Item 8.01. Other Events.
On May 28 and June 3, 2021, Stamps.com Inc. (the "Company," "we" or "us")
reached an agreement in principle and signed a Term Sheet to settle a pending
securities class action and stockholder derivative cases, respectively, as
described below. Based on currently available information related to expected
insurance recoveries and legal costs, and assuming the settlements are finalized
and obtain final approval from the respective Courts, the Company estimates a
net cash outflow of approximately $66 to $77 million.
The Company and the other defendants have denied and continue to deny each and
all of the claims alleged in the Securities Class Action (as defined below) and
the Derivative Actions (as defined below), and the proposed settlements contain
no admission of liability, wrongdoing, or responsibility by any of the
defendants.
On February 28, 2019 and March 13, 2019, two putative class action complaints
were filed against us in the United States District Court for the Central
District of California, Western Division. One of the two putative class actions
was dismissed without prejudice, and the other case, styled as Karinski v.
Stamps.com, Inc. et al, Case 2:19-cv-01828 (the "Securities Class Action"),
continued as previously disclosed in our SEC filings, including the Form 10-K
filed on February 26, 2021.
As previously disclosed: on May 16, 2019 and May 21, 2019, two purported
shareholder derivative suits were filed in the United States District Court for
the Central District of California, Western Division, and the two cases were
consolidated as In re Stamps.com Stockholder Derivative Litigation, Case
2:19-cv-04272, and subsequently transferred to the United States District Court
for the District of Delaware; on October 3, 2019, a purported shareholder
derivative suit was filed against us in a case titled Harvey v. Kenneth T.
McBride, et al, Case No. 1:19-cv-01861-CFC, in the United States District Court
for the District of Delaware; and on February 3, 2021, the Court consolidated
such cases as In re Stamps.com Stockholder Derivative Litigation, Case No.
1:19-cv-01861-CFC (collectively, the "Federal Derivative Actions"). Also, as
previously disclosed, on August 19, 2019, a purported shareholder derivative
suit was filed against us in a case formerly titled City of Cambridge Retirement
System v. Kenneth T. McBride, et al, Case No. 2019-0658-AGB (and now titled
Macomb County Employees' Retirement System v. Kenneth T. McBride, et al. Case
No. 2019-0658), in the Delaware Court of Chancery (the "State Derivative Action"
and, together with the Federal Derivative Actions, the "Derivative Actions").
On May 28, 2021, the lead plaintiff in the Securities Class Action, the Company
and each of the other defendants in the Securities Class Action (the "Securities
Defendants") reached an agreement in principle to settle the Securities Class
Action. Under the terms of the agreement in principle, the lead plaintiff, on
behalf of a class of all persons that purchased or otherwise acquired Company
stock between May 3, 2017 and May 8, 2019, inclusive, would release the
Securities Defendants from all claims asserted or that could have been asserted
in the Securities Class Action and dismiss such claims with prejudice, in
exchange for payment of $100 million to or on behalf of the class by the Company
(a portion of which is expected to be funded by insurance proceeds). The
agreement in principle remains subject to the satisfaction of various
conditions, including negotiation and execution of a final stipulation of
settlement, notice to the proposed class, and approval by the United States
District Court for the Central District of California. If these conditions are
satisfied, the proposed settlement will resolve all claims in the Securities
Class Action against the Company and each of the other Securities Defendants. In
the event that we are unable to execute a final stipulation of settlement and
obtain Court approval, we and all other Securities Defendants will continue to
defend vigorously against the claims asserted in the Securities Class Action.
On June 3, 2021, the plaintiffs in the Derivative Actions (the "Derivative
Plaintiffs"), the Company and each of the defendants in the Derivative Actions
(the "Derivative Defendants") executed a Term Sheet whereby they agreed to
settle the claims in the Derivative Action pursuant to the Term Sheet. Among
other things, the Term Sheet provides that Derivative Plaintiffs would release
the Derivative Defendants from all claims asserted or that could have been
asserted in the Derivative Actions, in exchange for: (i) payment of $30 million
of insurance proceeds to the Company on behalf of certain of the Derivative
Defendants from D&O insurance policies purchased by the Company for the benefit
of its directors and officers and the Company; and (ii) the implementation of
certain corporate governance changes by the Company. The Term Sheet also
provides that the parties will negotiate in good faith concerning a fee and
expense award to Derivative Plaintiffs' counsel. The Term Sheet remains subject
to certain conditions, including negotiation and execution of a final
stipulation of settlement, notice to the Company's stockholders, and approval by
the Court of Chancery of the State of Delaware. In the event that we are unable
to execute a final stipulation of settlement and obtain Court approval, the
Derivative Defendants will continue to defend vigorously against the claims
asserted in the Derivative Actions.
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Forward-Looking Statements
This Current Report on Form 8-K (this "Report") contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). You can find many (but not all) of
these statements by looking for words such as "approximates," "believes,"
"expects," "anticipates," "estimates," "projects," "seeks," "intends," "plans,"
"could," "would," "may" or other similar expressions in this Report. Our
forward-looking statements relate to future events or our future performance and
include, but are not limited to, any statements that refer to proposed terms of
settlement of certain legal proceedings. Other statements contained in this
Report that are not historical facts are also forward-looking statements.
We claim the protection of the safe harbor contained in the Private Securities
Litigation Reform Act of 1995. We caution investors that any forward-looking
statements presented in this Report, or that we may make orally or in writing
from time to time, are based on beliefs and assumptions made by us and
information available to us at the time made. Such statements are based on
assumptions, and the actual outcome will be affected by known and unknown risks,
trends, uncertainties and factors that are beyond our control or ability to
predict. Among other things, each of the proposed settlements is subject to
certain conditions, including negotiation and execution of a mutually
satisfactory definitive settlement agreement and entry by the applicable Court
of a final order approving the settlement that is not subject to further appeal.
There can be no assurance that the parties to either settlement will enter into
a definitive settlement agreement or that such agreement will be approved by the
relevant Court. In addition, legal and other costs in connection with the legal
proceedings being settled, efforts to finalize the settlements and potential
other costs including those related to stockholder rights in connection with the
required notices described above could be higher than expected. Although we
believe that our assumptions are reasonable, they are not guarantees of future
performance, and some will inevitably prove to be incorrect. As a result, our
actual future results can be expected to differ from our expectations, and those
differences may be material. Accordingly, investors should use caution in
relying on forward-looking statements to anticipate future results or trends.
Please refer to the risk factors under "Item 1A. Risk Factors" of our Form 10-K
for the year ended December 31, 2020, as well as those described in our other
public filings (if any). This Report and all subsequent written and oral
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. We do not undertake any obligation to release
publicly any revisions to our forward-looking statements to reflect events or
circumstances after the date of this Report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibit is being furnished or filed herewith:
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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