the "Disclosing Party") that the
Receiving Party should reasonably understand to be confidential (collectively,
"Confidential Information") in confidence and not to use, copy, or disclose, or
permit any of its personnel to use, copy, or disclose the Disclosing Party's
Confidential Information for any purpose that is not specifically authorized
herein. For the purposes of this Section 7.4, the terms and conditions of this
Agreement and the Materials shall be deemed Confidential Information.
8. WARRANTY.
--------
8.1 Limited Warranty of Performance. Stamps.com. warrants to Distributor
-------------------------------
that all Software will, under normal use, conform to the limited warranty
contained in the Software License Agreement applicable to such Software during
the warranty period set forth in such Agreement (the "Warranty Period"). The
foregoing warranty will apply only to the most current version of Software
issued by
6
<PAGE>
Stamps.com from time to time. Stamps.com assumes no responsibility for claims
resulting from the distribution of superseded, outdated, or uncorrected versions
of Software.
8.2 Exclusive Remedy. If a Customer contacts Stamps.com during the
----------------
Warranty Period claiming a breach of the warranty set forth in the then-current
Software License Agreement provided by Distributor to that Customer, Stamps.com
will use reasonable efforts to resolve the claim directly with such Customer by
correcting or replacing such Software. If a Customer contacts Distributor during
the Warranty Period claiming any such breach of warranty, Distributor shall
promptly refer the matter to Stamps.com. DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY
IN THE EVENT OF ANY SUCH CLAIM, IF VERIFIED, IS EXPRESSLY LIMITED TO
STAMPS.COM'S REASONABLE EFFORTS TO CORRECT OR REPLACE SUCH DEFECTIVE SOFTWARE
AND/OR DOCUMENTATION AT STAMPS.COM'S SOLE EXPENSE.
8.3 Disclaimer. No representation or other affirmation of fact not set
----------
forth herein, including, without limitation, statements regarding capacity,
compliance, suitability for use, or performance of any Software, shall be or be
deemed to be a warranty or representation by Stamps.com for any purpose, or give
rise to any liability or obligation of Stamps.com whatsoever. EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES EXPRESS
OR IMPLIED INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE, AND NON-
INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR REPRESENTATION AS TO (Y) THE
ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE VALUES, INCLUDING BUT NOT
LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999 THROUGH AND BEYOND JANUARY
1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES, TO OPERATE IN ACCORDANCE
WITH THE DOCUMENTATION, OR (Z) WHETHER ANY OR ALL DATA FIELDS FOR CALENDAR DATE
VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF INDICATING CENTURY AND
MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
9. LIMITATION OF LIABILITY; INJUNCTIVE RELIEF.
-------------------------------------------
9.1 No Consequential Damages; Limitation of Liability. IN NO EVENT SHALL
-------------------------------------------------
EITHER PARTY BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT FOR
LOSS OF PROFITS, COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR
INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR DAMAGES UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY.
EXCEPT WITH RESPECT TO A BREACH OF SECTION 7.4 AND DISTRIBUTOR'S INDEMNIFICATION
OBLIGATIONS UNDER SECTION 11 BELOW, THE LIABILITY OF EITHER PARTY FOR ANY CLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL NOT EXCEED THE AMOUNT
PAID BY STAMPS.COM TO DISTRIBUTOR WITH RESPECT TO THE SPECIFIC ITEMS OF SOFTWARE
GIVING RISE TO SUCH CLAIM.
9.2 Injunctive Relief. Each party acknowledges that any breach of its
-----------------
obligations under this Agreement with respect to the proprietary rights or
Confidential Information of the other party will cause the other party
irreparable injury for which there are inadequate remedies at law and, therefor,
that such other party shall be entitled to injunctive relief, without the
posting of any bond, in addition to all other remedies provided by this
Agreement or available at law or in equity.
10. STAMPS.COM'S INDEMNITY.
----------------------
7
<PAGE>
If notified promptly in writing of any action (and all prior claims
relating to such action) against Distributor based on a claim that, or arising
from, (i) Distributor's distribution and/or use of Software infringes a third
party's copyright or trademark or misappropriates a third party's trade secret
(if given access by Distributor to any information Distributor has regarding
such alleged infringement), (ii) Stamps.com's material breach of this Agreement
gross negligence or willful misconduct, or (iii) Stamps.com's failure to comply
with applicable state, federal, and local laws and regulations, industry
standards or rules of professional conduct, including, without limitation, those
applicable to product claims, labeling, approvals, registrations and
notifications, the Internic, the Internet Assigned Numbers Authority and
Internet community standards, Stamps.com. agrees to defend and hold harmless
Distributor in such action at its expense and will pay any costs or damages
finally awarded against Distributor in any such action; provided that,
Stamps.com shall have had sole control of the defense of any such action and all
negotiations for its settlement or compromise. In the event that Stamps.com
reasonably believes that any Software infringes a copyright or trademark or
misappropriates a trade secret, Stamps.com may, at its option and at its
expense, either procure for Distributor the right to continue using any
Software, modify the same so it becomes non-infringing or allow the Distributor
to terminate this Agreement pursuant to Section 16.2(ii). Stamps.com shall not
have any liability to Distributor under any provision of this clause if any
infringement, or claim thereof, is based upon: (i) the use of Software in
combination with other computer hardware or software programs that Stamps.com
has not approved for use with such Software, (ii) Software that has been
modified by Distributor, (iii) Distributor's use of Software beyond the scope of
the license granted to it by Stamps.com hereunder and otherwise for any purpose
for which Software was not intended to be used; or (iv) Distributor's failure to
use commercially reasonable efforts to cease reproducing, bundling and/or
distributing Software following Distributor's receipt from Stamps.com of notice
of infringement or misappropriation. Distributor shall indemnify Stamps.com and
hold it harmless against any expense, judgment or loss for infringement of any
patent or other intellectual property right which results from the exceptions
set forth in the immediately preceding sentence of this Section 11
(collectively, "Exceptions"). No costs or expenses shall be incurred for the
account of Stamps.com without the prior written consent of Stamps.com. THE
FOREGOING STATES THE ENTIRE LIABILITY OF STAMPS.COM WITH RESPECT TO INFRINGEMENT
OF PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY ANY
SOFTWARE, OR ANY PART THEREOF, OR BY ITS OPERATION.
11. DISTRIBUTOR'S INDEMNITY.
-----------------------
Provided that Distributor is notified promptly and in writing of such claim
(and all prior related claims), Distributor shall indemnify Stamps.com and hold
Stamps.com harmless from and against any judgment, damage, liability, or
expenses, including reasonable attorney's fees, arising out of any claim against
Stamps.com arising from (i) infringement of any patent or other intellectual
property right which results from the Exceptions; (ii) Distributor's grant of a
warranty to any Customer exceeding the limited warranty set forth in Section 9.1
of this Agreement (an "Excess Warranty"), (iii) Distributor's material breach of
this Agreement, (iv) Distributor's gross negligence or willful misconduct, (v)
Distributor's failure to comply with applicable state, federal, and local laws
and regulations, industry standards or rules of professional conduct, including,
without limitation, those applicable to product claims, labeling, approvals,
registrations and notifications, the Internic, the Internet Assigned Numbers
Authority and Internet community standards; or (vi) Distributor's addition to
any copy of Software of any product claim, label, instructions, packaging, or
the like, without Stamps.com's prior written consent. Notwithstanding any
provision to the contrary contained in this Agreement, Distributor shall have
sole control of the defense of any such action and all negotiations for its
settlement or compromise; and no cost or expense shall be incurred for the
account of Distributor without Distributor's prior written consent.
12. REPORTS AND RECORDS.
-------------------
8
<PAGE>
12.1 Distributor's Reports. Distributor shall keep complete records
---------------------
concerning all copies of Software shipped to or downloaded by, Customers, as the
case may be. Within fifteen (15) Business Days of the close of each quarter
during the Term, Distributor shall complete and forward to Stamps.com a report
containing a summary setting forth the number of copies of Software provided to,
or downloaded by, Customers, as the case may be.
12.2 Stamps.com's Reports. Stamps.com is responsible for providing
--------------------
revenue share data on registrations received from the Avery registration code.
Stamps.com agrees to maintain copies of all documentation relating to Service
Fee Revenues from Avery's accounts or Customers' downloads of software
distributed by Distributor hereunder. Within fifteen (15) days after the end of
each month, Stamps.com shall provide a report to Distributor setting forth such
Service Fee Revenues.
13. RELATIONSHIP OF PARTIES.
-----------------------
Distributor is an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as a partner, joint
venturer, co-owner, employee, or agent of the other party, and neither party
shall hold itself out as such. Neither party has any right or authority to
incur, assume or create, in writing or otherwise, any warranty, liability or
other obligation of any kind, express or implied, in the name of or on behalf of
the other party, it being intended by both Distributor and Stamps.com that each
shall remain an independent contractor responsible for its own actions.
14. ASSIGNMENT.
----------
Neither party shall assign, transfer or otherwise dispose of this Agreement
in whole or in part to any individual, corporation or other entity without the
prior written consent of the other party, which shall not be unreasonably
withheld or delayed. By way of example, but not of limitation, a party may
reasonably withhold its written consent to any assignment, transfer or other
disposition of this Agreement to any individual, corporation or other entity
that is a competitor of, or would lead to a conflict of interest with, the party
withholding consent.
15. TERM OF AGREEMENT; TERMINATION.
------------------------------
15.1 Term. This Agreement shall be effective as of the Effective Date and
----
shall have an initial term that commences on the Effective Date and expires on
December 31, 1999. This Agreement shall automatically renew for subsequent terms
of one (1) year, unless either party gives the other party notice of its
intention not to renew this Agreement at least thirty (30) days prior to the
expiration of the then-current term.
15.2 Events of Termination.
---------------------
(i) Bankruptcy/Reorganization. Either party may terminate this
-------------------------
Agreement immediately upon written notice to the other party if the other party
becomes insolvent, seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, proceedings
in bankruptcy or insolvency are instituted against the other party, or a
receiver is appointed, or if any substantial part of the other party's assets is
the object of attachment sequestration or other type of comparable proceeding,
and such proceeding is not vacated or terminated within thirty (30) days after
its commencement or institution.
(ii) Default. Either party may terminate this Agreement if the other
-------
party commits a material breach of any of the material terms or provisions of
this Agreement and does not cure such breach within thirty (30) days after
receipt of written notice given by the other party. Notwithstanding the
9
<PAGE>
foregoing, Stamps.com may immediately terminate this Agreement in the event that
Stamps.com reasonably determines that Distributor has breached its obligations
under Section 2.1, 3.2. 8.3 or 8.4.
15.3 Termination Due to the United States Postal Service. Stamps.com may
---------------------------------------------------
terminate this Agreement upon written notice to Distributor if the United States
Postal Service ("USPS") (i) does not approve the Software, or (ii) determines
that the Software may not be used to print postage onto labels because such use
of labels fails to meet the USPS's specifications.
15.4 Rights Upon Termination. Upon termination of this Agreement by
-----------------------
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any moneys due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under Sections 2.3, 3.2, 3.3, 3.7, 8.1, 8.3 (first and third paragraphs only),
8.4, 9.2, 9.3, 10.1, 10.2, 11, 12, 13.1, 13.2, 14, 15, 16.4, 16.5, and 17.1 -
17.9. Without limiting the foregoing, upon termination of this Agreement, all
licenses granted to Distributor hereunder shall terminate and each party shall
remove any links from its Web site to the other party's Web site.
15.5 Licenses. Existing Licenses. Either party may terminate this
---------------------------
Agreement immediately if it or the other party is unable to obtain or renew any
permit, license or other governmental approval necessary to carry on the
business contemplated under this Agreement. All Software License Agreements in
effect as of the date of termination or expiration of this Agreement shall
survive such termination or expiration and continue in effect until terminated
in accordance with their terms.
16. MISCELLANEOUS.
-------------
16.1 Force Majeure. If the performance of any obligation (other than
-------------
payment and confidentiality obligations) under this Agreement is prevented,
restricted or interfered with by reason of war, revolution, civil commotion,
acts of public enemies, blockade, embargo, strikes, outage of the Internet, law,
order, proclamation, regulation, ordinance, demand, or requirement having a
legal effect of any government or any judicial authority or representative of
any such government, or any other act whatsoever, whether similar or dissimilar
to those referred to in this Section 16.1, which is beyond the reasonable
control of the party affected, then the party so affected shall, upon giving
prior written notice to the other party, be excused from such performance to the
extent of such prevention, restriction, or interference, provided that the party
so affected shall use reasonable commercial efforts to avoid or remove such
causes of nonperformance, and shall continue performance hereunder with
reasonable dispatch whenever such causes are removed. The parties agree and
acknowledge that the foregoing shall include Stamps.com's failure to obtain any
necessary governmental approval required in connection with the use of any
Software, including without limitation any postal service approval.
16.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all previous negotiations, agreements
and commitments with respect thereto, and shall not be released, discharged,
changed or modified in any manner except by instruments signed by duly
authorized officers or representatives of each of the parties hereto. No course
of prior dealing between the parties and no usage of the trade shall be relevant
to supplement or explain any term used herein. Acceptance or acquiescence in a
course of performance rendered hereunder shall not be relevant to determine the
meaning of these terms and conditions even though the accepting or acquiescing
party has knowledge of the performance and opportunity for objection.
16.3 Applicable Law. Any claim or controversy relating in any way to this
--------------
Agreement shall be governed and interpreted exclusively in accordance with the
laws of the State of California and the United States without regard to the
United Nations Convention on Contracts for the International Sale of
10
<PAGE>
Goods. This Agreement shall be deemed to have been made in, and shall be
construed under, the internal laws of the State of California, without regard to
the principles of conflicts of laws thereof and the United Nations Convention on
Contracts for the International Sale of Goods. Any mediation under Section
17.4(iii) below shall be conducted in Los Angeles County, California. In
addition, Stamps.com and Distributor acknowledge and agree that the courts
located in such county shall have exclusive jurisdiction in any action or
proceedings with respect to this Agreement, including the federal district
courts located in such county.
16.4 Dispute Resolution. All disputes arising in connection with this
------------------
Agreement shall be resolved as follows:
(i) General Intent. Stamps.com and Distributor intend that all
--------------
problems and disputes relating to this Agreement or arising from the
transactions contemplated hereby ("Disputes") shall be resolved through the
procedures of this Section; provided, however that neither party shall be under
-----------------
any obligation to proceed in accordance with this Section with respect to
Disputes concerning any alleged breach of Section 2.3, 3.2, 8.1, 8.2, 8.3 or 8.4
of this Agreement, as to which a party may take any legal action in a court of
law or equity (without the necessity of posting any bond) to assert or enforce a
claim that it has against the other party under this Agreement. The procedures
in this Section shall not replace or supersede any other remedy to which a party
is entitled under this Agreement or under applicable law.
(ii) Informal Resolution Efforts. Stamps.com and Distributor
---------------------------
initially shall attempt to resolve Disputes through informal negotiations
conducted by the president or any vice president of Stamps.com and the president
or any vice president or authorized representative of Distributor.
(iii) Mediation. If a Dispute cannot be resolved under subsection
---------
(ii) above, the Dispute shall be submitted to mediation by written notice of the
party seeking mediation to the other party. In the mediation process, Stamps.com
and Distributor shall attempt in good faith to resolve their differences
voluntarily with the aid of an impartial mediator, who will attempt to
facilitate negotiations. The mediator shall be selected by mutual agreement of
Stamps.com and Distributor. If Stamps.com and Distributor cannot agree on a
mediator, the American Arbitration Association or JAMS/Endispute shall designate
a mediator at the request of either party. Any mediator so designated must be
acceptable to both parties. The mediation shall be confidential, and the
mediator may not testify for either party in any later proceeding relating to
the Dispute. Each party shall bear its own costs in the mediation. The fees and
expenses of the mediator shall be shared equally by the parties.
(iv) Court Actions. If Stamps.com and Distributor cannot resolve a
-------------
Dispute through mediation pursuant to Section above, either party may seek
further redress by taking legal action in a court of law or equity to assert or
enforce a claim that it has against the other party under this Agreement.
16.5 Partial Illegality. If any provision of this Agreement or the
------------------
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, the remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event, the
parties shall use their best efforts to replace the invalid or unenforceable
provisions by a provision that, to the extent permitted by the applicable law,
achieves the purposes intended under the invalid or unenforceable provision. Any
deviation by either party from the terms and provisions of this Agreement to the
limited extent necessary to comply with applicable laws, rules or regulations
shall not be considered a breach of this Agreement.
16.6 Waiver of Compliance. Any failure by any party hereto to enforce at
--------------------
any time any term or condition under this Agreement shall not be considered a
waiver of that party's right thereafter to enforce each and every item and
condition of this Agreement.
11
<PAGE>
16.7 Notices. All notices and other communications in connection with
-------
this Agreement shall be in writing and shall be sent to the respective parties
at addresses set forth below in this Section or to such other addresses as may
be designated by the parties in writing from time to time in accordance with
this Section by registered or certified air mail, postage prepaid, or by express
courier service, service fee prepaid, or by telefax with a hard copy to follow
via air mail or express courier service in accordance with this Section. All
notices shall be deemed received (i) if given by hand, immediately, (ii) if
given by air mail, five (5) business days after posting, (iii) if given by
express courier service, three (3) business days after delivery to courier
service, or (iv) if given by telefax, upon receipt thereof by the recipient's
telefax machine as indicated either in the sendees identification line produced
by the recipient's telefax machine or in the sender's transmission confirmation
report as produced electronically by the sender's telefax machine.
To Stamps.com: Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
Attention: President
Facsimile: (310) 450-7337
With a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce R. Hallett, Esq.
Facsimile: (949) 790-6301
To Distributor: Avery Dennison
50 Pointe Drive
Brea, CA 92821
Attention: Jill Karrenbrock
With a copy to: Mary Freeman, Esq.
50 Pointe Drive
Brea, CA 92821
16.8 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duty authorized representative as of the Effective Date.
STAMPS.COM, INC.
By:_________________________________
Name: John M. Payne
Title: President/CEO
DISTRIBUTOR:
AVERY DENNISON OFFICE PRODUCTS COMPANY
By:_________________________________
Name: David W. Freeman
Title: VP/GM Automation Products
13
<PAGE>
EXHIBIT A
DISTRIBUTION OBLIGATIONS
------------------------
Distributor's obligations in connection with its distribution rights under the
Agreement are as follows:
1. Distributor shall promote and make the Stamps.com Software available as the
exclusive Internet Postage Software for download from the Software Section
of the Avery Office Products World Wide Web ("Web") Site (the
Avery.com/software uniform resource locator ("URL") address) in which
prospective Customers may download various software products
2. Distributor shall provide Stamps.com with preferred positioning and logo
placement in the Avery Software Alliance Section of the Avery Office
Products World Wide Web Site as compared to any other vendor of PC
software, approved by the USPS through which prospective end users may
download postage.
3. From the Effective Date through December 31, 1999, the Software shall be
the exclusive Internet Postage Software that Distributor distributes
through the following methods:
3.1. via downloading by prospective Customers from the Software Section of
the Avery Office Products Web Site;
3.2. automated download capabilities through the installation process of
all (downloaded) Label Pro and Avery Wizard software products;
provided that Stamps.com, provides the necessary resources to
Distributor to enable such capabilities; and
3.3. inclusion in a bundle with all Distributor Label Pro software products
sold by Distributor in the retail and commercial distribution
channels.
4. Distributor shall promote Stamps.com's "Free Postage" logo on the external
packaging of all Distributor Label Pro products with which the Software is
bundled pursuant to Section 3.3 above, in accordance with the logo usage
guidelines to be provided under separate cover by Stamps.com from time to
time during the Term.
5. As soon as reasonably possible after the Effective Date, Distributor shall
provide and maintain a hypertext link to Stamps.com's World Wide Web site
(the "Stamps.com Site") located as of the Effective Date at the universal
resource locator ("URL") address www.Stamps.com from the Software Alliance
Section of the Avery Office Products World Wide Web Site.
6. At Stamps.com cost and expense, Distributor will provide Stamps.com the
right to direct market the Software to selected registered Label Pro and
Wizard users. Distributor shall not grant similar rights to any other
Internet postage software provider during the term of this Agreement.
Distributor shall at all times maintain control over, and have the right to
regulate in its sole discretion Stamps.com's access to, Distributor's
customer lists. The promotion, which must be a joint promotion, must be
approved by and executed through Distributor, and Stamps.com acknowledges
that it will not have direct access to the identity of registered Label Pro
and Wizard users.
7. During the term hereof Distributor shall not enter into any agreement with
any other vendor of PC software approved by the USPS, through which
prospective end users may download postage, to include or promote such
software products with Avery SKU numbers 5160, 5163, or both.
8. If Stamps.com purchases label "starter kits" from Distributor for direct
sale or promotion to consumers, Distributor will negotiate the pricing on
such starter kits in good faith with
<PAGE>
Stamps.com and will offer Stamps.com preferential pricing on such starter
kits. However, if Stamps.com does not purchase the "starter kits" then
Distributor will pay a transaction fee to be negotiated in good faith with
Stamps.com for such sales by Stamps.com to consumers. Upon completion of
the parties' negotiations with respect to such preferential pricing and/or
transaction fee, the parties shall amend this Exhibit A to set forth herein
such preferential pricing and/or transaction fee.
Stamps.com's obligations with respect to this Agreement are as follows:
- -----------------------------------------------------------------------
1. Within thirty (30) days of the date on which Stamps.com receives approval
of the Software from the USPS, Stamps.com shall provide to Distributor a
master diskette from which Distributor may copy the Software for
distribution.
2. In order to assist Distributor with the fulfillment of its obligations
under Section 3.2 of this Exhibit A, Stamps.com will provide at no charge
the necessary resources to integrate Stamps.com Internet Postage software
into the Label Pro main installation splash screen and the installation
software that Distributor maintains at the Distributor Site.
3. Stamps.com agrees to explore in good faith the inclusion of Distributor in
promotional and bundling arrangements with partners of Stamps.com, among
others, Gateway 2000, Inc. and Dell Computer Corporation.
4. Distributor's branded Laser and Inkjet labels shall be the sole labels that
Stamps.com promotes and supports in all label settings and/or preferences
dialogs in Stamps.com's Software. Stamps.com grants Distributor a first-
right-of-refusal, subject to USPS approval, to produce and supply
additional mailing-related PC laser and inkjet specialty media products
Stamps.com plans to market during the term hereof, excluding envelope
products. At any time during the Term, if Distributor does not produce an
Internet postage-related laser or inkjet specialty media product, excluding
envelope products, that meets the then current needs of Stamps.com,
Stamps.com shall have the right to market products of third-party vendors
that fulfill Stamps.com's needs, until such time as Distributor begins to
produce product that meets such needs. Distributor acknowledges and agrees
that Stamps.com can provide no guarantees as to whether Customers will use
Distributor's products described above.
5. As soon as reasonably possible after the Effective Date, Stamps.com shall
provide and maintain a hypertext link to Avery Software Web Site located as
of the Effective Date at the universal resource locator ("URL") address
www.Avery.com. from Software Alliance Section of the Avery Office Products
Worldwide Web Site.
6. Stamps.com shall use commercially reasonable efforts to make accessible to
end users through the "help" files included in the Software from time to
time and on Stamps.com's Software support site on the World Wide Web
Distributor's recommended practices and procedures with respect to the
printing of labels on inkjet and laserjet printers.
<PAGE>
EXHIBIT B
STANDARD SOFTWARE LICENSE AGREEMENT
-----------------------------------
STAMPS.COM, INC. END-USER SOFTWARE LICENSE AGREEMENT FOR STAMPS.COM INTERNET
POSTAGE SINGLE-USER VERSION
IMPORTANT: READ CAREFULLY
BEFORE OPENING THE SEALED ENVELOPE
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY MATERIAL,
THE USE OF WHICH IS SUBJECT TO THIS END-USER SOFTWARE LICENSE AGREEMENT. OPENING
THE SEALED ENVELOPE CONSTITUTES YOUR AND (IF APPLICABLE) YOUR COMPANY'S ASSENT
TO AND ACCEPTANCE OF THIS END-USER SOFTWARE LICENSE AGREEMENT (THE "LICENSE" OR
"AGREEMENT"). IF YOU DO NOT AGREE WITH ALL OF THE TERMS, YOU MUST NOT USE THIS
PRODUCT. WRITTEN APPROVAL IS NOT A PREREQUISITE TO THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT, AND NO SOLICITATION OF SUCH WRITTEN APPROVAL
BY OR ON BEHALF OF STAMPS.COM, INC. ("STAMPS.COM") SHALL BE CONSTRUED AS AN
INFERENCE TO THE CONTRARY. IF THESE TERMS ARE CONSIDERED AN OFFER BY STAMPS.COM,
ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
LICENSE AND WARRANTY:
The Software which accompanies this License (the "Software") is the property of
Stamps.com, and is protected by state, federal, and international copyright law.
Although Stamps.com continues to own the Software, you will have certain rights
to use the Software after your acceptance of this License. Except as may be
modified by a license addendum which accompanies this License, your rights and
obligations with respect to the use of this Software are as follows:
1. YOU MAY:
A. Use only one copy of any version of the Software contained on the enclosed
CD-ROM or floppy disk or downloaded from the Internet or any other online source
on a single computer;
B. Install the Software from its original distribution medium onto another
computer so long as any other copies of the Software are deleted or otherwise
made irreversibly inoperative;
C. Make one copy of the Software for archival purposes; and
D. Distribute unmodified and unregistered copies of the Software on the
original distribution medium for non-commercial use.
2. YOU MAY NOT:
A. Use the Software to purchase or print evidence of United States postage
until and unless you have been issued a Postal Meter License by the United
States Postal Service;
B. Sublicense, rent or lease any portion of the Software;
C. Reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative works
from the Software;
<PAGE>
D. Copy or move any version of the Software after it has been installed and/or
registered to another computer;
E. Use the Software to commit or attempt to commit any form of fraud against or
engage in any form of criminal activity involving the United States Postal
Service or related agencies and organizations;
F. Authorize or allow other persons or entities to use the Software unless such
persons are members of your immediate family or household;
G. Make known or allow to be made known information relating to Software serial
numbers, accounts, passwords, device identification numbers, or any other
information that could reveal or jeopardize the integrity of your Stamps.com
account; or
H. Install or use the Software on a computer located outside the United States
of America or its territories and possessions.
3. Warranty
Stamps.com warrants that the tangible media on which the Software is distributed
will be free from defects sixty (60) days from the date of delivery of the
Software to you. Your sole remedy in the event of a breach of this warranty
will be that Stamps.com will, at its option, replace any defective media
returned to Stamps.com within the warranty period. Stamps.com does not warrant
that the Software will not meet your requirements or that operation of the
Software will be uninterrupted or that the Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR
REPRESENTATION AS TO (1) THE ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE
VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999
THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES,
TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (2) WHETHER ANY OR ALL DATA
FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF
INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
THIS ABOVE WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS,
WHICH VARY FROM STATE TO STATE.
4. Disclaimer of Damages
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL STAMPS.COM BE LIABLE TO YOU FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST
DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF STAMPS.COM
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES. SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
<PAGE>
IN NO CASE SHALL STAMPS.COM'S LIABILITY EXCEED THE PURCHASE PRICE FOR THE
SOFTWARE. The disclaimers and limitations set forth above will apply regardless
of whether you accept the Software.
5. U.S. Government Restricted Rights:
If your company is an agency of the United States government, as defined in FAR
section 2.101, DFAR section 252.227-7014(a)(1) and DFAR section 252.227-
7014(a)(5) or otherwise, all software and accompanying documentation provided in
connection with this Agreement are "commercial items," "commercial computer
software," and/or "commercial computer software documentation." Consistent with
DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, disclosure or distribution thereof
by or for the United States government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement.
USE, DUPLICATION, OR DISCLOSURE BY THE UNITED STATES GOVERNMENT IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN SUBPARAGRAPH (C)(1)(II) OF THE RIGHTS IN TECHNICAL
DATA AND COMPUTER SOFTWARE CLAUSE AT DFARS 252.227-7013 OR SUBPARAGRAPHS (C)(1)
AND (2) OF THE COMMERCIAL COMPUTER SOFTWARE RESTRICTED RIGHTS CLAUSE AT 48 CFR
52.227-19, AS APPLICABLE.
6. Export:
You may not export or re-export the Software outside the United States without
Stamps.com's express written consent. In the event such consent is received,
you must comply with the U.S. Foreign Corrupt Practices Act and all export laws,
restrictions, national security controls and regulations of the United States
and other applicable foreign agency or authority. You shall not export or re-
export, or allow the export or re-export of the Software, any component of
Software, or any copy of the Software in violation of any such restrictions,
laws or regulations, or to Cuba, Libya, North Korea, Iran, Iraq, or Rwanda or to
any Group D:1 or E:2 country (or any national of such country) specified in the
then current Supplement No. 1 to part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
7. General.
This Agreement will be governed by the laws of the State of California and any
applicable federal law or Postal Regulations. This Agreement may only be
modified by a license addendum which accompanies this License or by a written
document which has been signed by both you and Stamps.com. Should you have any
questions concerning this Agreement, or if you desire to contact Stamps.com for
any reason, please write:
Stamps.com, Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
<PAGE>
EXHIBIT C
STAMPS.COM'S TRADEMARKS
-----------------------
1. "S" Design
2. "S" Design with "Internet Postage"
3. "StampFX"
4. "stamps.com"
5. "Stamps for Home"
6. "Stamps for Office"
7. "Stamps for Networks"
8. "Stamps2000"
9. "Essurance"
* "Free Postage" logo and trademark to be provided by Stamps.com
<PAGE>
EXHIBIT D
SOFTWARE PROGRAMS
-----------------
1. USPS approved Stamps.com software
<PAGE>
EXHIBIT 10.23
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is made as of this 11th day of
March, 1999 (the "Effective Date"), by and between Stamps.com Inc., a Delaware
corporation, with its principal place of business at 2900 31st Street, Suite
150, Santa Monica, California 90405 ("Stamps.com") and Dymo-CoStar Corporation,
a Delaware corporation, with its principal place of business at 599 West Putnam
Ave., Greenwich, CT 06830-6092 (the "Distributor").
RECITALS
WHEREAS, Stamps.com develops and publishes software which enables end-users
to purchase postage electronically through Stamps.com's network system; and
WHEREAS, pursuant to the terms and conditions of this Agreement Stamps.com
desires to appoint Distributor as an independent contractor to distribute such
software and Distributor desires to provide such distribution services.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the meanings set
forth in this Article 1:
"Agreement" has the meaning given to that term in the preamble to this
---------
Agreement.
"Stamps.com" has the meaning given to that term in the preamble to this
----------
Agreement.
"Business Day" means any weekday, Monday through Friday, excluding national
------------
holidays.
"Confidential Information" has the meaning given to that term in Section
------------------------
8.4 of this Agreement.
"Customers" means end-user licensees of Software.
---------
"Distributor" has the meaning given to that term in the preamble of this
-----------
Agreement.
"Disputes" has the meaning given to that term in Section 17.4(i).
--------
"Documentation" means the user manuals and other documentation provided by
-------------
Stamps.com for use with Software. Unless expressly excluded, the term "Software"
as used herein shall include the applicable Documentation.
"Effective Date" has the meaning given to that term in the preamble of this
--------------
Agreement.
"Exceptions" has the meaning given to that term in Section 11.
----------
"Excess Warranty" has the meaning given to this term in Section 12.
---------------
"Logo Program" has the meaning given to this term in Section 6.7.
------------
1
<PAGE>
"Materials" has the meaning given to this term in Section 8.1.
---------
"OEM" means original equipment manufacturer.
---
"Service Fee Revenues" has the meaning given to this term in Section 5.2.
--------------------
"Software" means (i) the object code version of Stamps.com's software
--------
programs listed in Exhibit D, and (ii) the object code version of any updates,
modifications or revisions to such computer programs provided to Distributor
pursuant to the terms of this Agreement.
"Software License Agreement" means the agreement provided in Exhibit B.
--------------------------
"Term" has the meaning given to that term in Section 16.1.
----
"Trademarks" means all then-current names, marks and designations used by
----------
Stamps.com.
"Warranty Period" has the meaning given to that term in Section 9.1.
---------------
2. APPOINTMENT OF DISTRIBUTOR.
---------------------------
2.1 Grant to Distributor. Subject to all the term and conditions of
--------------------
this Agreement and the limitations set forth below, Stamps.com hereby grants and
Distributor hereby accepts, a non-transferable, non-exclusive right to market
and distribute copies of Software solely to Customers in the United States.
Copies of Software are licensed for distribution and not sold. Distributor shall
not appoint, hire or otherwise engage subdealers to market or distribute
Software without the express written consent of Stamps.com.
2.2 Software License. Subject to all the terms and conditions of this
----------------
Agreement, Stamps.com hereby grants a non-exclusive, nontransferable, royalty-
free, sub-licensable and fully-paid-up license to Distributor, for so long as
this Agreement remains in effect, to use, reproduce and copy all Software and to
provide and make available to Customers, copies of all Software; provided that
the user of all such copies provided or made available to Customers shall be
subject to the terms of the applicable Software License Agreement between each
such Customer and Stamps.com. The foregoing license is provided by Stamps.com to
Distributor free of charge.
2.3 Title and Ownership. Distributor hereby acknowledges that all right,
-------------------
title and interest in and to Software shall at all times remain that of
Stamps.com, including all rights in the nature of copyright, patent, trade-
secret and other intellectual property and proprietary rights with respect to
Software. Distributor shall have no right, title, or interest therein, and
Distributor is not authorized to grant any right or license with respect thereto
except as expressly set forth in, and permitted under, this Agreement.
3. DISTRIBUTOR'S OBLIGATIONS GENERALLY.
-----------------------------------
3.1 Distribution of Software. Distributor shall use its best efforts to
------------------------
distribute Software to Customers pursuant to the provisions set forth in Exhibit
A.
3.2 Copying/Reverse Engineering. In no event shall Distributor use,
---------------------------
market or distribute Software other than as provided herein. Distributor agrees
not to (i) disassemble, decompile or otherwise reverse engineer Software or
otherwise attempt to learn the source code, structure, algorithms or ideas
underlying Software, (ii) take any action contrary to Stamps.com's Software
License Agreement, except as expressly and unambiguously allowed under this
Agreement, (iii) alter or modify Software, (iv)
2
<PAGE>
attempt to disable any security devices or codes incorporated in Software, or
(v) allow or assist others to do any of the foregoing.
3.3 Distributor's Procurement of USPS Approval. Distributor must obtain
------------------------------------------
final US Postal Service ("USPS") certification and approval on or prior to one
hundred and twenty (120) days from the Effective Date for all products in which
it plans to include Stamps.com Software. Such certification must be evidenced
in writing from the USPS to Distributor or such other appropriate proof of
certification acceptable to Stamps.com.
3.4 Software Package; Software License Agreement. Subject to Exhibit A,
--------------------------------------------
Distributor shall ensure that each copy of Software distributed by or through
Distributor to Customers shall include all components of such Software as
prepackaged by Stamps.com, including, without limitation, (i) diskettes or other
media bearing labels, (ii) Stamps.com's end user manuals and Documentation,
Stamps.com's Software License Agreement, and (iii) at the option of Stamps.com,
advertising and promotional materials supplied by Stamps.com. The parties to
each Software License Agreement shall be Stamps.com and the Customer. The terms
of the Software License Agreement shall be subject to change by Stamps.com, at
its sole discretion, upon reasonable notice to Distributor. Stamps.com shall
have the right to add to or discontinue any or all Software, but only upon
thirty (30) days' prior written notice to Distributor.
3.5 Third Party Infringement. Distributor shall notify Stamps.com promptly
------------------------
of any infringement of any copyrights, Trademarks, or other intellectual
property or proprietary rights relating to any Software. Stamps.com may, in its
sole discretion, take or not take whatever action it believes is appropriate in
connection with any such infringement. If Stamps.com elects to take any such
action, Distributor agrees to fully cooperate in connection therewith. If
Stamps.com initiates and prosecutes any action with respect to infringement of
any copyrights, Trademarks, or other proprietary rights relating to any
Software, Stamps.com shall be entitled to retain all amounts (including court
costs and attorneys' fees) awarded by way of judgment, settlement, or compromise
with respect thereto.
3.6 Compliance. Distributor shall ascertain and comply with all applicable
----------
state, federal and local laws and regulations and standards of industry or
professional conduct, including, without limitation, those applicable to product
claims, labeling, approvals, registrations and notifications, the Internic, the
Internet Assigned Numbers Authority and Internet community standards, and shall
also obtain Stamps.com's prior written consent before adding any product claim,
label, instructions, packaging or the like to any copy of Software.
3.7 Export Control. Distributor shall not export or re-export any Software
--------------
outside the United States without Stamps.com's express written consent. In the
event such consent is received, Distributor shall comply with the U.S. Foreign
Corrupt Practices Act and all export laws, restrictions, national security
controls and regulations of the United States and other applicable foreign
agency or authority, and shall not export or re-export, or allow the export or
re-export of Software, any component of Software, any other product or
Confidential Information or any copy or direct product of any of the foregoing
in violation of any such restrictions, laws or regulations, or to Cuba, Libya,
North Korea, Iran, Iraq, or Rwanda or to any Group D:1 or E:2 country (or any
national of such country) specified in the then current Supplement No. 1 to Part
740, or, in violation of the embargo provisions in Part 746, of the U.S. Export
Administration Regulations (or any successor regulations or supplement), except
in compliance with and with all licenses and approvals required under applicable
export laws and regulations, including without limitation, those of the U.S.
Department of Commerce.
4. DELIVERY TO DISTRIBUTOR.
-----------------------
3
<PAGE>
4.1 Delivery. Stamps.com shall deliver a master copy of all Software to
--------
Distributor in a format which shall enable Distributor to provide copies thereof
to Customers. Stamps.com shall provide sufficient copies of all Documentation to
Distributor to allow Distributor to include such Documentation to Customers with
Software pursuant to Distributor's obligations as set forth in Exhibit A.
5. PRICES, PAYMENTS, AND PAYMENT TERMS.
-----------------------------------
5.1 Distributor's Prices to Customers. Distributor shall provide or make
---------------------------------
available copies of Software free of charge to Customers and shall not charge
any fee or other consideration in connection with the delivery or distribution
of such copies.
5.2 Revenue Sharing. As full consideration for its services hereunder,
---------------
Stamps.com shall pay Distributor a quarterly fee equal to [***]. of all
---
Service Fee Revenues received by Stamps.com attributable to purchases by
Customers using Software; provided that, if any such Customer previously
-------- ----
obtained any Software from any person other than Distributor, the Service Fee
Revenues attributable to purchases by such Customer shall not be included for
purposes of determining Distributor's quarterly fee. All quarterly fees payable
by Stamps.com to Distributor shall be paid within forty-five (45) days after the
end of the quarter in which Stamps.com receives the Service Fee Revenues from
which such fees are derived. As used herein, the term "Service Fee Revenues"
shall mean all service fees received by Stamps.com from purchases of postage by
Customers and shall specifically exclude (a) the cost of the postage that is
purchased and (b) any taxes with respect thereto.
6. MARKETING AND ADVERTISING.
-------------------------
6.1 Distributor's General Undertaking, Representation, and Warranty.
---------------------------------------------------------------
Distributor represents, warrants, and covenants to Stamps.com that all
advertising and marketing materials relating to Software and/or Stamps.com that
are developed by Distributor shall be accurate in all respects.
6.2 Distribution of Software. Distributor hereby agrees to advertise,
------------------------
market, sell and distribute Software solely as provided in Exhibit A. In its
distribution efforts, Distributor will use the Trademarks, but shall not
represent or imply that it is Stamps.com or is a part of Stamps.com; provided
--------
that all advertisements and promotional materials, packaging and anything else
- ----
bearing a Trademark shall identify Stamps.com as the Trademark owner and
Software manufacturer; provided further that any use of the Trademarks shall be
-------- -------
governed by Section 8.3.
6.3 Marketing Materials. Stamps.com agrees to provide to Distributor, at
-------------------
no cost to Distributor, such promotional materials for Software in camera ready
or electronic format as Stamps.com generally makes available to its resellers
and distributors, including technical specifications, prices, drawings, and
advertisements. Distributor may reproduce such promotional materials as
reasonably required in connection with its promotional, advertising and/or
marketing activities in connection with Software, provided that all copyright,
-------- ----
trademark and other property markings of Stamps.com are reproduced. Such
promotional materials, including all copies and reproductions made by
Distributor, remain the property of Stamps.com and, except insofar as they are
distributed by Distributor in the course of its performance of its duties under
this Agreement must be promptly returned to Stamps.com upon the expiration or
____________________
[***] Confidential treatment has been requested for the bracketed portions.
The confidential portion has been omitted and filed separately with the
Securities and Exchange Commission.
4
<PAGE>
termination of this Agreement. Distributor may develop its own promotional
materials for Software, provided that Distributor shall submit any such
-------- ----
promotional materials to Stamps.com for Stamps.com's review, and Stamps.com
shaft have the right to approve or reject any such promotional materials in
Stamps.com's sole discretion.
6.4 Web Sites.
---------
(i) Hypertext Links. If Distributor has a World Wide Web site
---------------
("Web site"), Distributor shall establish a hypertext link to Stamps.com's Web
site within thirty (30) days of the Effective Date. With respect to each
hypertext link linking users of Distributor's Web site to Stamps.com's Web site,
Distributor shall not alter the look, feel, or functionality of Stamps.com's Web
site and shall not act to prevent the look and feel of Stamps.com's Web site
(including, without limitation, page format, navigational bars, colors, fonts,
Stamps.com's trademarks, all hyperlinks appearing on Stamps.com's Web site or,
in general, the overall design of Stamps.com's Web site) from being displayed.
(ii) Responsibilities. Each party shall be solely responsible for
----------------
the development, operation, and maintenance of its Web site and for all
materials that appear on its Web site, including without limitation, (i) the
technical operation of its Web site and all related equipment, (ii) the accuracy
and appropriateness of materials posted on its Web site, and (iii) ensuring that
materials posted on its Web site do not violate any law, rule, or regulation, or
infringe upon the rights of any third party and are not defamatory, obscene or
otherwise illegal. Each party disclaims all liability for all such matters with
respect to the other's Web site.
6.5 Advertising and Public Relations. Distributor may advertise Software
--------------------------------
in appropriate periodicals and in a manner insuring proper and adequate
publicity for Software. Each time Distributor places any such advertising in any
periodical, Distributor shall provide Stamps.com with notice (pursuant to
Section 17.8 below) that Distributor has done so, specifying the name and date
of the applicable periodical. Distributor shall engage in public relations
activities to encourage the publication of articles and other publications
regarding Software.
6.6 Announcements. Within thirty (30) days following the Effective date,
-------------
Stamps.com and Distributor shall jointly issue a press release announcing
Distributor's appointment under this Agreement. Thereafter, each party shall
obtain the other party's prior written approval of all press releases that such
party issues with respect to this Agreement and the transactions contemplated by
this Agreement. Distributor also shall obtain Stamps.com's prior written
approval of all other press releases that Distributor issues with respect to
Software.
6.7 Logo Program. During the Term, upon mutual agreement of the Parties,
------------
Distributor shall participate in a promotional logo program ("Logo Program") as
follows: Distributor shall be entitled to offer free postage to Customers for a
period of up to twelve months from the Effective Date; provided that, (a) the
amount of free postage to be given to any Customer shall not exceed ten dollars
($10), (b) Stamps.com shall be entitled to immediately terminate the Logo
Program at its sole discretion, (c) Customers shall not be entitled to receive
free postage until they have made an initial purchase of postage from
Stamps.com, (d) Customers shall not be entitled to receive free postage if they
have previously obtained Software (whether from Distributor or another person),
(e) Distributor and Stamps.com shall mutually agree on one or more logos which
Distributor shall display on all of its packaging and marketing materials which
are generally seen by Customers, including but not limited to external packaging
and Web sites, and (f) Distributor shall not alter any such logos and shall
display such logos in strict compliance with the parties' agreement with respect
to size, color, location and any other relevant criteria
5
<PAGE>
with respect to such logos. The logos used in die Logo Program shall be deemed
Trademarks for all purposes of this Agreement, including the license granted by
Stamps.com in Section 8.3.
7. INSTALLATION AND SUPPORT.
------------------------
Stamps.com shall be solely responsible for providing Customers with
installation, maintenance and technical integration support with respect to
Software. Distributor shall notify Stamps.com as soon as possible, and within no
more than twenty-four (24) hours or one (1) Business Day, whichever period is
longer, of Distributor's receipt of any Customer request for support or
assistance with respect to Software.
8. PROTECTION OF PROPRIETARY RIGHTS.
--------------------------------
8.1 Acknowledgment of Proprietary Materials. Distributor hereby
---------------------------------------
acknowledges that all Software, Documentation and technical support and training
materials provided to Distributor by Stamps.com (collectively, the "Materials")
are protected by the copyright laws of the United States and other countries and
that the Materials embody valuable confidential and trade secret information of
Stamps.com, the development of which required the expenditure of considerable
time and money by Stamps.com.
8.2 Proprietary Markings. Distributor hereby agrees to ensure that all
--------------------
copyright trademark and other proprietary notices of Stamps.com affixed to or
displayed on Software and Documentation will not be removed, obscured or
modified by Distributor.
8.3 Stamps.com Trademarks. Distributor acknowledges that Stamps.com is the
---------------------
owner of all right, title and interest in and to all the Trademarks set forth in
Exhibit C, together with any new or revised names, designs or designations that
Stamps.com may adopt to identify it or any Software during the Term, and
Distributor agrees not to adopt or use any of such Trademarks in any manner
whatsoever except as expressly provided in this Agreement.
Stamps.com hereby grants Distributor a license during the Term to use
the Trademarks, provided that (i) they are used solely in connection with the
-------- ----
marketing and distribution of Software and in accordance with Stamps.com's
specifications as to style, color and typeface set forth in Exhibit C, (ii) such
use shall be subject to prior written approval of Stamps.com, which approval
shall not be unreasonably withheld, and, (iii) no other right to use any name or
designation is granted by this Agreement. Upon expiration or termination of
this Agreement, Distributor will take all action necessary to transfer and
assign to Stamps.com, or its nominee, any right, title or interest in or to any
of the Trademarks, and the goodwill related thereto, which Distributor may have
acquired in any manner as a result of the marketing and distribution of Software
under this Agreement, and Distributor shall cease using any Trademark.
Distributor hereby agrees to notify Stamps.com immediately upon Distributor
gaining knowledge of any infringement or potential infringement of any
Trademark.
Distributor agrees not to apply for registration of any Trademarks
anywhere in the world or for any mark confusingly similar thereto. Stamps.com
may elect to apply for registration of one or more of the Trademarks anywhere in
the world at its expense, and, in such event, Stamps.com shall so notify
Distributor and Distributor shall assist and cooperate with Stamps.com in
connection therewith. Distributor also agrees not to use or contest, during or
after the term of this Agreement, any Trademark, name, mark or designation used
by Stamps.com anywhere in the world (or any name, mark or designation similar
thereto). Distributor acknowledges and agrees that all use of the Trademarks by
Distributor shall inure to the benefit of Stamps.com.
6
<PAGE>
8.4 Confidential Information. Distributor hereby agrees to hold any
------------------------
information, materials and data made available to it by Stamps.com that
reasonably should be understood to be confidential (collectively, "Confidential
Information"), in confidence and agrees not to use, copy, or disclose, or permit
any of its personnel to use, copy, or disclose the same for any purpose that is
not specifically authorized herein. For the purposes of this Section 8.4, the
terms and conditions of this Agreement and the Materials are Confidential
Information of Stamps.com.
9. WARRANTY.
--------
9.1 Limited Warranty of Performance. Stamps.com warrants to Distributor
-------------------------------
that all Software will, under normal use, conform to the limited warranty
contained in the Software License Agreement applicable to such Software during
the warranty period set forth in such Agreement (the "Warranty Period"). The
foregoing warranty will apply only to the most current version of Software
issued by Stamps.com from time to time. Stamps.com assumes no responsibility for
claims resulting from the distribution of superseded, outdated, or uncorrected
versions of Software.
9.2 Exclusive Remedy. If a Customer contacts Stamps.com during the
----------------
Warranty Period claiming a breach of the warranty set forth in the then-current
Software License Agreement provided by Distributor to that Customer, Stamps.com
will use reasonable efforts to resolve the claim directly with such Customer by
correcting or replacing such Software. If a Customer contacts Distributor during
the Warranty Period claiming any such breach of warranty, Distributor shall
promptly refer the matter to Stamps.com. DISTRIBUTOR'S SOLE AND EXCLUSIVE REMEDY
IN THE EVENT OF ANY SUCH CLAIM, IF VERIFIED, IS EXPRESSLY LIMITED TO
STAMPS.COM'S REASONABLE EFFORTS TO CORRECT OR REPLACE SUCH DEFECTIVE SOFTWARE
AND/OR DOCUMENTATION AT STAMPS.COM'S SOLE EXPENSE.
9.3 Disclaimer. No representation or other affirmation of fact not set
----------
forth herein, including, without limitation, statements regarding capacity,
compliance, suitability for use, or performance of any Software, shall be or be
deemed to be a warranty or representation by Stamps.com for any purpose, or give
rise to any liability or obligation of Stamps.com whatsoever. The Software has
been designed to record, store, process and calculate and present calendar dates
falling on or after January 1, 2000, and is designed to calculate any
information dependent on or relating to such dates in the same manner and with
the same functionality, data integrity and performance as the Software records,
stores, processes, calculates and presents calendar dates on or before December
31, 1999, or calculates and presents any information dependent on or relating to
such dates. In addition, Stamps.com has no reason to believe that the Software
will lose functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000. NEVERTHELESS, EXCEPT AS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER WARRANTIES EXPRESS OR IMPLIED
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, COMPLIANCE, AND NON-INFRINGEMENT, AND ANY
WARRANTY, GUARANTEE OR REPRESENTATION AS TO (Y) THE ABILITY OF THE SOFTWARE TO
PROCESS CALENDAR DATE VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES
FROM JANUARY 1, 1999 THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH
CALENDAR DATE VALUES, TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (Z)
WHETHER ANY OR ALL DATA FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT
FIELDS CAPABLE OF INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS
CORRECTLY.
7
<PAGE>
10. LIMITATION OF LIABILITY; INJUNCTIVE RELIEF.
------------------------------------------
10.1 No Consequential Damages; Limitation of Liability. IN NO EVENT
-------------------------------------------------
SHALL EITHER PARTY BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT FOR LOSS OF PROFITS, COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, OR INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL OR OTHER SIMILAR
DAMAGES UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY. EXCEPT WITH RESPECT TO A BREACH OF SECTION 8.4 AND
DISTRIBUTOR'S INDEMNIFICATION OBLIGATIONS UNDER SECTION 12 BELOW, THE LIABILITY
OF EITHER PARTY FOR ANY CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT SHALL NOT EXCEED THE AMOUNT PAID BY STAMPS.COM TO DISTRIBUTOR WITH
RESPECT TO THE SPECIFIC ITEMS OF SOFTWARE GIVING RISE TO SUCH CLAIM.
10.2 Injunctive Relief. Distributor acknowledges that any breach of
-----------------
its obligations under this Agreement with respect to the proprietary rights or
Confidential Information of Stamps.com will cause Stamps.com irreparable injury
for which there are inadequate remedies at law, and therefore Stamps.com will be
entitled to injunctive relief in addition to all other remedies provided by this
Agreement or available at law.
11. DEFENSE OF INTELLECTUAL PROPERTY CLAIMS.
----------------------------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Distributor based on a claim that Distributor's
distribution and/or use of Software infringes a third party's copyright or
trademark or misappropriates a third party's trade secret, and if given access
by Distributor to any information Distributor has regarding such alleged
infringement, Stamps.com agrees to defend and hold harmless Distributor in such
action at its expense and will pay any costs or damages finally awarded against
Distributor in any such action; provided that Stamps.com shall have had sole
-------- ----
control of the defense of any such action and all negotiations for its
settlement or compromise. In the event that Stamps.com reasonably believes that
any Software infringes a copyright or trademark or misappropriates a trade
secret, Stamps.com may, at its option and at its expense, either procure for
Distributor the right to continue using any Software, modify the same so it
becomes non-infringing or allow the Distributor to terminate this Agreement
pursuant to Section 16.2(ii). Stamps.com shall not have any liability to
Distributor under any provision of this clause if any infringement, or claim
thereof, is based upon: (i) the use of Software in combination with other
computer hardware or software program that Stamps.com has not approved for use
with such Software, (ii) Software that has been modified by Distributor, (iii)
Distributor's use of Software beyond the scope of the license granted to it by
Stamps.com hereunder, (iv) Distributor's use after notice of infringement or
misappropriation, or (v) Infringement relating solely to the use of Software but
not the Software itself. Distributor shall indemnify Stamps.com and hold it
harmless against any expense, judgment or loss for infringement of any patent or
other intellectual property right which results from the exceptions set forth in
the immediately preceding sentence of this Section 11 (collectively,
"Exceptions"). No costs or expenses shall be incurred for the account of
Stamps.com without the prior written consent of Stamps.com. THE FOREGOING
STATES THE ENTIRE LIABILITY OF STAMPS.COM WITH RESPECT TO INFRINGEMENT OF
PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY ANY
SOFTWARE, OR ANY PART THEREOF, OR BY ITS OPERATION.
12. DISTRIBUTOR'S INDEMNITY.
-----------------------
If notified promptly in writing of any action (and all prior claims
relating to such action) against Stamps.com based on a claim arising from (i)
infringement of any patent or other intellectual property
8
<PAGE>
right which results from the Exceptions; (ii) Distributor's grant of a warranty
to any Customer exceeding the limited warranty set forth in Section 9.1 of this
Agreement (an "Excess Warranty"), (iii) Distributor's material breach of this
Agreement, or (iv) Distributor's negligence or willful misconduct Distributor
shall indemnify Stamps.com and hold Stamps.com harmless from and against any
judgment, damage, liability, or expenses, including reasonable attorney's fees,
arising out of any claim with respect to the breach or alleged breach of such
Excess Warranty or this Agreement or such negligence or willful misconduct;
provided that Distributor shall have had sole control of the defense of any such
- -------- ----
action and all negotiations for its settlement or compromise; and, provided
--------
further that no cost or expense shall be incurred for the account of Distributor
- -------
without Distributor's prior written consent.
13. REPORTS AND RECORDS.
-------------------
13.1 Reports. Distributor shall keep complete records concerning all
-------
copies of Software provided to, or downloaded by, Customers, as the case may be.
Within ten (10) Business Days of the close of each month during the Term,
Distributor shall complete and forward to Stamps.com a monthly report containing
a summary setting forth the number of copies of Software provided to, or
downloaded by, Customers, as the case may be, and the name and location of the
Customer who was provided with, or downloaded a copy of, Software, as the case
may be.
13.2 Audit. Distributor agrees to maintain copies of all documentation
-----
relating to the distribution of Software under this Agreement. If requested in
writing by Stamps.com, Distributor shall permit Stamps.com and its independent
certified public accountants, subject to a non-disclosure agreement with
Distributor, to have access to such documentation at Distributor's place of
business during ordinary business hours. Distributor agrees to keep for three
(3) years after termination of this Agreement records of all copies of Software
provided to or downloaded by Customers, as the case may be, in each case
sufficient to adequately administer a recall of any Software and to fully
cooperate in any decision by Stamps.com to recall, retrieve and/or replace any
Software. Stamps.com agrees to maintain copies of all documentation relating to
Service Fee Revenues from Customer purchases using Software distributed by
Distributor hereunder. Within fifteen (15) days after the end of each month,
Stamps.com shall provide a report to Distributor setting forth the revenues
received by Stamps.com for such month which are attributable to purchases from
Customers using such Software. If requested in writing by Distributor,
Stamps.com shall permit, at Distributor's sole expense, Distributor and
distributor's independent certified public accountants, subject to a non-
disclosure agreement with Stamps.com, up to once per calendar year, to have
access solely to such documentation as is reasonably necessary for Distributor
and Distributor's accountants to verify the amount of revenues set forth on such
report; provided, in no event shall such access include access to Stamps.com's
servers. For a period of three (3) years after termination of this Agreement,
Stamps.com agrees to keep records of all Customer purchases made pursuant to
Software distributed by Distributor hereunder.
14. RELATIONSHIP OF PARTIES.
-----------------------
Distributor is an independent contractor and nothing contained in this
Agreement shall be construed to constitute either party as a partner, joint
venturer, co-owner, employee, or agent of the other party, and neither party
shall hold itself out as such. Neither party has any right or authority to
incur, assume or create, in writing or otherwise, any warranty, liability or
other obligation of any kind, express or implied, in the name of or on behalf of
the other party, it being intended by both Distributor and Stamps.com that each
shall remain an independent contractor responsible for its own actions.
Distributor agrees to indemnify and hold Stamps.com harmless from and against
any damage or expenses, including reasonable attorney's fees, arising out of
Distributor's breach of the provisions of this Section 14.
9
<PAGE>
15. ASSIGNMENT.
----------
Distributor shall not assign, transfer or otherwise dispose of this
Agreement in whole or in part to any individual, corporation or other entity
without the prior written consent of Stamps.com.
16. TERM OF AGREEMENT; TERMINATION.
------------------------------
16.1 Term. This Agreement shall be effective as of the Effective Date
----
and shall have an initial term that commences on the Effective Date and expires
two (2) years from the Effective Date. Upon the expiration of such term (or any
renewal term), this Agreement shall automatically renew for additional one (1)
year periods unless either party notifies the other party at least sixty (60)
days prior to the applicable renewal date of its intention to not renew the
Agreement (the initial term and any renewal term shall be collectively referred
to as the "Term").
16.2 Events of Termination.
---------------------
(i) Bankruptcy/Reorganization. Either party may terminate this
-------------------------
Agreement immediately upon written notice to the other party if the other party
becomes insolvent, seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding, proceedings
in bankruptcy or insolvency are instituted against the other party, or a
receiver is appointed, or if any substantial part of the other party's assets is
the object of attachment, sequestration or other type of comparable proceeding,
and such proceeding is not vacated or terminated within thirty (30) days after
its commencement or institution.
(ii) Default. Either party may terminate this Agreement if the
-------
other party commits a material breach of any of the material terms or provisions
of this Agreement and does not cure such breach within thirty (30) days after
receipt of written notice given by the other party. Notwithstanding the
foregoing, Stamps.com may immediately terminate this Agreement in the event
Distributor breaches its obligations under Section 2.1, 3.2, 8.3 or 8.4.
(iii) Licenses. Either party may terminate this Agreement
--------
immediately if it or the other party is unable to obtain or renew any permit,
license or other governmental approval necessary to carry on the business
contemplated under this Agreement.
(iv) USPS Certification for Distributor. Stamps.com may
----------------------------------
terminate this Agreement immediately upon written notice to Distributor in the
event Distributor fails to obtain USPS certification in accordance with Section
3.3 of the Agreement.
16.3 Termination for Convenience. Each party shall terminate this
---------------------------
Agreement any time with or without cause upon thirty (30) days' prior written
notice to the other party. In the event Stamps.com terminates this Agreement
pursuant to this Section 16.3, Distributor may not sell any inventory containing
the Software or Stamps.com's logos on or after six (6) months after the
termination date of this Agreement.
16.4 Rights Upon Termination. Upon termination of this Agreement by
-----------------------
expiration of the Term or otherwise, all further rights and obligations of the
parties shall cease, except that the parties shall not be relieved of (i) their
respective obligations to pay any moneys due or which become due as of or
subsequent to the date of termination, and (ii) any other respective obligations
under Sections 2.3, 3.2, 8.1, 8.3 (first and third paragraphs only), 8.4, 9.2,
9.3, 10.1, 10.2, 11, 12, 13.1, 13.2, 14, 15, 16.4, 16.5, and 17.1 - 17.9.
Without limiting the foregoing, upon termination of this Agreement, all licenses
granted
10
<PAGE>
to Distributor hereunder shall terminate and each party shall remove any links
from its Web site to the other party's Web site.
16.5 Existing Licenses. All Software License Agreements in effect as of
-----------------
the date of termination or expiration of this Agreement shall survive such
termination or expiration and continue in effect until terminated in accordance
with their terms.
17. MISCELLANEOUS.
-------------
17.1 Force Majeure. If the performance of any obligation (other than
-------------
payment and confidentiality obligations) under this Agreement is prevented,
restricted or interfered with by reason of war, revolution, civil commotion,
acts of public enemies, blockade, embargo, strikes, outage of the Internet, law,
order, proclamation, regulation, ordinance, demand, or requirement having a
legal effect of any government or any judicial authority or representative of
any such government, or any other act whatsoever, whether similar or dissimilar
to those referred to in this Section 17.1, which is beyond the reasonable
control of the party affected, then the party so affected shall, upon giving
prior written notice to the other party, be excused from such performance to the
extent of such prevention, restriction, or interference, provided that the party
so affected shall use reasonable commercial efforts to avoid or remove such
causes of nonperformance, and shall continue performance hereunder with
reasonable dispatch whenever such causes are removed. The parties agree and
acknowledge that the foregoing shall include Stamps.com's failure to obtain any
necessary governmental approval required in connection with the use of any
Software, including without limitation any postal service approval.
17.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all previous negotiations, agreements
and commitments with respect thereto, and shall not be released, discharged,
changed or modified in any manner except by instruments signed by duly
authorized officers or representatives of each of the parties hereto. No course
of prior dealing between the parties and no usage of the trade shall be relevant
to supplement or explain any term used herein. Acceptance or acquiescence in a
course of performance rendered hereunder shall not be relevant to determine the
meaning of these terms and conditions even though the accepting or acquiescing
party has knowledge of the performance and opportunity for objection.
17.3 Applicable. Any claim or controversy relating in any way to this
----------
Agreement shall be governed and interpreted exclusively in accordance with the
laws of the State of California and the United States without regard to the
United Nations Convention on Contracts for the International Sale of Goods.
This Agreement shall be deemed to have been made in, and shall be construed
under, the internal laws of the State of California, without regard to the
principles of conflicts of laws thereof and the United Nations Convention on
Contracts for the International Sale of Goods. Any mediation under Section
17.4(iii) below shall be conducted in Los Angeles County, California. In
addition, Stamps.com and Distributor acknowledge and agree that the courts
located in such county shall have exclusive jurisdiction in any action or
proceedings with respect to this Agreement, including the federal district
courts located in such county.
17.4 Dispute Resolution. All disputes arising in connection with this
------------------
Agreement shall be resolved as follows:
(i) General Intent. Stamps.com and Distributor intend that all
--------------
problems and disputes relating to this Agreement or arising from the
transactions contemplated hereby ("Disputes") shall be resolved through the
procedures of this Section 17.4; provided, however, that neither party shall be
-------- -------
under any obligation to proceed in accordance with this Section 17.4 with
respect to Disputes concerning any alleged breach of Section 2.3, 3.2, 8.1, 8.2,
8.3 or 8.4 of this Agreement, as to which a party may take any
11
<PAGE>
legal action in a court of law or equity (without the necessity of posting any
bond) to assert or enforce a claim that it has against the other party under
this Agreement. The procedures in this Section 17.4 shall not replace or
supersede any other remedy to which a party is entitled under this Agreement or
under applicable law.
(ii) Informal Resolution Efforts. Stamps.com and Distributor
---------------------------
initially shall attempt to resolve Disputes through informal negotiations
conducted by the president or any vice president of Stamps.com and the president
or any vice president of Distributor.
(iii) Mediation. If a Dispute cannot be resolved under subsection
---------
17.4(ii), the Dispute shall be submitted to mediation by written notice of the
party seeking mediation to the other party. In the mediation process, Stamps.com
and Distributor shall attempt in good faith to resolve their differences
voluntarily with the aid of an impartial mediator, who will attempt to
facilitate negotiations. The mediator shall be selected by mutual agreement of
Stamps.com and Distributor. If Stamps.com and Distributor cannot agree on a
mediator, the American Arbitration Association or JAMS/Endispute shall designate
a mediator at the request of either party. Any mediator so designated must be
acceptable to both parties. The mediation shall be confidential, and the
mediator may not testify for either party in any later proceeding relating to
the Dispute. Each party shall bear its own costs in the mediation. The fees
and expenses of the mediator shall be shared equally by the parties.
(iv) Court Actions. If Stamps.com and Distributor cannot resolve a
-------------
Dispute through mediation pursuant to Section 17.4(iii) above, either party may
seek further redress by taking legal action in a court of law or equity to
assert or enforce a claim that it has against the other party under this
Agreement.
17.5 Statute of Limitations. Any action by the Distributor for breach of
----------------------
these terms and conditions must be commenced within one (1) year after the cause
of action has accrued.
17.6 Partial Illegality. If any provision of this Agreement or the
------------------
application thereof to any party or circumstances shall be declared void,
illegal or unenforceable, die remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event the
parties shall use their best efforts to replace the invalid or unenforceable
provisions by a provision that, to the extent permitted by the applicable law,
achieves the purposes intended under the invalid or unenforceable provision.
Any deviation by either party from the terms and provisions of this Agreement to
the limited extent necessary to comply with applicable laws, rules or
regulations shall not be considered a breach of this Agreement.
17.7 Waiver of Compliance. Any failure by any party hereto to enforce at
--------------------
any time any term or condition under this Agreement shall not be considered a
waiver of that party's right thereafter to enforce each and every item and
condition of this Agreement.
17.8 Notices. All notices and other communications in connection with
-------
this Agreement shall be in writing and shall be sent to the respective parties
at addresses set forth below in this Section 17.8, or to such other addresses as
may be designated by the parties in writing from time to time in accordance with
this Section 17.8, by registered or certified air mail, postage prepaid, or by
express courier service, service fee prepaid, or by telefax with a hard copy to
follow via air mail or express courier service in accordance with this Section
17.8. All notices shall be deemed received (i) if given by hand, immediately,
(ii) if given by air mail, five (5) business days after posting, (iii) if given
by express courier service, three (3) business days after delivery to courier
service, or (iv) if given by telefax, upon receipt thereof by the recipient's
telefax machine as indicated either in the sender's identification line produced
12
<PAGE>
by the recipients telefax machine or in the sender's transmission confirmation
report as produced electronically by the sender's telefax machine.
To Stamps.com: Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
Attention: President
Facsimile: (310) 450-7337
With a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Attention: Bruce R. Hallett, Esq.
Facsimile: (949) 790-6301
To Distributor: Dymo-CoStar Corporation
599 West Putnam Ave.
Greenwich, CT 06830
Attn: President
Facsimile: (203) 661-1540
With a copy to:
John J. O'Connor
Esselte Corporation
71 Clinton Road
Garden City, New York 11530
17.9 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representative as of the Effective
Date.
STAMPS.COM INC.
By:________________________________
Name:______________________________
Title:_____________________________
DISTRIBUTOR:
DYMO-COSTAR CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
13
<PAGE>
EXHIBIT A
DISTRIBUTION OBLIGATIONS
------------------------
Distributor's obligations under the Agreement are as follows:
- ------------------------------------------------------------
1. Distributor must obtain USPS certification for any of distributor's
products bundled with the Software in accordance with Section 3.3 of this
Agreement.
2. Distributor shall promote Stamps.com's "Free Postage" logo (the "Logo") on
all external packaging of distributor products with which the Software is
bundled pursuant to Section 6.7 of this Agreement, and in accordance with
the logo usage guidelines which are mutually agreeable to Distributor and
Stamps.com and which will be provided under separate cover by Stamps.com
from time to time during the Term.
3. Distributor shall advertise the Software and the Logo in periodicals and
other forms of media advertising in which Distributor advertises its
products that are bundled with the Software; provided, however, Distributor
may advertise the Software and the Logo in television commercials at its
sole discretion. Distributor's advertising of the Software and Logo must
comply with Section 6 of this Agreement and the mutually agreeable logo
usage guidelines to be provided under separate cover by Stamps.com from
time to time during the Term.
4. Distributor shall bundle and distribute the Software on all CD-ROMs
packaged with Distributor's LabelWriter printers sold through computer and
office product distribution channels in the USA; provided, however, that
-------- -------
Distributor shall not be required to bundle and distribute the Software on
CD-ROMs packaged with Distributor's LabelWriter printers distributed in
connection with special promotions with other PSPs.
5. Distributor shall promote, market, and provide for the installation of the
Software from the main Co-Star Software Installation Splash Screen/Front
End (the "Splash Screen"), as well as provide Customer's an option dialog
box to install the Software at the end of the Co-Star Software Installation
Process (the "Installation Process") on the Customer's computer or server
if the Customer has chosen not to install the Software from the Splash
Screen.
6. Distributor shall market Stamps.com's free postage offer that is described
in Section 6.7 of the Agreement (the "Free Postage Offer") on all products
offered by Distributor to its existing customer U.S. customer base (subject
to paragraph 3 and 4).
7. Distributor shall provide Stamps.com the right to direct market the
Software, including e-mail and direct mail, to Distributor'' existing U.S.
customers, at least once per calendar quarter during the Term. Distributor
shall at all times maintain control of, and access to, Distributor's list
of registered users. Stamps.com must submit all marketing materials to
Distributor for distribution to its registered users.
8. At all times during which the Agreement remains in effect, Distributor
shall provide and maintain a hypertext link to the Stamps.com World Wide
Web site (the "Stamps.com Site") located from all the pages on
Distributor's World Wide Web site that contain references to Stamps.com
and/or the Software.
9. Distributor shall provide Stamps.com with preferred positioning over other
PSPs and providers of services and products similar to those now or
subsequently provided by Stamps.com of the
A-1
<PAGE>
Stamps.com Logo on the Dymo-CoStar Site and each other page of the Co-Star
Site on which a reference to Stamps.com, the Software, or both appears. The
parties may mutually agree on such preferred positioning on a case-by-case
basis.
10. Distributor shall provide Stamps.com the right to market and resell
Distributor's LabelWriter printers, and other related or similar products,
on the Stamps.com Site. Stamps.com and the Distributor must agree to
commercially reasonable terms to govern such marketing and reseller
relationship; provided, however, that Distributor must sell their
LabelWriter printer products to Stamps.com at a price equal to or less than
the lowest price Distributor offers to its other distributors and resellers
from time to time during the Term (as indicated in a quarterly price list
provided by Distributor to Stamps.com) and Distributor must provide drop
shipment capability for printer orders; provided, further, that Stamps.com
may not sell Distributor's LabelWriter printer products at a higher price
than offered in retail markets; and provided further, the Distributor may
sell their LabelWriter printer products in certain limited circumstances
(i.e., an individual, high volume order, but not as an ordinary course
distribution relationship and not to any competitor of Stamps.com) at a
price less than the selling price of the LabelWriter printer products to
Stamps.com.
11. Distributor shall use commercially reasonable and good faith efforts to
demonstrate and promote the Software with the LabelWriter printers, and
other similar or related products, at all trade and promotional events
Distributor attends during the Term in the United States.
12. Distributor shall provide Stamps.com with the necessary resources and
expert level engineering and technical support assistance to integrate the
Software into Distributor's LabelWriter printer products at no charge.
13. In a collaborative effort with Stamps.com, Distributor shall include
Stamps.com in discussions to integrate the Software into Distributor's Co-
Star Label Printer software.
Stamps.com's obligations with respect to this Agreement are as follows:
- -----------------------------------------------------------------------
1. Within thirty (30) days of Stamps.com's USPS certification, Stamps.com
shall provide the Software to Distributor for integration with
Distributor's USPS approved LabelWriter printer products and label designs.
2. Stamps.com shall have the right to market and resell Distributor's
Label/Writer printers, and other related or similar products, on the
Stamps.com Site. Stamps.com and the Distributor must agree to commercially
reasonable terms to govern such marketing and reseller relationship;
provided, however, that Distributor must sell their LabelWriter printer
products to Stamps.com at a price equal to or less than the lowest price
Distributor offers to its other distributors and resellers from time to
time during the Term and Distributor must provide drop shipment capability
for printer orders; and provided further, that Stamps.com may not sell
Distributor's LabelWriter printer products at a higher price than offered
in retail markets; and provided further, the Distributor may sell their
LabelWriter printer products in certain limited circumstances (i.e., an
individual, high volume order, but not as an ordinary course distribution
relationship and not to any competitor of Stamps.com) at a price less than
the selling price of the LabelWriter printer products to Stamps.com.
3 Stamps.com shall provide reasonable technical support to Distributor to
complete the integration of the Software into Distributor's products at no
charge.
A-2
<PAGE>
4. Stamps.com shall modify the Software and any Stamps.com software (other
than the Software) that Stamps.com has, or may from time to time develop,
distribute and/or permit any third party to distribute in any distribution
channel (the "Other Software"), so that the Software and Other Software
will operate properly with respect to Distributor's labels with the
following stock keeping unit ("SKU") numbers: 30323, 30383, and 30384.
A-3
<PAGE>
EXHIBIT B
STANDARD SOFTWARE LICENSE AGREEMENT
-----------------------------------
STAMPS.COM INC. END-USER SOFTWARE LICENSE AGREEMENT FOR STAMPS.COM INTERNET
POSTAGE SINGLE-USER VERSION
IMPORTANT: READ CAREFULLY
BEFORE OPENING THE SEALED ENVELOPE
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY MATERIAL,
THE USE OF WHICH IS SUBJECT TO THIS END-USER SOFTWARE LICENSE AGREEMENT.
OPENING THE SEALED ENVELOPE CONSTITUTES YOUR AND (IF APPLICABLE) YOUR COMPANY'S
ASSENT TO AND ACCEPTANCE OF THIS END-USER SOFTWARE LICENSE AGREEMENT (THE
"LICENSE" OR "AGREEMENT"). IF YOU DO NOT AGREE WITH ALL OF THE TERMS, YOU MUST
NOT USE THIS PRODUCT. WRITTEN APPROVAL IS NOT A PREREQUISITE TO THE VALIDITY OR
---
ENFORCEABILITY OF THIS AGREEMENT, AND NO SOLICITATION OF SUCH WRITTEN APPROVAL
BY OR ON BEHALF OF STAMPS.COM, INC. ("STAMPS.COM") SHALL BE CONSTRUED AS AN
INFERENCE TO THE CONTRARY. IF THESE TERMS ARE CONSIDERED AN OFFER BY
STAMPS.COM, ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
LICENSE AND WARRANTY:
The Software which accompanies this License (the "Software") is the property of
Stamps.com and is protected by state, federal, and international copyright law.
Although Stamps.com continues to own the Software, you will have certain rights
to use the Software after your acceptance of this License. Except as may be
modified by a license addendum which accompanies this License, your rights and
obligations with respect to the use of this Software are as follows:
1. YOU MAY:
A. Use only one copy of any version of the Software contained on the enclosed
CD-ROM or floppy disk or downloaded from the Internet or any other online
source on a single computer;
B. Install the Software from its original distribution medium onto another
computer so long as any other copies of the Software are deleted or
otherwise made irreversibly inoperative;
C. Make one copy of the Software for archival purposes; and
D. Distribute unmodified and unregistered copies of the Software on the
original distribution medium for non-commercial use.
2. YOU MAY NOT:
A. Use the Software to purchase or print evidence of United States postage
until and unless you have been issued a Postal Meter License by the United
States Postal Service;
B. Sublicense, rent or lease any portion of the Software;
C. Reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative
works from the Software;
B-1
<PAGE>
D. Copy or move any version of the Software after it has been installed and/or
registered to another computer;
E. Use the Software to commit or attempt to commit any form of fraud against
or engage in any form of criminal activity involving the United States
Postal Service or related agencies and organizations;
F. Authorize or allow other persons or entities to use the Software unless
such persons are members of your immediate family or household;
G. Make known or allow to be made known information relating to Software
serial numbers, accounts, passwords, device identification numbers, or any
other information that could reveal or jeopardize the integrity of your
Stamps.com account; or
H. Install or use the Software on a computer located outside the United States
of America or its territories and possessions.
3. Warranty
Stamps.com warrants that the tangible media on which the Software is distributed
will be free from defects sixty (60) days from the date of delivery of the
Software to you. Your sole remedy in the event of a breach of this warranty
will be that Stamps.com will, at its option, replace any defective media
returned to Stamps.com within the warranty period. Stamps.com does not warrant
that the Software will not meet your requirements or that operation of the
Software will be uninterrupted or that the Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY WARRANTY, GUARANTEE OR
REPRESENTATION AS TO (1) THE ABILITY OF THE SOFTWARE TO PROCESS CALENDAR DATE
VALUES, INCLUDING BUT NOT LIMITED TO, CALENDAR DATE VALUES FROM JANUARY 1, 1999
THROUGH AND BEYOND JANUARY 1, 2000, AND IN PROCESSING SUCH CALENDAR DATE VALUES,
TO OPERATE IN ACCORDANCE WITH THE DOCUMENTATION, OR (2) WHETHER ANY OR ALL DATA
FIELDS FOR CALENDAR DATE VALUES AND DATA ARE FOUR-DIGIT FIELDS CAPABLE OF
INDICATING CENTURY AND MILLENNIUM OR ADDRESSING LEAP YEARS CORRECTLY.
THIS ABOVE WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS,
WHICH VARY FROM STATE TO STATE.
4. Disclaimer of Damages
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL STAMPS.COM BE LIABLE TO YOU FOR ANY SPECIAL,
CONSEQUENTIAL, INDIRECT, OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS OR LOST
DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF STAMPS.COM
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
B-2
<PAGE>
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES. SO THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
YOU.
IN NO CASE SHALL STAMPS.COM'S LIABILITY EXCEED THE PURCHASE PRICE FOR THE
SOFTWARE. The disclaimers and limitations set forth above will apply regardless
of whether you accept the Software.
5. U.S. Government Restricted Rights:
If your company is an agency of the United States government, as defined in FAR
section 2.101, DFAR section 252.227-7014(a)(1) and DFAR section 252.227-
7014(a)(5) or otherwise, all software and accompanying documentation provided in
connection with this Agreement are "commercial items," "commercial computer
software," and/or "commercial computer software documentation." Consistent with
DFAR section 227.7202 and FAR section 12.212, any use, modification,
reproduction, release, performance, display, disclosure or distribution thereof
by or for the United States government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement.
USE, DUPLICATION, OR DISCLOSURE BY THE UNITED STATES GOVERNMENT IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN SUBPARAGRAPH (C)(1)(II) OF THE RIGHTS IN TECHNICAL
DATA AND COMPUTER SOFTWARE CLAUSE AT DFARS 252.227-7013 OR SUBPARAGRAPHS (C)(1)
AND (2) OF THE COMMERCIAL COMPUTER SOFTWARE RESTRICTED RIGHTS CLAUSE AT 48 CFR
52.227-19, AS APPLICABLE.
6. Export:
You may not export or re-export the Software outside the United States without
Stamps.com's express written consent. In the event such consent is received,
you must comply with the U.S. Foreign Corrupt Practices Act and all export laws,
restrictions, national security controls and regulations of the United States
and other applicable foreign agency or authority. You shall not export or re-
export, or allow the export or re-export of the Software, any component of
Software, or any copy of the Software in violation of any such restrictions,
laws or regulations, or to Cuba, Libya, North Korea, Iran, Iraq, or Rwanda or to
any Group D:1 or E:2 country (or any national of such country) specified in the
then current Supplement No. 1 to part 740, or, in violation of the embargo
provisions in Part 746, of the U.S. Export Administration Regulations (or any
successor regulations or supplement), except in compliance with and with all
licenses and approvals required under applicable export laws and regulations,
including without limitation, those of the U.S. Department of Commerce.
7. General.
This Agreement will be governed by the laws of the State of California and any
applicable federal law or Postal Regulations. This Agreement may only be
modified by a license addendum which accompanies this License or by a written
document which has been signed by both you and Stamps.com. Should you have any
questions concerning this Agreement, or if you desire to contact Stamps.com for
any reason, please write:
Stamps.com Inc.
2900 31st Street, Suite 150
Santa Monica, CA 90405
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EXHIBIT C
STAMPS.COM'S TRADEMARKS
-----------------------
1. "S" Design
2. "S" Design with "Internet Postage"
3. "StampFX"
4. "stamps.com"
5. "Stamps for Home"
6. "Stamps for Office"
7. "Stamps for Networks"
8. "Stamps2000"
9. "Essurance"
10. "Postage Server"
* Free Postage Logo and trademark to be provided by Stamps.com
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EXHIBIT D
SOFTWARE PROGRAMS
-----------------
1. USPS approved Stamps.com software
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
________________________________________
ARTHUR ANDERSEN LLP
Los Angeles, California
June 24, 1999
