\n 1. Eligibility…………………………………………………. 16
\n 2. Number of options; expiration date…………………………….. 16
\n 3. Purpose of the offer…………………………………………. 18
\n 4. Procedures for tendering options………………………………. 19
\n 5. Withdrawal rights and change of election……………………….. 20
\n 6. Acceptance of options for exchange and issuance of restricted stock.. 20
\n 7. Conditions of the offer………………………………………. 21
\n 8. Price range of shares underlying the options……………………. 23
\n 9. Source and amount of consideration; terms of restricted stock…….. 23
\n10. Information concerning InfoSpace………………………………. 26
\n11. Financial information………………………………………… 26
\n12. Interests of directors and officers; transactions and arrangements
\n concerning the options……………………………………….. 29
\n13. Status of options acquired by us in the offer; accounting
\n consequences of the offer…………………………………….. 31
\n14. Legal matters; regulatory approvals……………………………. 31
\n15. Material U.S. federal income tax consequences…………………… 31
\n16. Extension of offer; termination; amendment……………………… 34
\n17. Fees and expenses……………………………………………. 35
\n18. Additional information……………………………………….. 35
\n19. Miscellaneous……………………………………………….. 36
\n<\/c><\/s><\/c><\/caption>\n<\/table>\n 4<\/p>\n
SUMMARY TERM SHEET<\/p>\n
The following are answers to some questions that you may have about this
\noffer. We urge you to read carefully the remainder of this Offer to Exchange
\nand the accompanying materials because the information in this summary and in
\nthe introduction preceding the summary are not complete and may not contain all
\nof the information that is important to you. We have included references to the
\nrelevant sections of this Offer to Exchange where you can find more complete
\ndescriptions of the topics in this summary.<\/p>\n
1. Why are we making the offer?<\/p>\n
Our board of directors has authorized this exchange in order to provide
\neligible employees an incentive for their continued efforts and dedication. As
\na company, we are committed to employee ownership because it helps us attract
\nand retain the best and brightest employees. (Page 18)<\/p>\n
2. Who is eligible to participate in the offer?<\/p>\n
You are an employee eligible to participate in the offer (an “Eligible
\nEmployee”) if (1) you are a full-time U.S. based employee of InfoSpace, Inc. or
\nSaraide Inc. working in the U.S. and are paid through U.S. payroll, (2) you
\nwere hired on or before October 26, 2001, (3) you are employed by InfoSpace or
\none of its U.S. subsidiaries on the date this offer is made and remain employed
\nas of the date the tendered options are accepted for exchange and the date the
\nrestricted stock is granted, and (4) you hold one or more options to purchase
\nInfoSpace common stock granted on or after February 6, 2001 under the 2001
\nNonstatutory Stock Option Plan (the “2001 Plan”) or the Restated 1996 Flexible
\nStock Incentive Plan (the “1996 Plan”).<\/p>\n
You are not eligible to participate in the offer if (1) you are a non-U.S.
\nbased employee of InfoSpace or one of its subsidiaries, (2) you were hired
\nafter October 26, 2001, (3) you are employed by InfoSpace or a U.S. subsidiary
\nof InfoSpace, but you are paid through payroll outside the U.S. or only work
\npart-time, (4) you are a non-employee member of our board of directors, (5) you
\nare a consultant or contractor, or (6) you are not an Eligible Employee as
\ndescribed above. (Page 16)<\/p>\n
3. If I meet the eligibility requirements, but I’m on an approved leave of
\nabsence during the election period, can I still participate?<\/p>\n
Yes. If you meet the eligibility requirements, but you are on an approved
\nleave of absence during the election period, we will provide you documents
\nrelating to the offer, including, among other things, an Election Form.
\nHowever, if you are absent for more than 50% of any given vesting period due to
\nbeing on an approved leave of absence you would not receive any vesting for
\nthat period, and the vesting of your restricted stock will be suspended for
\nthat period. For any such vesting period in which an employee does not vest due
\nto having been on an approved leave of absence for more than 50% of that
\nvesting period, an additional vesting period will be added on to the end of the
\nvesting schedule for that employee subject to the terms and conditions of the
\nrest of this Offer to Exchange. (Page 16)<\/p>\n
4. What securities are we offering to exchange?<\/p>\n
We are offering to exchange all stock options having an exercise price of
\n$3.00 or more that were granted under our 2001 Plan and our 1996 Plan on or
\nafter February 6, 2001 (“Eligible Options”) to Eligible Employees. In return
\nfor your tender of Eligible Options, you will receive a certain number of
\nshares of restricted stock. Although we will not issue restricted stock in
\nexchange for any Special Options (described below) you hold, if you elect to
\naccept this offer, you must return also all your Special Options for
\ncancellation. If you elect to participate in the exchange, you will also be
\neligible to receive a Supplemental Grant (described below). (Page 16)<\/p>\n
5<\/p>\n
5. What are the Special Options?<\/p>\n
The Special Options are all outstanding options you hold, other than
\nEligible Options, with exercise prices equal to or greater than $3.00 per share
\ngranted under: the 1996 Plan, the 2001 Plan, the Go2Net Inc. 1996 Stock Option
\nPlan, the Go2Net Inc. 2000 Stock Option Plan, the Silicon Investor, Inc. 1996
\nStock Plan, the WEB 21 Stock Option Plan, the Authorize.Net Corporation 1999
\nStock Incentive Plan, the IQC Corporation Option to Purchase Common Stock, the
\nSaveSmart, Inc. 1997 Equity Incentive Plan, the Saraide.com Inc. 1998 Equity
\nIncentive Plan, the InfoSpace, Inc. and Saraide Inc. 2000 Stock Plan and the
\nINEX Corporation Share Option Plan, regardless of when granted or whether
\nvested or unvested. If you elect to participate in the offer, you will be
\nrequired to tender all Special Options you hold. However, no restricted stock
\nwill be issued in exchange for the Special Options. (Page 17)<\/p>\n
6. What is restricted stock?<\/p>\n
When you receive “restricted stock” you become a holder of shares of
\nInfoSpace common stock. These shares are “restricted” because they are subject
\nto forfeiture and restrictions on transfer until the restrictions lapse, at
\nwhich time the shares “vest.” The forfeiture and transfer restrictions will be
\nset forth in a restricted stock agreement entered into by you and us. Once
\nshares of restricted stock have vested, those shares will be yours to hold,
\ntransfer or sell as you desire, subject to applicable securities laws and
\npayment of withholding taxes. In contrast, a stock option, when vested, gives
\nthe option holder a contractual right (subject to the terms and conditions of
\nthe option plan and option agreement) to purchase shares of common stock at a
\ncertain price for a specified period. (Page 24)<\/p>\n
7. How many shares of restricted stock will I receive in exchange for the
\noptions I return?<\/p>\n
You will receive one (1) share of restricted stock for every four (4) shares
\ncovered by an Eligible Option that you tender. All fractional amounts will be
\nrounded up. For example, assume that you tender an Eligible Option covering
\n3,750 shares. 3,750 shares divided by 4 equals 937.5. The restricted stock
\ngrant would be rounded up to 938 shares. (Page 17)<\/p>\n
You will not receive any restricted stock in exchange for the Special
\nOptions. However, if you elect to participate in the exchange, you may be
\neligible to receive a supplemental restricted stock grant (“Supplemental
\nGrant”) granted by the board of directors of InfoSpace, in its sole discretion.
\nThe board of directors has reserved approximately 8,000,000 shares of
\nrestricted stock to make the Supplemental Grants. The number of shares of
\nrestricted stock granted as Supplemental Grants, if any, will vary among
\nemployees. The terms of the Supplemental Grants will be the same as the terms
\nof the restricted stock granted in exchange for the Eligible Options. Eligible
\nEmployees must participate in the exchange offer in order to be eligible to
\nreceive a Supplemental Grant. (Page 17)<\/p>\n
8. If I elect to exchange eligible options, do I have to exchange all of my
\noptions or can I just exchange some of them?<\/p>\n
If you elect to participate in the exchange, you must tender all of your
\nEligible Options and Special Options. Partial tenders of Eligible Options and
\nSpecial Options are not permitted. (Pages 17 and 21)<\/p>\n
9. When will I receive my restricted stock?<\/p>\n
The restricted stock will be granted on November 28, 2001, unless we extend
\nthis Offer to Exchange or unless we decide to reject all tendered options. We
\nexpect to distribute the restricted stock agreements promptly after expiration
\nof this Offer to Exchange and after we have accepted and cancelled the tendered
\noptions. Your award of restricted stock will be evidenced by a restricted stock
\nagreement between you and us, but you will not receive a stock certificate for
\nthe restricted stock. Until the restricted stock vests, it will be held in the
\ncustody of Paine Webber. Generally, as the shares vest, they will be deposited
\ninto your account with Paine Webber, subject to payment of applicable
\nwithholding taxes. (Page 21)<\/p>\n
6<\/p>\n
10. What is the vesting schedule for the restricted stock?<\/p>\n
The shares of restricted stock will vest over a two-year period that will
\nbegin on the exchange date (assuming your continued employment). Subject to the
\nterms and conditions of the 2001 Plan and the restricted stock agreement, 12.5%
\nof the shares will vest every three-month period beginning on February 27, 2002
\n(February 27, 2002, May 27, 2002, August 27, 2002, November 27, 2002, February
\n27, 2003, May 27, 2003, August 27, 2003 and November 27, 2003). Vesting will
\nonly occur, however, if you are employed by InfoSpace or one of its
\nsubsidiaries through the respective vesting dates. Even if the options you
\nexchange are partially or fully vested, the shares of restricted stock you
\nreceive will not be vested and will be subject to the new vesting period. (Page
\n24)<\/p>\n
If you are absent for more than 50% of any given vesting period due to being
\non an approved leave of absence, the vesting of your restricted stock will be
\nsuspended for that period. The vesting that you missed generally will be added
\non at the end of the regularly scheduled vesting period. For example, assume an
\nemployee goes out on an approved leave of absence on February 1, 2002 and
\nreturns on May 1, 2002. The employee would vest for the period ending on
\nFebruary 27, 2002 because he or she worked for more than 50% of that vesting
\nperiod. He or she would not vest for the period ending on May 27, 2002 because
\nhe or she would have been on leave for more than 50% of that vesting period. An
\nadditional vesting period would be added on at the end and the employee would
\nbe scheduled to be 100% vested on February 27, 2004. (Page 25)<\/p>\n
If you change your status from full-time to part-time and your status is
\npart-time for more than 50% of any given vesting period, vesting of your
\nrestricted stock will be suspended until the next period in which you are
\nfull-time for more than 50% of the given vesting period. The vesting period(s)
\nthat you missed will be added on at the end of the vesting schedule.<\/p>\n
In addition, certain members of senior management will be entitled to
\naccelerated vesting of any unvested restricted stock if their employment is
\nterminated as a result of an involuntary termination within 24 months following
\na change of control of InfoSpace. (Page 25)<\/p>\n
11. Under what circumstances will I forfeit the restricted stock I receive in
\nthe exchange?<\/p>\n
Prior to vesting, your unvested restricted stock will be forfeited
\ncompletely if you leave InfoSpace for any or no reason, including voluntary
\nresignation or termination of your employment by us with or without cause.
\nWhatever shares vest while you remain an InfoSpace employee are yours to keep
\neven after you leave InfoSpace. However, as described in Question 10 above,
\ncertain members of senior management whose employment terminates within 24
\nmonths of a change of control may be entitled to receive accelerated vesting.
\nYour restricted stock agreement will contain the particular provisions
\nregarding the effect of an acquisition on your restricted stock. (Page 25)<\/p>\n
12. What are the other restrictions on the restricted stock?<\/p>\n
The restrictions on the restricted stock you receive in this exchange will
\nbe set forth in your restricted stock agreement. Restricted stock generally may
\nnot be sold, transferred, assigned, pledged or otherwise encumbered or disposed
\nof until the stock vests. Until then, the restricted stock will be held in the
\ncustody of Paine Webber. Once the restricted stock has vested, the stock will
\nno longer be subject to forfeiture in connection with your employment with
\nInfoSpace. (Page 24)<\/p>\n
13. Will I receive a stock certificate representing the restricted stock?<\/p>\n
Your award of restricted stock will be evidenced by the restricted stock
\nagreement between you and us, and you will not receive a stock certificate for
\nthe restricted stock. Until the restricted stock vests, it will be held in the
\ncustody of Paine Webber. Following each vesting date, if you are still employed
\nby us, have signed the restricted stock agreement and related documents and
\nhave opened your account with Paine Webber, and subject to the terms and
\nconditions of the 2001 Plan and the restricted stock agreement, 12.5% of the
\nshares of your original award of restricted stock will be deposited into your
\nPaine Webber account within approximately six business days, subject to payment
\nof applicable withholding taxes. (Page 24)<\/p>\n
7<\/p>\n
14. Am I entitled to exercise any rights of ownership of restricted stock while
\nthe stock is subject to restriction?<\/p>\n
Once the restricted stock is granted, you will be treated as a stockholder.
\nThis will entitle you to voting, dividend and other stockholder rights (subject
\nto the transfer and forfeiture restrictions of your restricted stock) with
\nrespect to all shares of restricted stock, whether vested or unvested.
\nInfoSpace will deliver to you, by mail or otherwise, all notices of meetings,
\nproxies and other materials distributed to all of our stockholders. (Page 24)<\/p>\n
15. Are there conditions to the offer to exchange?<\/p>\n
We are not obligated to accept the tendered options if optionholders as a
\ngroup tender options to purchase less than 46,755,234 of shares of our common
\nstock (95% of the aggregate shares underlying the Eligible Options and Special
\nOptions). However, we may choose to cancel options and grant restricted stock
\npursuant to this offer if options to purchase less than 46,755,234 shares of
\nour common stock are tendered. This offer is also subject to other conditions
\ndescribed in Section 7. (Page 22)<\/p>\n
16. If I am eligible to participate in the exchange, will I be eligible to
\nreceive other option grants?<\/p>\n
InfoSpace will not issue any new options to an Eligible Employee for a
\nperiod of at least six months from the date of the restricted stock grant,
\nregardless of whether or not the Eligible Employee participates in the offer.
\nWe will defer the grant of new options to Eligible Employees because it is
\nnecessary for us to do so to avoid incurring compensation expense because of
\naccounting rules that could apply to such interim option grants as a result of
\nthe offer. Therefore, Eligible Employees, regardless of whether they
\nparticipate in the exchange, generally will not be eligible to receive any new
\noption grants until the 2002 annual review currently scheduled for October
\n2002. (Page 21)<\/p>\n
17. What happens if I choose not to participate in the exchange?<\/p>\n
If you choose not to accept the offer to exchange, the options you currently
\nhold will remain outstanding without modification and you will remain eligible
\nto receive future option grants. However, assuming we complete the exchange, we
\nwill not issue any new options to you or any other Eligible Employee for a
\nperiod of at least six months from the date the restricted stock is issued
\nregardless of whether you participate in the exchange. (Page 19)<\/p>\n
If you choose not to accept the offer, you will not receive a supplemental
\ngrant for which you might otherwise have been eligible.<\/p>\n
If Eligible Employees tender options representing less than 46,755,234
\nshares (95% of shares underlying Eligible Options and Special Options), we may
\nelect not to complete the exchange. If we do not complete the exchange, our
\nboard of directors has not approved any plans to make additional stock option
\ngrants prior to the 2002 annual review, currently scheduled for October 2002,
\nor otherwise issue the supplemental grants of restricted stock described in
\nthese offering materials. (Page 22)<\/p>\n
If any of your Eligible Options or Special Options qualify as “incentive
\nstock options” for tax purposes and you choose not to tender them, the tax
\ntreatment of those options may be adversely impacted. (See Q&A number 20 and
\npage 32)<\/p>\n
18. What is the source of the common stock that will be used to exchange for my
\noptions?<\/p>\n
The restricted stock offered to option holders will be issued under the 2001
\nPlan and will be drawn from the pool of common stock currently authorized for
\nissuance under that Plan. All options under the 1996 Plan and the 2001 Plan
\nreturned to us in the tender offer will be cancelled and those shares will be
\nreturned to the Plans from<\/p>\n
8<\/p>\n
which they were granted, thereby permitting the issuance of the restricted
\nstock under the 2001 Plan and providing additional stock for future awards
\nunder the 1996 Plan and 2001 Plan. (Page 23)<\/p>\n
19. What are the U.S. tax effects for the restricted stock?<\/p>\n
Assuming you do not make an election under Section 83(b) of the Internal
\nRevenue Code, you will have no taxable income at the time we grant you the
\nrestricted stock in exchange for your tendered Eligible Options. Instead, you
\nwill recognize ordinary income when (and if) the restricted stock vests. If you
\nmake a Section 83(b) election, you recognize ordinary income at the time of
\ngrant of the restricted stock. However, if you later forfeit the restricted
\nstock, no tax deduction is allowed with respect to the forfeiture. That is, you
\nwill not receive any credit for taxes paid with respect to such forfeited
\nstock. In all cases, the amount of ordinary income that you recognize will
\nequal the fair market value of the shares at the time you recognize income.<\/p>\n
For example, if you receive 3,200 shares of restricted stock on November 28,
\n2001, 400 shares would vest every three months, beginning February 27, 2002.<\/p>\n
If you do not make an election under Section 83(b) of the Code, on or before
\nDecember 27, 2001, you would recognize ordinary income for 400 shares on
\nFebruary 27, 2002 and the amount would be the closing price of our common stock
\non the following market trading day. If our stock price is $1.00 on February
\n28, 2002, you would recognize $400 of ordinary income. If on February 28, 2002,
\nour stock price is $1.25, you would recognize $500 of ordinary income.<\/p>\n
If you do make an election under Section 83(b) of the Code, you would
\nrecognize ordinary income for all 3,200 shares on November 28, 2001, the date
\nof grant. If our stock price is $1.00 on November 28, 2001, you would
\nimmediately recognize $3,200 of ordinary income. The subsequent vesting of the
\nshares does not trigger additional recognition of ordinary income.<\/p>\n
Upon the subsequent sale of the shares, any gain or loss will be treated as
\ncapital gain or loss. Capital gains are grouped and netted by holding periods.
\nNet capital gain on assets held twelve (12) months or less is taxed at your
\nhighest marginal income tax rate. Net capital gain on assets held for more than
\ntwelve (12) months is taxed currently at a maximum federal rate of 20%. Capital
\nlosses are first allowed in full against capital gains and then up to $3,000
\nagainst other income. (Page 31)<\/p>\n
PLEASE BE AWARE THAT THE STOCK PRICES LISTED ABOVE ARE ONLY BEING USED AS
\nEXAMPLES. WE ARE NOT MAKING ANY REPRESENTATIONS, WARRANTIES OR COVENANTS THAT
\nINFOSPACE’S STOCK PRICE WILL ACTUALLY ACHIEVE THE AMOUNTS INDICATED AS OF SUCH
\nDATES OR ON ANY DATE.<\/p>\n
THE PREVIOUS DISCUSSION REGARDING TAXES IS INTENDED ONLY AS A SUMMARY OF THE
\nGENERAL U.S. TAX LAWS THAT MAY APPLY TO THE RESTRICTED STOCK. THE FEDERAL,
\nSTATE AND LOCAL TAX CONSEQUENCES TO ANY PARTICULAR INDIVIDUAL WILL DEPEND UPON
\nHIS OR HER INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, WE STRONGLY ADVISE YOU TO
\nSEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING YOUR PARTICIPATION IN THE
\nOFFER.<\/p>\n
20. If I have incentive stock options, what happens if I elect not to exchange
\nthem in this offer?<\/p>\n
We do not believe that our offer to you will change any of the terms of your
\nincentive stock options if you do not accept the offer. However, the IRS may
\ncharacterize our offer to you as a “modification” of options eligible for
\ntender that qualify for favorable tax treatment as incentive stock options (but
\nnot non-qualified stock options), even if you decline the offer. A successful
\nassertion by the IRS that the options are modified could extend the period of
\ntime that you are required to hold the options to qualify for favorable tax
\ntreatment and cause a portion of your incentive stock options to be treated as
\nnonqualified stock options. (Page 32)<\/p>\n
9<\/p>\n
21. How will withholding taxes be handled when my restricted stock vests?<\/p>\n
At the time you recognize ordinary income (either upon vesting or, if you
\nmake an election under Section 83(b) of the Code, upon grant), we will have a
\nwithholding tax obligation, much like the obligation that arises when we pay
\nyour salary. This ordinary income will be reflected on your year-end W-2. In
\norder to facilitate the payment of this withholding tax obligation, we have
\narranged with Paine Webber to sell a portion of your shares of restricted stock
\n(including any Supplemental Grants) as they vest that is sufficient to pay the
\nwithholding obligation, and this arrangement will be reflected in your
\nrestricted stock agreement and your Irrevocable Standing Order to Sell Shares.
\nSpecifically, the following will happen:<\/p>\n
. You will be required to open an account with Paine Webber prior to the
\n vesting of your shares of restricted stock. We will require you to sign
\n and return the Irrevocable Standing Order to Sell Shares prior to any
\n vesting of your shares. The Irrevocable Standing Order to Sell Shares
\n includes provisions authorizing Paine Webber to sell a portion of your
\n shares of restricted stock to pay withholding taxes.<\/p>\n
Note: If you are an executive of InfoSpace subject to the reporting
\n requirements of Section 16 of the Securities Act of 1934, as amended, or
\n you are a specifically named “Covered Person” under the InfoSpace Company
\n Policy Regarding Special Trading Procedures, you may be required to file
\n with the SEC a 10b5-1 trading plan in lieu of signing and delivering an
\n Irrevocable Standing Order to Sell Shares.<\/p>\n
. If you make a Section83(b) election, you must pay over to us the amount of
\n the withholding taxes by check at the time of the election. If you do not
\n pay over the amount of withholding taxes by check, your Section 83(b)
\n election will not be effective and Paine Webber will rely on your standing
\n order to sell that number of vested shares that is sufficient to obtain
\n proceeds to satisfy the withholding tax obligation after each vesting
\n date, as described below. You will pay Paine Webber’s usual trade
\n commission for this sale.<\/p>\n
. If you do not make a Section83(b) election, on one of three (3) market
\n trading days immediately following each vesting date, Paine Webber will
\n rely on your irrevocable standing order to sell that number of vested
\n shares that is sufficient to obtain proceeds to satisfy the withholding
\n tax obligation. You will pay Paine Webber’s usual trade commission for
\n this sale.<\/p>\n
. InfoSpace will estimate the amount of taxes to be withheld based on the
\n closing stock price on the date of vesting. An estimate is needed because
\n your actual taxable compensation will be determined using the closing
\n price on the first market trading day following your vesting date. A
\n schedule will be provided to Paine Webber on the vesting date(s) showing
\n the shares to be sold for each employee to satisfy the estimated
\n withholding taxes.<\/p>\n
. Shares will be sold in three blocks on the three consecutive trading days
\n following the vesting date. You will be assigned to one of three trading
\n groups that will rotate in selling order for each quarterly vesting date.<\/p>\n
. Your selling price will be reported by Paine Webber as the average sales
\n price of the block of shares for the trading group that you were assigned
\n to. This means that each of the three blocks may have a different selling
\n price associated with the shares traded to pay withholding taxes and
\n commissions. However, if you are an executive officer of InfoSpace subject
\n to the reporting requirements of Section 16 of the Securities Exchange Act
\n of 1934, as amended, or you are a specifically named “Covered Person”
\n under the InfoSpace Company Policy Regarding Special Trading Procedures
\n (Covered Persons will be notified by the Company), your shares will be
\n sold in one-third increments over the three trading days following vesting
\n and your selling price will be tracked separately and will be reported by
\n Paine Webber as your actual sales price for your shares sold.<\/p>\n
. You may recognize a short-term capital gain or loss on the shares traded
\n to pay your withholding taxes and commission based on the difference
\n between the sales price of your shares sold to cover withholding and the
\n amount of taxable income recognized on the vesting date (i.e. equal to the
\n closing price of our stock on the trading day following your vesting
\n date). Any proceeds from your trade not used to pay withholding taxes or
\n commissions will be deposited into your Paine Webber account.<\/p>\n
10<\/p>\n
. The amount of withholding taxes you owe will be based on the closing price
\n of our stock on the next market trading day following the vesting date. We
\n will attempt to estimate the correct number of vested shares to be sold to
\n cover withholding taxes based on the price of our stock. However, it is
\n possible that the proceeds obtained from the sale will be either too much
\n or too little to satisfy the withholding tax obligations. In the event
\n that excess proceeds are received, the excess will be deposited in your
\n Paine Webber account. In the event that the proceeds received are
\n insufficient to cover the withholding taxes, then we reserve the right to
\n either instruct Paine Webber to sell additional vested shares or deduct
\n the necessary amount from your wages.<\/p>\n
By participating in this exchange and signing the restricted stock agreement
\nand Irrevocable Standing Order to Sell Shares, you will authorize us and Paine
\nWebber to take the above actions to pay withholding taxes. In the event there
\nis not a market in our common stock, we will have the right to make other
\narrangements to satisfy the withholding obligations. (Page 33)<\/p>\n
22. When can I sell my shares of restricted stock?<\/p>\n
You may generally sell your shares once they have become vested pursuant to
\nthe terms of your restricted stock grant and the terms of the 2001 Plan.
\nIncluded with the offering materials will be information and instructions
\nregarding setting up your account with Paine Webber.<\/p>\n
The scheduled vesting dates for the restricted stock grants are as follows:
\nFebruary 27, 2002, May 27, 2002, August 27, 2002, November 27, 2002, February
\n27, 2003, May 27, 2003, August 27, 2003, and November 27, 2003.<\/p>\n
The vested shares (less the shares held back for tax withholding) will be
\ndeposited to your Paine Webber account on the morning of the next trading day
\nfollowing each vesting date. Once sufficient shares have been sold to cover
\nyour tax obligations and Paine Webber’s commission, any remaining shares will
\nbe deposited in your account approximately six business days after the vesting
\ndate. This delay is necessary to allow adequate time for Paine Webber to sell
\nthe shares to pay the taxes and for your account to be reconciled. (Page 24)<\/p>\n
23. How do I exchange my options for restricted stock pursuant to the offer?<\/p>\n
In connection with the offer, we are providing you a packet of information,
\nwhich includes, among other things, a cover letter describing the offer.
\nAdditionally, there will be included an Election Form that Brent Satterlee must
\nreceive by 9:00 p.m., Pacific Standard Time, on November 26, 2001, stating
\nwhether or not you intend to participate in the offer. You may mail your
\nElection Form to Brent’s attention at: 601 108th Avenue N.E., Suite 1200,
\nBellevue, Washington 98004. It also is acceptable to fax your signed Election
\nForm to Brent at (425) 201-6185 on or before the above deadline and mail the
\noriginal. If you do not hand it in, or it is not timely received by us, you
\nwill not be able to participate.<\/p>\n
We will send an e-mail three (3) business days prior to the expiration of
\nthe offer to confirm whether your Election Form has been received or alerting
\nyou that it has not yet been received. We will send a final confirmation e-mail
\nfollowing the expiration of the offer to confirm what remaining forms were
\nreceived. However, these e-mails do not constitute acceptance of the options
\nfor exchange. (Page 19)<\/p>\n
24. When does the offer to exchange expire? Can the offer be extended, and if
\nso, how will I know if it is extended?<\/p>\n
The offer expires on November 26, 2001 at 9:00 p.m., Pacific Standard Time.
\nAlthough we do not currently intend to do so, we may, in our discretion, extend
\nthe offer at any time. If the offer is extended we will make a public
\nannouncement of the extension no later than 6:00 a.m. Pacific Standard Time, on
\nthe next business day following the previously scheduled expiration of the
\noffer period. (Page 19)<\/p>\n
11<\/p>\n
25. During what period of time may I withdraw my previously tendered options?<\/p>\n
You may withdraw your tendered options at any time before 9:00 p.m., Pacific
\nStandard Time, on November 26, 2001. If we extend the offer beyond that time,
\nyou may withdraw your tendered options at any time until the extended
\nexpiration of the offer. To withdraw tendered options, you must deliver to
\nBrent Satterlee in the Bellevue office a completed Notice to Withdraw From the
\nOffer while you still have the time to withdraw the tendered options. Once you
\nhave withdrawn your options, you may re-tender them only by following the
\ndelivery procedures described in this offer. (Page 20)<\/p>\n
26. Do I have to return an election form if I do not want to exchange my
\noptions?<\/p>\n
Whether you accept the offer or not, we urge you to complete and deliver the
\nElection Form to Brent Satterlee by the deadline specified above. Although we
\nwould appreciate receiving your Election Form, if you do not deliver it to us,
\nyou will be deemed to have rejected this offer. (Page 19)<\/p>\n
27. What happens to my options if I do not accept the offer or if my options
\nare not accepted for exchange?<\/p>\n
If you do not accept the offer, or if we do not accept all tendered options,
\nyou will keep all of your current options, including any Special Options, and
\nyou will not receive any restricted stock. The options will retain their
\ncurrent exercise prices and vesting schedule until you exercise them or they
\nexpire by their terms. However, if you currently have incentive stock options
\nthat are eligible to be tendered under this offer and you do not accept the
\noffer, see Question 19 above. (Page 9)<\/p>\n
28. What happens to my options if after I tender my options, I cease to be an
\nemployee of InfoSpace?<\/p>\n
If you cease to be an employee of InfoSpace prior to the expiration of the
\noffer, you may withdraw your tendered options and exercise them to the extent
\nthey are vested and in accordance with their terms. In this event, you will not
\nreceive any restricted stock.<\/p>\n
If you cease to be an employee of InfoSpace after we accepted and cancelled
\nyour tendered options, you will have no rights with respect to those options
\nand they will not be reissued and returned to you for any reason. (Page 16)<\/p>\n
This offer does not change the “at-will” nature of your employment with us
\nin any way and your employment may be terminated by us or by you at any time.<\/p>\n
29. What happens if an outside party acquires InfoSpace?<\/p>\n
If we are acquired prior to the expiration of the offer, you may withdraw
\nyour tendered options and have the rights afforded to you under the particular
\nstock plan and your existing stock option agreements evidencing those options.<\/p>\n
If you continue employment after a buyer acquires control of InfoSpace, the
\nbuyer generally will assume your unvested restricted stock and your vesting
\nschedule would continue. Rather than receiving shares of stock in InfoSpace,
\nyou would in all likelihood receive shares of stock in the buyer, cash or a
\ncombination of both when you vest. Certain members of senior management who do
\nnot continue employment after a buyer acquires InfoSpace may be entitled to
\nreceive certain accelerated vesting. Your restricted stock agreement will
\ncontain the particular provisions regarding the effect of an acquisition on
\nyour restricted stock. (Page 25)<\/p>\n
30. What do we and our board of directors think of this offer to exchange?<\/p>\n
Although our board of directors has approved this offer, neither we nor our
\nboard of directors makes any recommendation as to whether you should tender or
\nrefrain from tendering your options. You should evaluate<\/p>\n
12<\/p>\n
your situation and consult with your personal tax, financial or legal advisor
\nto determine whether or not to participate in the exchange. We recommend that
\nyou evaluate current market quotes for our market stock, among other factors,
\nbefore deciding whether or not to participate in the exchange. (Page 19)<\/p>\n
31. What are the accounting consequences to the Company of making this offer?<\/p>\n
InfoSpace will record an expense based on the stock’s value on the date of
\ngrant. This amount will be expensed as a compensation expense as the restricted
\nstock vests. The shares of restricted stock issued in exchange will not be
\ntreated as variable awards for financial accounting purposes. As a result of
\nthis offer, all options that are eligible to be tendered but that are not
\ntendered and accepted may be treated for financial reporting purposes as
\nvariable awards. This means that we may be required to record non-cash stock
\ncompensation charges reflecting any increases and decreases in the price of
\nInfoSpace’s common stock. The higher the market value of our common stock, the
\ngreater the non-cash stock compensation expense we would have to record. We
\nwould have to continue to reflect the impact of increases and decreases in the
\nprice of InfoSpace’s common stock in InfoSpace’s statement of operations until
\nthe options are exercised, forfeited or terminated. Options which were eligible
\nbut not tendered in this offer and accepted will retain their original term,
\nwhich is generally ten (10) years, subject to earlier expiration of the option
\nupon the occurrence of certain events, such as the optionee’s termination of
\nemployment. (Page 31)<\/p>\n
32. Who can I talk to if I have questions about this offer?<\/p>\n
All questions should be directed to the Exchange Offer Hotline at
\neo@infospace.com or (425) 709-8008. We will attempt to respond to e-mail
\ninquiries within 24-48 hours.<\/p>\n
33. What else should I know about this Offer to Exchange?<\/p>\n
We may update this Offer to Exchange in the future by furnishing to
\nparticipants an appendix, memorandum, notice or replacement page containing
\nupdated information. We generally will not send you a new Offer to Exchange,
\nexcept upon request. Accordingly, you should keep this Offer to Exchange for
\nfuture reference.<\/p>\n
You should rely on the information incorporated by reference or provided in
\nthis Offer to Exchange or any supplement to this Offer to Exchange. We have not
\nauthorized anyone to provide you with different or additional information. We
\nare not making an offer to sell any stock in any state or country where the
\noffer is not permitted. You should not assume that the information in this
\nOffer to Exchange or any supplement to this Offer to Exchange is accurate as of
\nany date other than the date on the front of this document.<\/p>\n
The SEC allows us to “incorporate by reference” the information we file with
\nthe SEC, which means that we can disclose important information to you by
\nreferring you to those documents. The information incorporated by reference is
\nconsidered to be part of this prospectus, and later information filed with the
\nSEC will update and supersede this information. We incorporate by reference the
\ndocuments listed below and any future filings we make with the SEC under
\nSections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
\n“1934 Act”).<\/p>\n
1. Our latest annual report filed pursuant to Section 13(a) or 15(d) of the
\n1934 Act or the latest prospectus filed pursuant to Rule 424(a) under the
\nSecurities Act of 1933 (the “1933 Act”) which contains, either directly or by
\nincorporation by reference, audited financial statements for our latest fiscal
\nyear for which such statements have been filed.<\/p>\n
2. All other reports and proxy statements filed pursuant to Section 13(a) or
\n15(d) of the 1934 Act since the end of the fiscal year covered by the annual
\nreport or prospectus referred to in paragraph (1) above.<\/p>\n
13<\/p>\n
CERTAIN RISKS OF PARTICIPATING IN THE OFFER<\/p>\n
Participation in the offer involves a number of potential risks, including
\nthose described below. This list and the risk factors under the heading
\nentitled “Factors Affecting Our Operating Results, Business Prospects and
\nMarket Price of Stock” in InfoSpace’s Annual Report on Form 10-K for the fiscal
\nyear ended December 31, 2000, filed on April 2, 2001, and under the heading
\nentitled “Factors Affecting Future Results” in InfoSpace’s Quarterly Report on
\nForm 10-Q for the quarter ended June 30, 2001, filed on August 13, 2001,
\nhighlight the material risks of participating in this offer. Eligible employees
\nshould carefully consider these risks and are encouraged to speak with an
\ninvestment and tax advisor as necessary before deciding to participant in the
\noffer. In addition, we strongly urge you to read the rest of this Offer to
\nExchange, the related letter from Naveen Jain, Chairman and Chief Executive
\nOfficer of InfoSpace, dated October 29, 2001, the Election Form and the Notice
\nto Withdraw from the Offer and our entire Annual Report on Form 10-K for the
\nfiscal year ended December 31, 2000 before deciding whether the participate in
\nthe exchange offer.<\/p>\n
ECONOMIC RISKS<\/p>\n
You may lose the potential benefit of any vested options that you tender in
\nthis offer.<\/p>\n
Your shares of restricted stock are scheduled to vest ratably in eight equal
\ninstallments every three months commencing February 27, 2002. You will receive
\nrestricted stock with a new vesting schedule and lose the benefit of vesting
\nthat has already occurred with respect to your Eligible Options and you will
\nreceive no restricted stock for the Special Options you tender. You will
\ngenerally forfeit any portion of the restricted stock you receive in this offer
\nthat is not vested when your service with us terminates for any reason. In such
\ncase, your unvested restricted stock will expire and will not continue to vest.
\nIf your service with us is terminated for any reason prior to February 27,
\n2002, you generally will forfeit all of your restricted stock. If your service
\nwith us is terminated for any reason prior to November 27, 2003, the last
\nregularly scheduled vesting date of the restricted stock (or later, in the case
\nof certain leaves of absence), you may lose the potential benefit of any vested
\noptions you tender in this offer.<\/p>\n
You may benefit from an increase in the trading price of our common stock to a
\nlesser extent if you tender your options in this offer.<\/p>\n
If the trading price of our common stock increases after this offer, of
\nwhich we can give you no assurance whatsoever, you may benefit to a lesser
\nextent if you tender your options. You are eligible to receive one (1) share of
\nrestricted stock for every four (4) shares of common stock covered by your
\nEligible Options and you are not eligible to receive any shares of restricted
\nstock for any shares covered by your Special Options. If the trading price of
\nour common stock increases above the exercise price of your tendered options,
\nbecause of the higher number of option shares, you may benefit more from
\nholding the options. We advise you to consult with your financial advisor
\nregarding the potential benefits of holding your options at different trading
\nprices of our common stock.<\/p>\n
14<\/p>\n
TAX-RELATED RISKS<\/p>\n
You may incur tax liability in connection with receiving your restricted stock
\nbut never recognize any benefit from your restricted stock, or incur tax
\nliability in excess of the amount you receive upon sale of your restricted
\nstock.<\/p>\n
If you do not make an election under Section 83(b) of the Internal Revenue
\nCode, upon the vesting of your restricted stock, you will be required to
\nrecognize additional income in an amount equal to the fair market value of the
\nrestricted stock that vests, determined on the day after the shares vest. If
\nthe trading price of our common stock decreases after a vesting date and your
\nshares are subsequently sold, you may receive an amount from the sale of your
\nrestricted stock that is less than your tax liability.<\/p>\n
If you make a Section 83(b) election, you will be required to recognize
\ntaxable income at the time you receive your restricted stock in an amount equal
\nto the fair market value of the restricted stock you receive on that date. If
\nyou make a Section 83(b) election and subsequently forfeit your shares of
\nrestricted stock, you will receive nothing from the forfeiture of your
\nrestricted stock to offset your tax liability. Also, if the trading price of
\nour common stock decreases after you receive your restricted stock, and your
\nrestricted stock subsequently vests, you may receive an amount from the sale of
\nyour restricted stock that is less than your tax liability.<\/p>\n
Even if you elect not to participate in the exchange, your incentive stock
\noptions may be affected.<\/p>\n
We believe that you will not be subject to current U.S. federal income tax
\nif you do not elect to participate in the exchange. We also believe that the
\nexchange will not change the U.S. federal income tax treatment of subsequent
\ngrants and exercises of your incentive stock options (and sales of shares
\nacquired upon exercises of such options) if you do not participate in the
\nexchange.<\/p>\n
However, the Internal Revenue Service may characterize our offer to you as a
\n“modification” of those incentive stock options, even if you decline the offer.
\nA successful assertion by the Internal Revenue Service that your incentive
\nstock options are modified would extend your required holding period with
\nrespect to the shares purchased under those options in order to qualify all of
\nthe gain on a subsequent sale of those shares as long-term capital gain. That
\nextended holding period for long-term capital gain would require that any
\ntaxable sale or disposition of the shares not take place until the later of (i)
\ntwo (2) years from the date of the deemed modification of your incentive stock
\noptions, or (ii) one (1) year from the date of the option exercise for those
\nshares. In addition, such a deemed modification may also cause a portion of
\nyour incentive stock options to be treated as non-qualified stock options upon
\nexercise.<\/p>\n
BUSINESS-RELATED RISKS<\/p>\n
For a description of risks related to InfoSpace’s business, please see
\nSection 19 of this Offer to Exchange.<\/p>\n
15<\/p>\n
THE OFFER<\/p>\n
1. Eligibility.<\/p>\n
You are an employee eligible to participate in the offer (an “Eligible
\nEmployee”) if:<\/p>\n
(1) you are a full-time (30 hours or more per week) U.S.-based employee
\n of InfoSpace, Inc. or Saraide Inc. (the “Company’s U.S. subsidiaries”)
\n working in the U.S. and are paid through U.S. payroll;<\/p>\n
(2) you were hired on or before October 26, 2001;<\/p>\n
(3) you are employed by InfoSpace or one of its U.S. subsidiaries on the
\n date this offer is made and remain employed as of the date the tendered
\n options are accepted for exchange and the date the restricted stock is
\n granted; and<\/p>\n
(4) you hold one or more eligible options to purchase InfoSpace common
\n stock granted on or after February 6, 2001 under the 2001 Nonstatutory Stock
\n Option Plan (the “2001 Plan”) or the Restated 1996 Flexible Stock Incentive
\n Plan (the “1996 Plan”).<\/p>\n
You are not eligible to participate in the offer if:<\/p>\n
(1) you are a non-U.S. based employee of InfoSpace or one of its
\n subsidiaries;<\/p>\n
(2) you were hired after October 26, 2001;<\/p>\n
(3) you are employed by InfoSpace or a U.S. subsidiary of InfoSpace, but
\n you are paid through payroll outside the U.S. or only work part-time;<\/p>\n
(4) you are a non-employee member of our board of directors;<\/p>\n
(5) you are a consultant or contractor; or<\/p>\n
(6) you are not an Eligible Employee as described above.<\/p>\n
If you meet the eligibility requirements, but you are on an approved leave
\nof absence during the election period, you are still eligible to participate in
\nthe offer. However, if you are absent for more than 50% of any given vesting
\nperiod due to being on an approved leave of absence you would not vest for that
\nperiod, and the vesting of your restricted stock will be deferred. For any such
\nvesting period in which an employee does not vest due to having been on an
\napproved leave of absence for more than 50% of that vesting period, an
\nadditional vesting period will be added on to the end of the vesting schedule
\nfor that employee subject to the terms and conditions of the rest of this Offer
\nto Exchange.<\/p>\n
2. Number of options; expiration date.<\/p>\n
Subject to the terms and conditions of the offer, we will exchange all
\noutstanding, unexercised Eligible Options held by Eligible Employees that are
\nproperly tendered in accordance with Section 4 and not validly withdrawn before
\nthe “expiration date,” as defined below, in return for shares of “restricted
\nstock,” as defined in Section 9. We are offering to exchange all stock options
\nhaving an exercise price of $3.00 or more that were granted under our 2001 Plan
\nand our 1996 Plan on or after February 6, 2001 (“Eligible Options”) to Eligible
\nEmployees. In return for your tender of Eligible Options, you will receive a
\ncertain number of shares of restricted stock.<\/p>\n
16<\/p>\n
Although we will not issue restricted stock in exchange for any “Special
\nOptions” you hold, if you elect to accept this offer, you must return all your
\nSpecial Options for cancellation. The Special Options are all outstanding
\noptions you hold, other than Eligible Options, with exercise prices equal to or
\ngreater than $3.00 per share granted under:<\/p>\n
. the 1996 Plan,<\/p>\n
. the 2001 Plan,<\/p>\n
. the Go2Net Inc. 1996 Stock Option Plan,<\/p>\n
. the Go2Net Inc. 2000 Stock Option Plan,<\/p>\n
. the Silicon Investor, Inc. 1996 Stock Plan,<\/p>\n
. the WEB 21 Stock Option Plan,<\/p>\n
. the Authorize.Net Corporation 1999 Stock Incentive Plan,<\/p>\n
. the IQC Corporation Option to Purchase Common Stock,<\/p>\n
. the SaveSmart, Inc. 1997 Equity Incentive Plan,<\/p>\n
. the Saraide.com Inc. 1998 Equity Incentive Plan,<\/p>\n
. the InfoSpace, Inc. and Saraide Inc. 2000 Stock Plan, and<\/p>\n
. the INEX Corporation Share Option Plan,<\/p>\n
regardless of when granted or whether vested or unvested. If you elect to
\nparticipate in the offer, you will be required to tender all Special Options
\nyou hold. You will not receive any restricted stock in exchange for the Special
\nOptions. However, if you elect to participate in the exchange, you will be
\neligible to receive a supplemental restricted stock grant (the “Supplemental
\nGrant”) granted by the board of directors of InfoSpace, in its sole discretion.
\nThe number of shares of restricted stock granted as Supplemental Grants, if
\nany, will vary among employees. The terms of the Supplemental Grants will be
\nthe same as the terms of the restricted stock granted in exchange for the
\nEligible Options. Eligible Employees must participate in the exchange offer in
\norder to be eligible to receive a Supplemental Grant.<\/p>\n
You will receive one share of restricted stock for every four (4) shares
\ncovered by an Eligible Option that you tender. All fractional amounts will be
\nrounded up. For example, assume that you tender an Eligible Option covering
\n3,750 shares. 3,750 shares divided by 4 equals 937.5. The restricted stock
\ngrant would be rounded up to 938 shares. We will not accept partial tenders of
\noptions. Therefore, you may tender options for all or none of the shares
\nsubject to your Eligible Options. Participating employees also will be required
\nto surrender, in addition to the Eligible Options, all of their Special
\nOptions. No restricted stock will be granted in exchange for the Special
\nOptions. We presently expect to cancel all tendered options on or about
\nNovember 28, 2001.<\/p>\n
If you cease to be an employee of InfoSpace prior to the expiration of the
\noffer, you may withdraw your tendered options and exercise them to the extent
\nthey are vested and in accordance with their terms. In this case, you will not
\nreceive any restricted stock. If you cease to be an employee of InfoSpace after
\nwe have accepted and cancelled your tendered options, you will have no rights
\nwith respect to those options and they will not be reissued and returned to you
\nfor any reason. In this case, you will be entitled to keep any vested shares of
\nrestricted stock as of your date of termination. These forfeiture provisions
\nwill apply regardless of whether you quit with or without good reason, we
\nterminate your employment with or without cause or your employment is
\nterminated because of death or disability. This offer does not change the
\n“at-will” nature of your employment with us in any way and your employment may
\nbe terminated by us or by you at any time.<\/p>\n
The term “expiration date” means 9:00 p.m., Pacific Standard Time, on
\nNovember 26, 2001, unless and until we, in our sole discretion, have extended
\nthe period of time during which the offer will remain open, in<\/p>\n
17<\/p>\n
which event the term “expiration date” refers to the latest time and date at
\nwhich the offer, as so extended, expires. See Section 16 of this Offer to
\nExchange for a description of our rights to extend, delay, terminate and amend
\nthe offer.<\/p>\n
If we decide to take any of the following actions, we will publish notice or
\notherwise inform you in writing of such action:<\/p>\n
. we increase or decrease the amount of consideration offered for the
\n options,<\/p>\n
. we decrease the number of options eligible to be tendered in the offer, or<\/p>\n
. we increase the number of options eligible to be tendered in the offer by
\n an amount that exceeds 2% of the shares issuable upon exercise of the
\n options that are subject to the offer immediately prior to the increase.<\/p>\n
If the offer is scheduled to expire at any time earlier than the tenth
\n(10th) business day from, and including, the date that notice of the increase
\nor decrease is first published, sent or given in the manner specified in
\nSection 16 of this Offer to Exchange, we will extend the offer so that the
\noffer is open at least ten (10) business days following the publication,
\nsending or giving of notice.<\/p>\n
We will also notify you of any other material change in the information
\ncontained in this Offer to Exchange.<\/p>\n
For purposes of the offer, a “business day” means any day other than a
\nSaturday, Sunday or federal holiday and consists of the time period from 12:01
\na.m. through 12:00 midnight, Eastern Standard Time.<\/p>\n
3. Purpose of the offer.<\/p>\n
We previously issued the Eligible Options to:<\/p>\n
. provide our employees with additional incentives and to promote the
\n success of our business, and<\/p>\n
. encourage our employees to continue their employment with us.<\/p>\n
Our board of directors has authorized this exchange in order to provide
\nEligible Employees an incentive for their continued efforts and dedication. As
\na company, we are committed to employee ownership because it helps us attract
\nand retain the best and brightest employees.<\/p>\n
We continually evaluate strategic opportunities as they arise, including
\nbusiness combination transactions, capital infusions and the purchase or sale
\nof assets. We also routinely grant options to our employees and non-employee
\ndirectors and offer stock pursuant to our 1998 Employee Stock Purchase Plan.
\nSubject to the foregoing, and except as otherwise disclosed in this Offer to
\nExchange or in our filings with the SEC, we presently have no definitive plans
\nor binding proposals that relate to or would result in:<\/p>\n
(a)any extraordinary transaction, such as a merger, reorganization or
\n liquidation;<\/p>\n
(b)any purchase, sale or transfer of a material amount of assets of our
\n assets or the assets of our subsidiaries;<\/p>\n
(c)any material change in our present dividend policy or in our
\n indebtedness;<\/p>\n
(d)any change in our present board of directors or management;<\/p>\n
(e)any material changes in our corporate structure or business;<\/p>\n
(f)our common stock not being authorized for quotation in an automated
\n quotation system operated by a national securities exchange;<\/p>\n
(g)our common stock becoming eligible for termination of registration
\n pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934;<\/p>\n
18<\/p>\n
(h)the suspension of our obligation to file reports with the SEC pursuant
\n to Section 15(d) of the Securities Exchange Act of 1934; or<\/p>\n
(i)any change in our certificate of incorporation or bylaws or any actions
\n which may impede the acquisition of control of us by an person.<\/p>\n
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER
\nYOU SHOULD TENDER OR NOT TENDER YOUR OPTIONS, NOR HAVE WE AUTHORIZED ANY PERSON
\nTO MAKE ANY SUCH RECOMMENDATION. YOU ARE URGED TO EVALUATE CAREFULLY ALL OF THE
\nINFORMATION IN THIS OFFER TO EXCHANGE, THE LETTER FROM NAVEEN JAIN DATED
\nOCTOBER 29, 2001, THE ELECTION FORM, AND THE NOTICE TO WITHDRAW FROM THE OFFER
\nAND TO CONSULT YOUR OWN INVESTMENT AND TAX ADVISORS. YOU MUST MAKE YOUR OWN
\nDECISION WHETHER OR NOT TO TENDER YOUR OPTIONS FOR EXCHANGE.<\/p>\n
4. Procedures for tendering options.<\/p>\n
Proper Tender of Options.<\/p>\n
To validly tender your eligible options, you must, in accordance with the
\nterms of the Election Form, properly complete, execute and deliver the Election
\nForm via facsimile or hand delivery to Brent Satterlee, along with any other
\nrequired documents. Whether you accept the offer or not, we urge you to
\ncomplete and deliver the Election Form to Brent Satterlee. Mr. Satterlee must
\nreceive all of the required documents before the expiration date. The
\nexpiration date is 9:00 p.m., Pacific Standard Time, on November 26, 2001. If
\nyou do not hand it in, or it is not timely received by us, you will not be able
\nto participate.<\/p>\n
Brent Satterlee
\n InfoSpace, Inc.
\n 601 108\/th\/ Avenue N.E., Suite 1200
\n Bellevue, Washington 98004
\n Fax. (425) 201-6185<\/p>\n
The delivery of all documents, including Election Forms and any Notice to
\nWithdraw from the Offer, is at your risk. We intend to confirm the receipt of
\nyour Election Form within three business days prior to the expiration of the
\noffer and we will send a final confirmation e-mail following the expiration of
\nthe offer to confirm what remaining forms were received. However, these e-mails
\ndo not constitute acceptance of the options for exchange. If you have not
\nreceived such a confirmation of receipt, it is your responsibility to ensure
\nthat we have received your Election Form.<\/p>\n
Determination of Validity; Rejection of Options; Waiver of Defects; No
\n Obligation to Give Notice of Defects.<\/p>\n
We will determine, in our discretion, all questions as to the form of
\ndocuments and the validity, form, eligibility, including time of receipt, and
\nacceptance of any tender of options. Our determination of these matters will be
\nfinal and binding on all parties. Although we anticipate that we will accept
\nproperly and timely tendered options that are not validly withdrawn, we reserve
\nthe right to reject any or all tenders of options for any reason, including
\ntenders of options that we determine are not in appropriate form or that we
\ndetermine are unlawful to accept. We also reserve the right to waive any of the
\nconditions of the offer or any defect or irregularity in any tender of any
\nparticular options or for any particular Eligible Employee, provided that if we
\ngrant any such waiver, it shall be granted to all Eligible Employees and
\ntenders of options. No tender of options will be deemed to have been properly
\nmade until all defects or irregularities have been cured by the tendering
\nEligible Employee or waived by us. Neither we nor any other person is obligated
\nto give notice of any defects or irregularities in tenders, nor will anyone
\nincur any liability for failure to give any notice. This is a one-time offer,
\nand we will strictly enforce the offer period, subject only to any extension
\nwhich we may grant in our sole discretion.<\/p>\n
Our Acceptance Constitutes an Agreement.<\/p>\n
Your tender of options pursuant to the procedures described above
\nconstitutes your acceptance of the terms and conditions of the offer. OUR
\nACCEPTANCE FOR EXCHANGE AND CANCELLATION OF THE<\/p>\n
19<\/p>\n
OPTIONS TENDERED BY YOU THROUGH THE OFFER WILL CONSTITUTE A BINDING AGREEMENT
\nBETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER.
\nAs noted above, we reserve the right to reject any or all tenders of options
\nfor any reason, including tenders of options that we determine are not in
\nappropriate form or that we determine are unlawful to accept.<\/p>\n
Subject to our rights to extend, terminate and amend the offer, we presently
\nexpect that we will accept all properly tendered options that have not been
\nvalidly withdrawn promptly after the expiration of the offer.<\/p>\n
5. Withdrawal rights and change of election.<\/p>\n
You may only withdraw your tendered options or change your election in
\naccordance with the provisions of this section.<\/p>\n
You may withdraw your tendered options at any time before 9:00 p.m., Pacific
\nStandard Time, on November 26, 2001. If we extend the offer beyond that time,
\nyou may withdraw your tendered options at any time until the extended
\nexpiration of the offer. We expect to accept all properly tendered options
\npromptly after the expiration of the offer on November 26, 2001, and we expect
\nto cancel all accepted options on or about November 28, 2001. If, however, we
\nhave not accepted your tendered options for exchange by 9:00 p.m., Pacific
\nStandard Time, on December 24, 2001, you may withdraw your tendered options at
\nany time after December 24, 2001, until they are accepted and cancelled.<\/p>\n
To validly withdraw tendered options, you must deliver to InfoSpace,
\nAttention: Brent Satterlee via facsimile (425-201-6185) or hand delivery, in
\naccordance with the procedures listed in Section 4 above, a signed and dated
\nNotice to Withdraw from the Offer, with the required information, while you
\nstill have the right to withdraw the tendered options.<\/p>\n
If you first decline to participate in the offer and then decide to
\nparticipate, you must deliver a new Election Form to InfoSpace, Attention:
\nBrent Satterlee via facsimile (425-201-6185) or hand delivery, in accordance
\nwith the procedures listed in Section 4 above prior to the expiration date. If
\nyou deliver a new Election Form that is properly signed and dated, it will
\nreplace any previously submitted Election Form, which will be disregarded. The
\nnew Election Form must be signed and dated.<\/p>\n
Except as described in the following sentences of this paragraph, the
\nElection Form and the Notice to Withdraw from the Offer must be executed by the
\nEligible Employee whose name appears on the option agreement or agreements
\nevidencing such options. If the Eligible Employee’s name has legally been
\nchanged since the signing of the option agreement, the Eligible Employee must
\nsubmit proof of the legal name change. If the signature is by a trustee,
\nexecutor, administrator, guardian, attorney-in-fact, officer of a corporation
\nor another person acting in a fiduciary or representative capacity, the
\nsigner’s full title and proper evidence of the authority of such person to act
\nin that capacity must be indicated.<\/p>\n
You may not rescind any withdrawal, and any options you withdraw will
\nthereafter be deemed not properly tendered for purposes of the offer, unless
\nyou properly re-tender those options before the expiration date by following
\nthe procedures described in Section 4.<\/p>\n
Neither we nor any other person is obligated to give notice of any defects
\nor irregularities in any Notice to Withdraw from the Offer or any new or
\namended Election Form, nor will anyone incur any liability for failure to give
\nany notice. We will resolve, in our discretion, all questions as to the form
\nand validity, including time of receipt, of any Notices to Withdraw from the
\nOffer and any new or amended Election Forms. Our determination of these matters
\nwill be final and binding.<\/p>\n
6. Acceptance of options for exchange and issuance of restricted stock.<\/p>\n
Upon the terms and conditions of the offer and promptly following the
\nexpiration date, we will accept for exchange and will cancel those Eligible
\nOptions that are properly tendered and not validly withdrawn before the<\/p>\n
20<\/p>\n
expiration date. Once the options are cancelled, you will no longer have any
\nrights with respect to those options. Subject to the terms and conditions of
\nthis offer, if your options are properly tendered and accepted for exchange,
\nthese options will be cancelled promptly after the date of our acceptance,
\nwhich we anticipate to be on or about November 28, 2001, and we will forward to
\nyou, as soon as practicable, a restricted stock agreement for execution in
\nconnection with the issuance to you of restricted stock.<\/p>\n
The restricted stock will be granted under the 2001 Plan on November 28,
\n2001, unless we extend this Offer to Exchange or unless we decide to reject all
\ntendered options. We expect to distribute the restricted stock agreements
\npromptly after expiration of this Offer to Exchange and after we have accepted
\nand cancelled the tendered options. Your award of restricted stock will be
\nevidenced by a restricted stock agreement between you and us, but you will not
\nreceive a stock certificate for the restricted stock. Until the restricted
\nstock vests, it will be held in the custody of Paine Webber.<\/p>\n
Generally, as the shares vest, they will be deposited into your account with
\nPaine Webber, subject to payment of applicable withholding taxes. Following
\neach vesting date, if you are still employed by us, have signed the restricted
\nstock agreement and related documents and have opened your account with Paine
\nWebber, 12.5% of the shares of your original award of restricted stock will be
\ndeposited into your Paine Webber account within approximately six business
\ndays, subject to payment of applicable withholding taxes.<\/p>\n
We will not accept partial tenders of your Eligible Options or Special
\nOptions. However, you may tender the remaining portion of an option which you
\nhave partially exercised. Accordingly, to participate in the offer, you must
\ntender all of your unexercised Eligible Options and Special Options whether or
\nnot such options are partially exercised.<\/p>\n
InfoSpace will not issue any new options to Eligible Employees for a period
\nof at least six months from the date of the restricted stock grant, regardless
\nof whether or not the Eligible Employee participates in the offer. We will
\ndefer the grant of new options to Eligible Employees because it is necessary
\nfor us to do so to avoid incurring compensation expense because of accounting
\nrules that could apply to these interim option grants as a result of the offer.
\nTherefore, Eligible Employees generally will not be eligible to receive any new
\noption grants until the 2002 annual review in October 2002.<\/p>\n
If you do not accept the offer, or if we do not accept any returned options,
\nyou will keep all of your current options, including any Special Options, and
\nyou will not receive any restricted stock. The options will retain their
\ncurrent exercise prices and vesting schedule until you exercise them or they
\nterminate or expire by their terms.<\/p>\n
Within three (3) business days prior to the expiration of the offer, we
\nintend to e-mail you a confirmation of receipt. However, this is not by itself
\nan acceptance of your options for exchange. For purposes of the offer, we will
\nnot be deemed to have accepted your options for exchange until such time as of
\nwhen we have given oral or written notice to the Eligible Employees generally
\nof such acceptance of such options for exchange, which notice may be made by
\npress release. Subject to our rights to extend, terminate and amend the offer,
\nwe presently expect that we will accept all properly tendered options that are
\nnot validly withdrawn promptly after the expiration of the offer. Options
\naccepted for exchange will be cancelled on the Cancellation Date, which we
\npresently expect to be on or about November 28, 2001. We currently anticipate
\nannouncing our decision to accept or reject the exchange offers on or about
\nNovember 28, 2001.<\/p>\n
7. Conditions of the offer.<\/p>\n
Notwithstanding any other provision of the offer, we will not be required to
\naccept any options tendered for exchange, and we may terminate or amend the
\noffer, or postpone our acceptance and cancellation of any options tendered for
\nexchange, in each case, subject to Rule 13e-4(f)(5) under the Securities
\nExchange Act, if at any time on or after October 29, 2001, and prior to the
\nExpiration Date, any of the following events has occurred, or has been
\ndetermined by us to have occurred, and, in our reasonable judgment in any case
\nand regardless of the circumstances giving rise to the event, including any
\naction or omission to act by us, the occurrence of such event<\/p>\n
21<\/p>\n
or events makes it inadvisable for us to proceed with the offer or with such
\nacceptance and cancellation of options tendered for exchange:<\/p>\n
. there shall have been threatened or instituted or be pending any action or
\n proceeding by any governmental, regulatory or administrative agency or
\n authority that directly or indirectly challenges the making of the offer,
\n the acquisition of some or all of the tendered options pursuant to the
\n offer, the issuance of restricted stock, or otherwise relates in any
\n manner to the offer, or that, in our reasonable judgment, could materially
\n and adversely affect our business, condition, income, operations or
\n prospects or materially impair the contemplated benefits of the offer to
\n InfoSpace;<\/p>\n
. there shall have been any action threatened, pending or taken, or approval
\n withheld, or any statute, rule, regulation, judgment, order or injunction
\n threatened, proposed, sought, promulgated, enacted, entered, amended,
\n enforced or deemed to be applicable to the offer or InfoSpace, by any
\n court or any authority, agency or tribunal that, in our reasonable
\n judgment, would or might directly or indirectly:<\/p>\n
(i) make the acceptance for exchange of, or issuance of restricted stock
\n for, some or all of the tendered options illegal or otherwise restrict
\n or prohibit consummation of the offer or that otherwise relates in any
\n manner to the offer;<\/p>\n
(ii)delay or restrict our ability, or render us unable, to accept for
\n exchange, or issue restricted stock for, some or all of the tendered
\n options;<\/p>\n
(iii)materially impair (such as by increasing the accounting or other costs
\n of the offer to InfoSpace) the contemplated benefits of the offer to
\n InfoSpace, where the contemplated benefits include the opportunity for
\n us to align employee and stockholder interests and offer Eligible
\n Employees a valuable incentive to stay with InfoSpace and to achieve
\n high levels of performance; or<\/p>\n
(iv)materially and adversely affect InfoSpace’s business, condition,
\n income, operations or prospects or materially impair the contemplated
\n benefits of the offer to InfoSpace;<\/p>\n
. a tender or exchange offer for some or all of our shares, or a merger or
\n acquisition proposal for InfoSpace, shall have been proposed, announced or
\n made by another person or entity or shall have been publicly disclosed;<\/p>\n
. the number of tendered options underlying shares of our common stock is
\n not sufficient to make the exchange worthwhile to InfoSpace; specifically,
\n we will not be obligated to cancel any options and grant any restricted
\n stock pursuant to this offer if optionholders as a group tender options to
\n purchase less than 46,755,234 shares of our common stock (95% of the
\n aggregate shares underlying the Eligible Options and Special Options).
\n However, we may choose to cancel options and grant restricted stock
\n pursuant to this offer if options to purchase less than 46,755,234 shares
\n of our common stock are tendered.<\/p>\n
. any change or changes shall have occurred in InfoSpace’s business,
\n condition, assets, income, operations, prospects or stock ownership that,
\n in our reasonable judgment, is or may be material to InfoSpace or may
\n materially impair the contemplated benefits of the offer to InfoSpace;<\/p>\n
. any general suspension of trading in, or limitation on prices for,
\n securities on any national securities exchange, the Nasdaq stock market or
\n the over-the-counter market; or<\/p>\n
. any actual or anticipated change in United States generally accepted
\n accounting principles which could materially and adversely effect the
\n manner in which we are required for financial accounting purposes to
\n account for the offer.<\/p>\n
The conditions to the offer are for our benefit. We may assert them in our
\ndiscretion regardless of the circumstances giving rise to them before the
\nexpiration date. We may waive them, in whole or in part, at any time and from
\ntime to time prior to the expiration date, in our discretion, whether or not we
\nwaive any other condition to the offer. Our failure at any time to exercise any
\nof these rights will not be deemed a waiver of any such rights. The waiver of
\nany of these rights with respect to particular facts and circumstances will not
\nbe deemed a waiver with respect to any other facts and circumstances. Any
\ndetermination we make concerning the events described in this Section 7 will be
\nfinal and binding upon all persons.<\/p>\n
22<\/p>\n
8. Price range of shares underlying the options.<\/p>\n
The shares underlying your options are currently traded on the Nasdaq
\nNational Market under the symbol “INSP.” The following table shows, for the
\nperiods indicated, the high and low sales prices per share of our common stock
\nas reported by the Nasdaq National Market, as adjusted for stock dividends and
\nstock splits.<\/p>\n
\n\n High Low
\n ——— ——–
\n
\n Fiscal Year 2001:
\n Quarter ended March 31, 2001………………….. $ 9.8750 $ 2.0625
\n Quarter ended June 30, 2001…………………… 5.6500 1.5625
\n Quarter ended September 30, 2001………………. 3.7900 1.0600<\/p>\n Fiscal Year 2000:
\n Quarter ended March 31, 2000………………….. $138.5000 $40.2500
\n Quarter ended June 30, 2000…………………… 78.2500 37.1250
\n Quarter ended September 30, 2000………………. 60.0000 25.5000
\n Quarter ended December 31, 2000……………….. 31.3125 5.4375<\/p>\n
Fiscal Year 1999:
\n Quarter ended March 31, 1999………………….. $ 12.4063 $ 3.5625
\n Quarter ended June 30, 1999…………………… 18.1563 8.8125
\n Quarter ended September 30, 1999………………. 14.7345 9.2188
\n Quarter ended December 31, 1999……………….. 54.2500 9.6875
\n<\/c><\/c><\/s><\/caption>\n<\/table>\n
As of October 26, 2001, the last reported sale price during regular trading
\nhours of our common stock, as reported by the Nasdaq National Market, was $1.67
\nper share.<\/p>\n
WE RECOMMEND THAT YOU EVALUATE CURRENT MARKET QUOTES FOR OUR COMMON STOCK,
\nAMONG OTHER FACTORS, BEFORE DECIDING WHETHER OR NOT TO TENDER YOUR OPTIONS.<\/p>\n
9. Source and amount of consideration; terms of restricted stock.<\/p>\n
Consideration.<\/p>\n
We will issue shares of common stock subject to certain vesting restrictions
\n(the “restricted stock”) under our 2001 Plan in exchange for the Eligible
\nOptions properly tendered to and accepted for exchange and cancelled by us.
\nParticipating employees will also be required to surrender any Special Options.
\nWe will cancel all surrendered Special Options but no restricted stock will be
\ngranted for the Special Options. We will issue one share of restricted stock
\nfor each four shares of common stock underlying the tendered Eligible Options
\nwhich we accept and cancel in accordance with the terms of this offer with
\nfractional shares rounded up to the nearest whole share. In addition, Eligible
\nEmployees who participate in the exchange will be eligible to receive a
\nSupplemental Grant of restricted stock under the 2001 Plan, as determined in
\nthe sole discretion of the board of directors. If we receive and accept tenders
\nof all Eligible Options from all Eligible Employees, subject to the terms and
\nconditions of this offer, we will issue 7,416,038 shares of restricted stock in
\nexchange for the shares underlying the Eligible Options. These shares would
\nequal approximately 3% of the total shares of our common stock outstanding as
\nof October 25, 2001.<\/p>\n
Terms of Restricted Stock.<\/p>\n
The following description of the terms of the restricted stock is a summary
\nand is not complete. The description is subject to, and qualified in its
\nentirety by reference to, all provisions of the 2001 Plan and the forms of
\nrestricted stock agreement. The 2001 Plan, as amended, and the forms of
\nrestricted stock agreement have been filed with the SEC as exhibits to the
\nSchedule TO. Please contact us by email at eo@infospace.com or at 601 108\/th\/
\nAvenue N.E., Suite 1200, Bellevue, Washington 98004, Attention: Brent
\nSatterlee, (telephone: 425-709-8008), to receive a copy of the 2001 Plan or the
\nrestricted stock agreements. We will promptly furnish you with copies of these
\ndocuments at our expense.<\/p>\n
23<\/p>\n
General.<\/p>\n
Awards of restricted stock under the 2001 Plan may be made to employees and
\nconsultants of InfoSpace and its subsidiaries. At present, 25,000,000 shares of
\ncommon stock are reserved for issuance under our 2001 Plan. Under the terms of
\nthe 2001 Plan, the shares of common stock underlying an option cancelled as
\npart of this offer are available for subsequent grants under the 2001 Plan. We
\nhave amended the 2001 Plan in connection with this offer, a copy of which is
\nattached to the Schedule TO as Exhibit (d)(1).<\/p>\n
The restricted stock issued under the 2001 Plan will be evidenced by a
\nrestricted stock agreement between us and each Eligible Employee whose tendered
\nEligible Options are accepted and cancelled in the offer. The restricted stock
\nagreement will contain the vesting provisions and other restrictions applicable
\nto the restricted stock to be issued to each such Eligible Employee. The shares
\nof restricted stock will be subject to forfeiture and other restrictions until
\nthe shares vest. These restrictions include prohibitions against sale,
\nassignment, transfer, conveyance, pledge, hypothecation, gift or other
\nencumbrance or disposition.<\/p>\n
We will issue in your name the number of shares of restricted stock that you
\nare entitled to receive in connection with the offer. Until the shares have
\nvested in accordance with the restricted stock agreement, Paine Webber will
\nhold the certificates representing the unvested portion of your restricted
\nshares in their custody. On each vesting date, subject to the terms and
\nconditions of the 2001 Plan and your restricted stock agreement, after you have
\nprovided for the payment to us of any required federal and state income and
\nwithholding taxes with respect to the vested portion of the restricted stock by
\nexecution of an Irrevocable Standing Order to Sell Shares with Paine Webber, we
\nwill deliver to your Paine Webber account the vested portion of the restricted
\nstock issued to you pursuant to the offer. You will have dividend, voting and
\nother stockholder rights with respect to all of the restricted stock, even
\nthough the stock certificate representing the unvested portion of the
\nrestricted stock is held in a separate account in the custody of Paine Webber,
\nuntil you vest in that portion of the restricted stock. In addition, we will
\nsend you all notices of meetings, proxy statements, proxies and other materials
\ndistributed to our stockholders. However, if you do not vest in the unvested
\nportion of the restricted stock and it is forfeited to us, you will lose all
\nstockholder rights with respect to those shares, and you will not be sent
\nnotices of meetings, proxy statements or other materials distributed to our
\nstockholders unless you otherwise continue to hold shares of our common stock.<\/p>\n
You may generally sell your shares once they have become vested pursuant to
\nthe terms of your restricted stock grant and the terms of the 2001 Plan.
\nIncluded with the offering materials will be information and instructions
\nregarding setting up your account with Paine Webber. We anticipate that the
\nvested shares (less the shares held back for tax withholding) will be deposited
\nto your Paine Webber account on the morning of the next trading day following
\neach vesting date. Once sufficient shares have been sold to cover your tax
\nobligations and Paine Webber’s commission, any remaining shares will be
\ndeposited in your account approximately six business days after the vesting
\ndate. This delay is necessary to allow adequate time for Paine Webber to sell
\nthe shares to pay the taxes and for your account to be reconciled.<\/p>\n
Note: If you are an executive of InfoSpace subject to the reporting
\nrequirements of Section 16 of the Securities Act of 1934, as amended, or you
\nare a specifically named “Covered Person” under the InfoSpace Company Policy
\nRegarding Special Trading Procedures, you may be required to file with the SEC
\na 10b5-1 trading plan in lieu of signing and delivering an Irrevocable Standing
\nOrder to Sell Shares.<\/p>\n
Vesting; Forfeiture.<\/p>\n
The shares of restricted stock will vest over a two-year period that will
\nbegin on the exchange date (assuming your continued employment and other
\nconditions to vesting are met). 12.5% of the shares will vest every three-month
\nperiod beginning on February 27, 2002 (February 27, 2002, May 27, 2002, August
\n27, 2002, November 27, 2002, February 27, 2003, May 27, 2003, August 27, 2003
\nand November 27, 2003). In the event a three-month amount is a fraction, we
\nwill round the number up to the nearest whole number. For example, if you
\nreceive 10,500 shares of restricted stock, 1,313 shares will vest in each of
\nthe first seven three-month periods and<\/p>\n
24<\/p>\n
1,309 shares will vest in the last three-month period. (10,500 divided by 8
\nequals 1312.5, which rounds up to 1,313 shares per three-month period. After
\nthe first seven three-month periods, 9,191 shares would have vested and the
\nremaining 1,309 shares would vest in the last three-month period.) This vesting
\nschedule will apply to the shares of restricted stock regardless of whether or
\nnot the options exchanged in this offer had already vested. Unvested shares of
\nrestricted stock are subject to forfeiture by you as described below.<\/p>\n
If you change your status from full-time to part-time and your status is
\npart-time for more than 50% of any given vesting period, vesting of your
\nrestricted stock will be suspended until the next period in which you are
\nfull-time for more than 50% of the given vesting period. The vesting period(s)
\nthat you missed will be added on at the end of the vesting schedule.<\/p>\n
In the event you terminate your employment with us, we terminate your
\nemployment with or without cause or your employment is terminated because of
\nyour death or disability, you generally will forfeit to us all unvested shares
\nof restricted stock. For example, assume you receive 10,000 shares of
\nrestricted stock in this offer. One year later, you terminate your employment
\nand at that time, 5,000 shares of restricted stock have vested. This means that
\nthe remaining 5,000 shares of unvested restricted stock are forfeited. You will
\nno longer have any rights whatsoever to shares of restricted stock that are
\nforfeited to us. This forfeiture is what makes the stock restricted.<\/p>\n
If you are absent for more than 50% of any given vesting period due to being
\non an approved leave of absence, the vesting of your restricted stock will be
\nsuspended for that period — i.e., you would not receive any vesting for that
\nperiod. For any such vesting period in which an employee does not vest due to
\nhaving been on an approved leave of absence for more than 50% of that vesting
\nperiod, an additional vesting period will be added on to the end of the vesting
\nschedule for that employee subject to the terms and conditions of the Offer to
\nExchange. For example, assume you are employed full-time from the grant date
\nthen go out on an approved leave of absence on February 1, 2002 and return to
\nfull-time work with the Company on May 1, 2002. You would vest for the period
\nending on February 27, 2002 because you worked for more than 50% of that
\nvesting period. You would not vest for the period ending on May 27, 2002
\nbecause you would have been on leave for more than 50% of the vesting period.
\nInstead, an additional vesting period would be added following November 27,
\n2003 (the last scheduled vesting date) and you would be scheduled to be 100%
\nvested on February 27, 2004 assuming all other conditions to vesting are met.<\/p>\n
Change of Control.<\/p>\n
If we are acquired prior to the expiration of the offer, you may withdraw
\nyour tendered options and have the rights afforded you under the particular
\nstock plan and your existing stock option agreements evidencing those options.<\/p>\n
If in the future an outside party, or a “buyer,” acquires control of
\nInfoSpace, the buyer may assume your unvested restricted stock or you may
\nreceive accelerated vesting, depending on the following circumstances:<\/p>\n
. If you continue employment with the buyer, your vesting schedule generally
\n will continue. The difference is that rather than receiving shares of
\n common stock in InfoSpace as you vest, you may receive either shares of
\n stock in the buyer or cash as you vest. The amount of stock or cash you
\n receive will be based on the per share amounts paid by the buyer to the
\n InfoSpace stockholders in connection with the buyer’s acquisition of
\n InfoSpace. In other words, your restricted shares would be converted into
\n a right to receive what the InfoSpace stockholders received in the
\n acquisition. In all likelihood, this would either be stock in the buyer,
\n cash or a combination of both. The actual amounts you receive would be
\n subject to the appropriate exchange ratios that are determined in the
\n acquisition.<\/p>\n
. In addition, if you are currently an executive officer of InfoSpace who is
\n subject to the reporting requirements of Section 16 of the Securities
\n Exchange Act, you will be entitled to accelerated vesting of any unvested
\n restricted stock if your employment is terminated as a result of an
\n involuntary termination within 24 months following a change of control of
\n InfoSpace.<\/p>\n
25<\/p>\n
Your restricted stock agreement contains the provisions, if any, regarding the
\neffect of a change of control on your restricted stock.<\/p>\n
PLEASE BE AWARE THAT THE DATES LISTED ABOVE AND THE DESCRIPTION OF POTENTIAL
\nBUYERS ARE ONLY BEING USED AS EXAMPLES. WE ARE NOT MAKING ANY REPRESENTATIONS,
\nWARRANTIES, COVENANTS OR STATEMENTS REGARDING YOUR EMPLOYMENT OR THAT AN
\nACQUISITION OF INFOSPACE WILL OR WILL NOT OCCUR IN THE FUTURE.<\/p>\n
Tax Consequences.<\/p>\n
You should refer to Section 15 of this Offer to Exchange for a discussion of
\nU.S. federal tax consequences resulting from the exchange of options for
\nrestricted stock.<\/p>\n
10. Information concerning InfoSpace.<\/p>\n
Our principal executive offices are located at 601 108\/th\/ Avenue N.E.,
\nSuite 1200, Bellevue, Washington 98004, and our telephone number is (425)
\n201-6100.<\/p>\n
InfoSpace, Inc. is an international provider of consumer and commerce
\nInternet infrastructure products and services. We distribute our products and
\nservices on multiple platforms, including PCs and non-PC devices which use
\nground wire Internet connections (or wireless devices) and cell phones, pagers
\nand personal digital assistants (or wireless devices), to our affiliate network
\nof Web sites and through our distribution partners, including wireless carriers
\nand device manufacturers and merchant banks and aggregators. We generate
\nrevenues through fees paid to us by these affiliates and distribution partners
\nwho then offer our products and services to their customers and end-users.<\/p>\n
11. Financial information.<\/p>\n
The following tables set forth selected financial and operating data of
\nInfoSpace. The selected audited historical statement of operations data for the
\nyears ended December 31, 1999 and December 31, 2000 and the selected audited
\nhistorical balance sheet data as of December 31, 1999 and December 31, 2000
\nhave been derived from the financial statements included in our annual report
\non Form 10-K for the year ended December 31, 2000. The selected historical
\nstatement of operations data for the six months ended June 30, 2000 and June
\n30, 2001 and the selected historical balance sheet data as of June 30, 2001,
\nwhich are included in our quarterly report on Form 10-Q for the quarter ended
\nJune 30, 2001, are unaudited, but include, in the opinion of management, all
\nadjustments, consisting only of normal recurring adjustments, necessary for a
\nfair presentation of such data. The information presented below should be read
\ntogether with our financial statements and related notes. We have presented the
\nfollowing data in thousands, except per share amounts.<\/p>\n
26<\/p>\n
INFOSPACE, INC.<\/p>\n
CONDENSED CONSOLIDATED BALANCE SHEETS
\n (Amounts in thousands, except share data)<\/p>\n
\n\n December 31,
\n ——————- June 30,
\n 2000 1999 2001
\n ———- ——– ———–
\n ASSETS (unaudited)
\n ——
\n
\nCurrent assets:…………………………………
\n Cash and cash equivalents…………………….. $ 370,148 $414,661 $ 268,161
\n Accounts receivable, net……………………… 33,881 13,551 17,414
\n Other current assets…………………………. 36,812 29,352 50,800
\n ———- ——– ———-
\n Total current assets……………………… 440,841 457,564 336,375<\/p>\nLong-term and other investments………………….. 154,025 222,761 164,394
\nProperty and equipment, net, and other long-term
\n assets………………………………………. 56,212 13,924 56,246
\nIntangible assets, net………………………….. 621,032 259,670 615,501
\n ———- ——– ———-
\n Total assets…………………………….. $1,272,110 $953,919 $1,172,516
\n ========== ======== ==========<\/p>\n
\n LIABILITIES AND STOCKHOLDERS’ EQUITY
\n ————————————
\n
\nCurrent liabilities…………………………….. $ 73,966 $ 39,267 $ 62,420
\nMinority interest………………………………. 21,599 — —
\nOther noncurrent liabilities…………………….. 7,973 5,632 3,477
\nStockholders’ equity……………………………. 1,168,572 909,020 1,106,619
\n ———- ——– ———-
\n Total liabilities and stockholders’ equity….. $1,272,110 $953,919 $1,172,516
\n ========== ======== ==========
\n<\/c><\/c><\/c><\/s><\/caption>\n<\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n
27<\/p>\n
INFOSPACE, INC.<\/p>\n
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS<\/p>\n
AND COMPREHENSIVE INCOME<\/p>\n
(Amounts in thousands, except per share data)<\/p>\n
\n\n Years Ended Six Months Ended
\n December 31, June 30,
\n ——————– ——————–
\n 2000 1999 2001 2000
\n ——— ——— ——— ———
\n (unaudited)
\n
\nRevenues (includes related party revenues of
\n $32,095, $2,921, $12,889 and $8,799)……………………. $ 214,530 $ 71,980 $ 97,507 $ 89,264
\nCost of revenues……………………………………….. 35,627 13,472 22,335 14,243
\n Gross profit………………………………………… 178,903 58,508 75,172 75,021
\n Total operating expenses……………………………… 492,855 161,052 271,659 230,572
\n ——— ——— ——— ———
\n Loss from operations……………………………… (313,952) (102,544) (196,487) (155,551)
\nOther income, net………………………………………. 27,682 22,342 10,563 14,707
\nGain (loss) on investments, net………………………….. 9,222 (6,016) 15,151
\nLoss from operations before income tax expense, minority
\n interest, cumulative effect of change in accounting principle
\n and preferred stock dividend…………………………… (277,048) (80,202) (191,940) (125,693)
\nIncome tax expense……………………………………… (137) (187) (24)
\nMinority interest………………………………………. (3,171) (6,398)
\n ——— ——— ——— ———
\nLoss from operations before cumulative effect of change in
\n accounting principle and preferred stock dividend………… (280,356) (80,202) (192,127) (132,115)
\nCumulative effect of change in accounting principle………… (2,056) (3,171) (2,055)
\n ——— ——— ——— ———
\nNet loss………………………………………………. (282,412) (80,202) (195,298) (134,170)
\n ========= ========= ========= =========
\nPreferred stock dividend………………………………… (159,931)
\n ——— ——— ——— ———
\nNet loss applicable to common stockholders………………… $(282,412) $(240,133) $(195,298) $(134,170)
\n ========= ========= ========= =========
\nBasic and diluted net loss per share………………………
\n Loss per share before accounting change………………… $ (0.92) $ (0.93) $ (0.59) $ (0.44)
\n Accounting change……………………………………. (0.01) — (0.01) (0.01)
\n ——— ——— ——— ———
\n Loss per share………………………………………. $ (0.93) $ (0.93) $ (0.60) $ (0.45)
\n ========= ========= ========= =========
\nShares used in computing diluted net loss per share………… 304,480 257,752 324,167 296,726
\n ========= ========= ========= =========
\nShares used in computed diluted net loss per share…………. 304,480 257,752 324,167 296,726
\n ========= ========= ========= =========
\nOther comprehensive income:………………………………
\nNet loss applicable to common stockholders………………… $(282,412) $(240,133) $(195,298) $(134,170)
\n Foreign currency translation adjustment………………… (316) 36 (318) (350)
\n Unrealized gain (loss) on equity investments……………. (95,279) 79,570 12,280 (42,396)
\n ——— ——— ——— ———
\nComprehensive income……………………………………. $(378,007) $(160,527) $(183,336) $(176,916)
\n ========= ========= ========= =========
\n<\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n 28<\/p>\n
The financial information in the following documents is incorporated herein
\nby reference:<\/p>\n
. Our annual report on Form 10-K for the fiscal year ended December 31,
\n 2000, as filed with the SEC on April 2, 2001;<\/p>\n
. Our quarterly report on Form 10-Q for the quarter ended March 31, 2001, as
\n filed with the SEC on May 15, 2001; and<\/p>\n
. Our quarterly report on Form 10-Q for the quarter ended June 30, 2001, as
\n filed with the SEC on August 13, 2001.<\/p>\n
For a copy of our audited financial statements for the two fiscal years
\nended December 31, 2000 and December 31, 1999, as filed with the SEC, please
\nsee the Form 10-K for the fiscal year ended December 31, 2000.<\/p>\n
For our most recent unaudited balance sheet, unaudited comparative
\nyear-to-date income statements and related earnings per share data, unaudited
\nstatements of cash flows and unaudited comprehensive income, as filed with the
\nSEC, please see the Form 10-Q for the quarter ended June 30, 2001.<\/p>\n
As of September 30, 2001, InfoSpace’s book value per share was $2.91.<\/p>\n
SEE SECTION 18 FOR INSTRUCTIONS ON HOW YOU CAN OBTAIN COPIES OF OUR SEC
\nFILINGS AND COPIES OF THE FINANCIAL STATEMENTS REFERENCED ABOVE.<\/p>\n
12. Interests of directors and officers; transactions and arrangements
\nconcerning the options.<\/p>\n
A list of our directors and executive officers is attached to this Offer to
\nExchange as Schedule A. Directors and executive officers, as a group,
\nbeneficially own Eligible Options under the 1996 Plan and the 2001 Plan having
\nan exercise price of $3.00 or more per share to purchase a total of 10,400,000
\nshares of our common stock, which represents approximately 35% of the shares
\nunderlying all Eligible Options outstanding under the 1996 Plan and the 2001
\nPlan.<\/p>\n
Directors who are employees and executive officers of InfoSpace or one of
\nits U.S. subsidiaries are eligible to participate in the offer; however,
\noutside directors are not eligible to participate in the offer. The directors
\nwho are employees and the executive officers of InfoSpace or one of its U.S.
\nsubsidiaries, as a group, will receive approximately 2,600,000 shares of
\nrestricted stock in the exchange offer and 2,850,000 shares of restricted stock
\npursuant to the Supplemental Grants, assuming all employee directors and
\nexecutive officers participate in the exchange offer.<\/p>\n
29<\/p>\n
The following table sets forth certain information regarding the ownership
\nof Eligible Options and Special Options as of November 16, 2001 by (i) each
\nperson who is known by us to own beneficially more than 5% of the outstanding
\nshares of our common stock, (ii) each of our directors and (iii) each of our
\nexecutive officers. Note that 5% stockholders and directors who are not
\nemployees are not eligible to participate in the offer.<\/p>\n
\n\n Eligible Options Special Options
\n —————- —————–
\nPrincipal Stockholders, Directors and Executive Officers Number Percent Number Percent
\n——————————————————– ——— ——- ——— ——-
\n
\nNaveen Jain (1)…………………………………….. 5,075,000 16.9% 1,493,000 7.5%
\nAcorn Ventures-IS, LLC (2)…………………………… 0 — (3) —
\nRasipuram V. Arun…………………………………… 1,500,000 5.0% 690,000 3.4%
\nYork Baur………………………………………….. 0 — 0 —
\nEdmund O. Belsheim, Jr………………………………. 2,500,000 8.3% 400,000 2.0%
\nJan E. Claesson…………………………………….. 0 — 0 —
\nJohn E. Cunningham, IV (2)…………………………… 0 — (4) —
\nPeter L.S. Currie (2)……………………………….. 0 — (5) —
\nTammy D. Halstead…………………………………… 600,000 2.0% 202,000 1.0%
\nRichard D. Hearney (2)………………………………. 0 — 0 —
\nPrakash Kondepudi…………………………………… 800,000 2.7% 116,500 0.6%
\nRufus W. Lumry, III (2)……………………………… 0 — (3) —
\nWilliam D. Savoy (2)………………………………… 0 — (6) —
\nLewis M. Taffer (2)…………………………………. 0 — 0 —
\n<\/c><\/c><\/c><\/c><\/s><\/caption>\n<\/table>\n——–<\/p>\n
(1)Includes 75,000 shares subject to Eligible Options and 94,000 shares subject
\n to Special Options granted to Anuradha Jain. Anuradha Jain is Naveen Jain’s
\n spouse.<\/p>\n
(2)Not eligible to participate in the exchange.<\/p>\n
(3)Rufus W. Lumry, III, a member of our Board of Directors, is the principal
\n stockholder, sole director and President of Acorn Ventures, Inc., the sole
\n member of Acorn Ventures-IS, LLC. Although not eligible to participate in
\n the exchange, Mr. Lumry holds options to purchase 50,000 shares that would
\n otherwise be deemed Special Options.<\/p>\n
(4)Though not eligible to participate in the exchange, Mr. Cunningham holds
\n options to purchase 50,000 shares that would otherwise be deemed Special
\n Options.<\/p>\n
(5)Though not eligible to participate in the exchange, Mr. Currie holds options
\n to purchase 50,000 shares that would otherwise be deemed Special Options.<\/p>\n
(6)Though not eligible to participate in the exchange, Mr. Savoy holds options
\n to purchase 80,500 shares that would otherwise be deemed Special Options.<\/p>\n
In the previous sixty days, the Company has made initial option grants under
\nthe 1996 Plan to the following directors and officers in connection with their
\ncommencement of service to the Company:<\/p>\n
. Richard Hearney–55,000 shares granted on September 7, 2001 at $1.32 per
\n share<\/p>\n
. Jan Claesson–1,000,000 shares granted on September 24, 2001 at $1.27 per
\n share<\/p>\n
. York Baur–330,000 shares granted on September 10, 2001 at $1.40 per
\n share; 270,000 shares granted on October 1, 2001 at $1.40 per share<\/p>\n
Other than as set forth above or periodic purchases of our common stock
\npursuant to our 1998 Employee Stock Purchase Plan and grants of stock options
\nin the ordinary course to employees who are not executive officers, there have
\nbeen no transactions in options to purchase our common stock or in our common
\nstock that were effected during the past sixty (60) days by InfoSpace or, to
\nour knowledge, by any current executive officer, director, affiliate or
\nsubsidiary of InfoSpace.<\/p>\n
30<\/p>\n
None of our executive officers or directors have as yet indicated their
\nintention to tender their options in the offer, other than:<\/p>\n
. Edmund O. Belsheim, our President and Chief Operating Officer, and<\/p>\n
. Tammy D. Halstead, our Chief Financial Officer.<\/p>\n
13. Status of options acquired by us in the offer; accounting consequences
\nof the offer.<\/p>\n
Options we acquire through the offer will be cancelled and the shares
\nsubject to those options granted under the 1996 Plan and 2001 Plan will be
\nreturned to the applicable pool of shares available for grants under the 1996
\nPlan and the 2001 Plan. To the extent these shares are not issued as restricted
\nstock in connection with the offer under the 2001 Plan, the shares will be
\navailable for future awards to employees and other eligible plan participants
\nunder the 1996 Plan and the 2001 Plan without further stockholder action,
\nexcept as required by applicable law or the rules of the Nasdaq National Market
\nor any other securities quotation system or any stock exchange on which our
\nshares are then quoted or listed.<\/p>\n
The exchange and cancellation of tendered options and the subsequent
\nissuance of restricted stock will result in the recognition of a compensation
\ncost by us. The compensation cost is measured as the quoted market price of our
\ncommon stock on the date a share of restricted stock is granted. As shares
\nvest, we will recognize compensation costs. The expense must be amortized
\nagainst our earnings over the vesting period of the restricted stock. The
\nshares of restricted stock issued in the exchange will not be treated as
\nvariable awards for financial accounting purposes.<\/p>\n
As a result of this offer, all options that are eligible to be tendered but
\nthat are not tendered and accepted may be treated for financial reporting
\npurposes as variable awards. This means that we may be required to record
\nnon-cash stock compensation charges reflecting any increases and decreases in
\nthe price of InfoSpace’s common stock. The higher the market value of our
\ncommon stock, the greater the non-cash stock compensation expense we would have
\nto record. We would have to continue to reflect the impact of increases and
\ndecreases in the price of InfoSpace’s common stock in InfoSpace’s statement of
\noperations until the options are exercised, forfeited or terminated. Options
\nwhich were eligible but not tendered in this offer and accepted will retain
\ntheir original term, which is generally ten (10) years, subject to earlier
\nexpiration or termination of the option upon the occurrence of certain events,
\nsuch as the optionee’s termination of employment.<\/p>\n
14. Legal matters; regulatory approvals.<\/p>\n
We are not aware of any license or regulatory permit that appears to be
\nmaterial to our business that might be adversely affected by our exchange of
\noptions and issuance of restricted stock as contemplated by the offer, or of
\nany approval or other action by any government or governmental, administrative
\nor regulatory authority or agency, domestic or foreign, that would be required
\nfor the acquisition or ownership of our options as contemplated herein. Should
\nany such approval or other action be required, we presently contemplate that we
\nwill seek such approval or take such other action. We cannot assure you that
\nany such approval or other action, if needed, could be obtained or what the
\nconditions imposed in connection with such approvals would entail or whether
\nthe failure to obtain any such approval or other action would result in adverse
\nconsequences to our business. Our obligation under the offer to accept tendered
\noptions for exchange and to issue new options for tendered options is subject
\nto the conditions described in Section 7.<\/p>\n
15. Material U.S. federal income tax consequences.<\/p>\n
The following is a general summary of the material U.S. federal income tax
\nconsequences of the exchange of options pursuant to the offer. This discussion
\nis based on the Internal Revenue Code, its legislative history, Treasury
\nRegulations thereunder and administrative and judicial interpretations thereof
\nas of the date of the offer, all of which are subject to change, possibly on a
\nretroactive basis. This summary does not discuss all of the tax consequences
\nthat may be relevant to you in light of your particular circumstances, nor is
\nit intended to be applicable in all respects to all eligible employees.<\/p>\n
31<\/p>\n
WE ADVISE ALL ELIGIBLE EMPLOYEES WHO MAY CONSIDER EXCHANGING THEIR OPTIONS
\nTO MEET WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL
\nAND FOREIGN TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.<\/p>\n
Issuance of Restricted Stock.<\/p>\n
If you do not make an election under Section 83(b) of the Internal Revenue
\nCode, you will have no taxable income at the time we grant you the restricted
\nstock. Instead, you will recognize ordinary income when (and if) the restricted
\nstock vests and no longer is subject to forfeiture. If you make a Section 83(b)
\nelection by filing the Section 83(b) election form. The election must be made
\nwithin thirty days of the grant of restricted stock by sending a Section 83(b)
\nelection to the Internal Revenue Service. You must also supply a copy to
\nInfoSpace (Attention: Payroll Department) along with a check to cover the
\nwithholding taxes, you recognize ordinary income at the time of grant of the
\nrestricted stock. However, if you later forfeit the restricted stock, no tax
\ndeduction is allowed with respect to the forfeiture. That is, you will not
\nreceive any credit for taxes paid with respect to such forfeited stock. In all
\ncases, the amount of ordinary income that you recognize will equal:<\/p>\n
. the fair market value of the shares at the time you recognize income, less<\/p>\n
. the amount (if any) you pay for the shares.<\/p>\n
For example, if you receive 3,200 shares of restricted stock on November 28,
\n2001, 400 shares would vest in each three-month period.<\/p>\n
If you do not make an election under Section 83(b) of the Code, you would
\nrecognize ordinary income for 400 shares on February 27, 2002 and the amount
\nwould be the closing price of our common stock on the following market trading
\nday. If our stock price is $1.00 on February 28, 2002, you would recognize $400
\nof ordinary income. If on February 28, 2002, our stock price is $1.25, you
\nwould recognize $500 of ordinary income.<\/p>\n
If you do make an election under Section 83(b) of the Code, you would
\nrecognize ordinary income for all 3,200 shares on November 28, 2001, the date
\nof grant. If our stock price is $1.00 on November 28, 2001, you would recognize
\n$3,200 of ordinary income. The subsequent vesting of the shares does not
\ntrigger additional recognition of ordinary income.<\/p>\n
We will generally be allowed a business expense deduction for the amount of
\nthe taxable income recognized by you in connection with the issuance or vesting
\nof your restricted stock.<\/p>\n
Subsequent Sale of Restricted Stock.<\/p>\n
Upon a sale or other taxable disposition of the restricted stock, you will
\nrecognize a taxable capital gain equal to the amount realized upon the sale or
\ndisposition of the shares less their fair market value at the time you
\nrecognized taxable income in connection with those shares. A capital loss will
\nresult to the extent the amount realized upon such sale is less than such fair
\nmarket value. The capital gain or capital loss will be long-term if the shares
\nare held for more than one (1) year prior to the sale.<\/p>\n
The capital gain holding period for unvested restricted stock will start
\neither (i) at the time the restricted stock vests, if no Section 83(b) election
\nis filed at the time of issuance, or (ii) at the time of issuance, if you file
\nthe Section 83(b) election within 30 days after the date of issuance.<\/p>\n
Effect on Incentive Stock Options Not Tendered.<\/p>\n
We do not believe that our offer to you will change any of the terms of your
\neligible incentive stock options if you do not accept the offer. However, the
\nInternal Revenue Service may characterize our offer to you as a<\/p>\n
32<\/p>\n
“modification” of those incentive stock options, even if you decline the offer.
\nA successful assertion by the Internal Revenue Service that your incentive
\nstock options are modified would extend your required holding period with
\nrespect to the shares purchased under those options in order to qualify all of
\nthe gain on a subsequent sale of those shares as long-term capital gain. That
\nextended holding period for long-term capital gain would require that any
\ntaxable sale or disposition of the shares not take place until the later of (i)
\ntwo (2) years from the date of the deemed modification of your incentive stock
\noptions or (ii) one (1) year from the date of the option exercise for those
\nshares. In addition, such a deemed modification may also cause a portion of
\nyour incentive stock options to be treated as non-qualified stock options upon
\nexercise.<\/p>\n
Withholding Taxes.<\/p>\n
At the time you recognize ordinary income (either upon vesting or, if you
\nmake an election under Section 83(b) of the Code, upon grant), we will have a
\nwithholding tax obligation, much like the obligation that arises when we pay
\nyour salary. This ordinary income will be reflected on your year-end W-2. In
\norder to facilitate the payment of this withholding tax obligation, we have
\narranged with Paine Webber to sell a portion of your shares of restricted stock
\n(including any Supplemental Grants) as they vest that is sufficient to pay the
\nwithholding obligation, and this arrangement will be reflected in your
\nrestricted stock agreement and your Irrevocable Standing Order to Sell Shares.
\nSpecifically, the following will happen:<\/p>\n
. You will be required to open an account with Paine Webber prior to the
\n vesting of your shares of restricted stock. We will require you to sign
\n and return the Irrevocable Standing Order to Sell Shares prior to any
\n vesting of your shares. The Irrevocable Standing Order to Sell Shares
\n includes provisions authorizing Paine Webber to sell a portion of your
\n vested shares of restricted stock to pay withholding taxes.<\/p>\n
Note: If you are an executive of InfoSpace subject to the reporting
\n requirements of Section 16 of the Securities Act of 1934, as amended, or
\n you are a specifically named “Covered Person” under the InfoSpace Company
\n Policy Regarding Special Trading Procedures, you may be required to file
\n with the SEC a 10b5-1 trading plan in lieu of signing and delivering an
\n Irrevocable Standing Order to Sell Shares.<\/p>\n
. If you make a Section 83(b) election, you must pay over to us the amount
\n of the withholding taxes by check at the time of the election. If you do
\n not pay over the amount of withholding taxes by check, your Section 83(b)
\n election will not be effective and Paine Webber will rely on your standing
\n order to sell that number of vested shares that is sufficient to obtain
\n proceeds to satisfy the withholding tax obligation after each vesting
\n date, as described below. You will pay Paine Webber’s usual trade
\n commission for this sale.<\/p>\n
. If you do not make a Section 83(b) election, on one of three market
\n trading days following each vesting date, Paine Webber will rely on your
\n standing order to sell that number of vested shares that is sufficient to
\n obtain proceeds to satisfy the withholding tax obligation. You will pay
\n Paine Webber’s usual trade commission for this sale.<\/p>\n
. InfoSpace will estimate the amount of taxes to be withheld based on the
\n closing stock price on the date of vesting. An estimate is needed because
\n your actual taxable compensation will be determined using the closing
\n price on the first market trading day following your vesting date. A
\n schedule will be provided to Paine Webber on the vesting date(s) showing
\n the shares to be sold for each employee to satisfy the estimated
\n withholding taxes.<\/p>\n
. The shares will be sold in three blocks on the three consecutive trading
\n days following the vesting date. You will be assigned to one of three
\n trading groups that will rotate in selling order for each quarterly
\n vesting date.<\/p>\n
. Your selling price will be reported by Paine Webber as the average sales
\n price of the block of shares for the trading group that you were assigned
\n to. This means that each of the three blocks may have a different selling
\n price associated with the shares traded to pay withholding taxes and
\n commissions.<\/p>\n
Note: However, if you are an executive officer of InfoSpace subject to the
\n reporting requirements of Section 16 of the Securities Exchange Act of
\n 1934, as amended, or you are a specifically named “Covered<\/p>\n
33<\/p>\n
Person” under the InfoSpace Company Policy Regarding Special Trading
\n Procedures (Covered Persons will be notified by the Company), your shares
\n will be sold in one-third increments over the three trading days following
\n vesting and your selling price will be tracked separately and will be
\n reported by Paine Webber as your actual sales price for your shares sold.<\/p>\n
. You will recognize a short-term capital gain or loss on the shares traded
\n to pay your withholding taxes and commission based on the difference
\n between the sales price of your shares sold to cover withholding and the
\n amount of taxable income recognized on the vesting date (equal to the
\n closing price of our stock on the trading day following your vesting
\n date). Any proceeds from your trade not used to pay withholding taxes or
\n commissions will be deposited into your Paine Webber account.<\/p>\n
. The amount of withholding taxes you owe will be based on the closing price
\n of our stock on the next market trading day following the vesting date. We
\n will attempt to estimate the correct number of vested shares to be sold to
\n cover withholding taxes based on the price of our stock on the vesting
\n date. However, it is possible that the proceeds obtained from the sale
\n will be either too much or too little to satisfy the withholding tax
\n obligations. In the event that excess proceeds are received, the excess
\n will be deposited in your Paine Webber account. In the event that the
\n proceeds received are insufficient to cover the withholding taxes, then we
\n reserve the right to either instruct Paine Webber to sell additional
\n vested shares or deduct the necessary amount from your wages.<\/p>\n
By participating in this exchange and signing the restricted stock agreement
\nand Irrevocable Standing Order to Sell Shares, you will authorize us and Paine
\nWebber to take the above actions to pay withholding taxes. In the event there
\nis not a market in our common stock, we will have the right to make other
\narrangements to satisfy the withholding obligations.<\/p>\n
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE
\nFEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATION IN THE OFFER.<\/p>\n
16. Extension of offer; termination; amendment.<\/p>\n
We expressly reserve the right, in our discretion, at any time and from time
\nto time, and regardless of whether or not any event listed in Section 7 has
\noccurred or is deemed by us to have occurred, to extend the period of time
\nduring which the offer is open and thereby delay the acceptance for exchange of
\nany options by giving oral or written notice of such extension to the Eligible
\nEmployees or making a public announcement thereof.<\/p>\n
We also expressly reserve the right, in our reasonable judgment, prior to
\nthe expiration date to terminate or amend the offer and to postpone our
\nacceptance and cancellation of any options tendered for exchange upon the
\noccurrence of any of the events listed in Section 7, by giving oral or written
\nnotice of such termination or postponement to you or by making a public
\nannouncement. Our reservation of the right to delay our acceptance and
\ncancellation of options tendered for exchange is limited by Rule 13e-4(f)(5)
\npromulgated under the Securities Exchange Act of 1934, which requires that we
\nmust pay the consideration offered or return the options tendered promptly
\nafter termination or withdrawal of a tender offer.<\/p>\n
Subject to compliance with applicable law, we further reserve the right, in
\nour discretion, and regardless of whether any event listed in Section 7 has
\noccurred or is deemed by us to have occurred, to amend the offer in any
\nrespect, including, without limitation, by decreasing or increasing the
\nconsideration offered in the offer to eligible employees or by decreasing or
\nincreasing the number of options being sought in the offer.<\/p>\n
Amendments to the offer may be made at any time and from time to time by
\npublic announcement of the amendment. In the case of an extension, the
\namendment must be issued no later than 6:00 a.m., Pacific Standard Time, on the
\nnext business day after the last previously scheduled or announced expiration
\ndate. Any public announcement made through the offer will be disseminated
\npromptly to Eligible Employees in a manner<\/p>\n
34<\/p>\n
reasonably designated to inform Eligible Employees of the change. Without
\nlimiting the manner in which we may choose to make a public announcement,
\nexcept as required by applicable law, we have no obligation to publish,
\nadvertise or otherwise communicate any such public announcement.<\/p>\n
If we materially change the terms of the offer or the information concerning
\nthe offer, or if we waive a material condition of the offer, we will extend the
\noffer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the
\nSecurities Exchange Act of 1934. These rules require that the minimum period
\nduring which an offer must remain open following material changes in the terms
\nof the offer or information concerning the offer, other than a change in price
\nor a change in percentage of securities sought, will depend on the facts and
\ncircumstances, including the relative materiality of such terms or information.<\/p>\n
If we decide to take any of the following actions, we will publish notice or
\notherwise inform you in writing of these actions:<\/p>\n
. we increase or decrease the amount of consideration offered for the
\n options,<\/p>\n
. we decrease the number of options eligible to be tendered in the offer, or<\/p>\n
. we increase the number of options eligible to be tendered in the offer by
\n an amount that exceeds 2% of the shares issuable upon exercise of the
\n options that are subject to the offer immediately prior to the increase.<\/p>\n
If the offer is scheduled to expire at any time earlier than the tenth
\n(10\/th\/) business day from, and including, the date that notice of such
\nincrease or decrease is first published, sent or given in the manner specified
\nin this Section 16, we will extend the offer so that the offer is open at least
\nten (10) business days following the publication, sending or giving of notice.<\/p>\n
For purposes of the offer, a “business day” means any day other than a
\nSaturday, Sunday or federal holiday and consists of the time period from 12:01
\na.m. through 12:00 midnight, Eastern Standard Time.<\/p>\n
17. Fees and expenses.<\/p>\n
We will not pay any fees or commissions to any broker, dealer or other
\nperson for soliciting tenders of options pursuant to this offer.<\/p>\n
18. Additional information.<\/p>\n
This Offer to Exchange is part of a Tender Offer Statement on Schedule TO
\nthat we have filed with the SEC. This Offer to Exchange does not contain all of
\nthe information contained in the Schedule TO and the exhibits to the Schedule
\nTO. We recommend that you review the Schedule TO, including its exhibits, and
\nthe following materials which we have filed with the SEC before making a
\ndecision on whether to tender your options:<\/p>\n
. Our annual report on Form10-K for our fiscal year ended December 31,2000,
\n filed with the SEC on April 2, 2001;<\/p>\n
. Our quarterly report on Form10-Q for our quarter ended March 31, 2001,
\n filed with the SEC on May 15, 2001; and<\/p>\n
. Our quarterly report on Form10-Q for our quarter ended June 30, 2001,
\n filed with the SEC on August 13, 2001.<\/p>\n
These filings, our other annual, quarterly and current reports, our proxy
\nstatements and our other SEC filings may be examined, and copies may be
\nobtained, at the following SEC public reference rooms:<\/p>\n
450 Fifth Street, N.W. 500 West Madison Street
\n Room 1024 Suite 1400
\n Washington, D.C. 20549 Chicago, Illinois 60661<\/p>\n
35<\/p>\n
You may obtain information on the operation of the public reference rooms by
\ncalling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the
\npublic on the SEC’s Internet site at http:\/\/www.sec.gov.<\/p>\n
Our common stock is quoted on the Nasdaq National Market under the symbol
\n“INSP” and our SEC filings can be read at the following Nasdaq address:<\/p>\n
Nasdaq Operations
\n 1735 K Street, N.W.
\n Washington, D.C. 20006<\/p>\n
Each person to whom a copy of this Offer to Exchange is delivered may obtain
\na copy of any or all of the documents to which we have referred you, other than
\nexhibits to such documents (unless such exhibits are specifically incorporated
\nby reference into such documents) at no cost, by:<\/p>\n
. writing to us at InfoSpace, Inc., 601 108\/th\/ Avenue N.E., Suite 1200,
\n Bellevue, Washington 98004 Attention: Brent Satterlee;<\/p>\n
. e-mailing the Exchange Offer Hotline at eo@infospace.com; or<\/p>\n
. telephoning the Exchange Offer Hotline at (425) 709-8008.<\/p>\n
As you read the foregoing documents, you may find some inconsistencies in
\ninformation from one document to another. If you find inconsistencies between
\nthe documents, or between a document and this Offer to Exchange, you should
\nrely on the statements made in the most recent document.<\/p>\n
The information contained in this Offer to Exchange about InfoSpace should
\nbe read together with the information contained in the documents to which we
\nhave referred you.<\/p>\n
19. Miscellaneous.<\/p>\n
This Offer to Exchange and our SEC reports referred to above include
\n“forward-looking statements.” When used in this Offer to Exchange, the words
\n“anticipate,” “believe,” “estimate,” “expect,” “intend” and “plan” as they
\nrelate to InfoSpace or our management are intended to identify these
\nforward-looking statements. All statements by us regarding our expected future
\nfinancial position and operating results, our business strategy, our financing
\nplans and expected capital requirements, forecasted trends relating to our
\nservices or the markets in which we operate and similar matters are
\nforward-looking statements. The documents we filed with the SEC, including our
\nannual report for the year ended December 31, 2000, on Form 10-K filed on April
\n2, 2001, as amended, discuss some of the risks that could cause our actual
\nresults to differ from those contained or implied in the forward-looking
\nstatements. These risks include, but are not limited to:<\/p>\n
. We have a history of losses and expect to continue to incur significant
\n operating losses, and we may never be profitable.<\/p>\n
. We have relatively limited operating history, which makes it difficult to
\n evaluate our future prospects.<\/p>\n
. Our financial results are likely to continue to fluctuate, which could
\n cause our stock price to be volatile or decline.<\/p>\n
. Our stock price has been and is likely to continue to be highly volatile.<\/p>\n
. If we are unable to diversify our revenue base, a significant portion of
\n our revenues will continue to be derived from wireline consumer services,
\n which could weaken our financial position.<\/p>\n
. Our financial and operating results will suffer if we are unsuccessful at
\n integrating acquired businesses.<\/p>\n
. Our future earnings could be negatively affected by significant charges
\n resulting from the impairment in the value of acquired assets.<\/p>\n
36<\/p>\n
. Our revenues are attributable to a small number of customers, the loss of
\n any one of which could harm our financial results.<\/p>\n
. We depend on third parties for content, and the loss of access to this
\n content could cause us to reduce our product offerings to customers.<\/p>\n
. Unless we are able to hire, retain and motivate highly qualified
\n employees, we will be unable to execute our business strategy.<\/p>\n
. Our historical and future expansion in personnel and facilities will
\n continue to significantly strain our management, operational and financial
\n resources.<\/p>\n
. Our expansion into international markets may not be successful and may
\n expose us to risks that could harm our business.<\/p>\n
. We have implemented anti-takeover provisions that could make it more
\n difficult to acquire us.<\/p>\n
. Our systems could fail or become unavailable, which would harm our
\n reputation, result in a loss of current and potential customers and could
\n cause us to breach existing agreements.<\/p>\n
. We rely heavily on our proprietary technology, but we may be unable to
\n adequately protect or enforce our intellectual property rights thus
\n weakening our competitive position and negatively impacting our financial
\n results.<\/p>\n
. Intense competition in the wireline, wireless and broadband markets could
\n prevent us from entering those markets or cause us to lose market share.<\/p>\n
. We rely on the Internet infrastructure, and its continued commercial
\n viability, over which we have no control and the failure of which could
\n substantially undermine our business strategy.<\/p>\n
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
\nAS TO WHETHER YOU SHOULD TENDER OR NOT TENDER YOUR OPTIONS THROUGH THE OFFER.
\nYOU SHOULD RELY ONLY ON THE INFORMATION IN THIS DOCUMENT OR DOCUMENTS TO WHICH
\nWE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION
\nOR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE
\nINFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT, THE LETTER FROM
\nNAVEEN JAIN DATED OCTOBER 29, 2001, THE ELECTION FORM AND THE NOTICE TO
\nWITHDRAW FROM THE OFFER. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION
\nTO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT
\nRECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.<\/p>\n
InfoSpace, Inc., October 29, 2001<\/p>\n
37<\/p>\n
SCHEDULE A<\/p>\n
INFORMATION CONCERNING THE DIRECTORS AND
\n EXECUTIVE OFFICERS OF INFOSPACE, INC.<\/p>\n
The directors and executive officers of InfoSpace, Inc. and their positions
\nand offices as of October 29, 2001, are set forth in the following table:<\/p>\n
\n\nName Position and Offices Held
\n—- ————————-
\n
\nNaveen Jain………………….. Chairman and Chief Executive Officer
\nEdmund O. Belsheim, Jr………… President, Chief Operating Officer and Director
\nTammy D. Halstead…………….. Chief Financial Officer
\nRasipuram (“Russ”) V. Arun…….. Executive Vice President and Chief Technology
\n Officer
\nYork Baur……………………. Executive Vice President, Wireline and Broadband
\nJan E. Claesson………………. Executive Vice President, Wireless
\nPrakash Kondepudi…………….. Executive Vice President, Merchant
\nJohn E. Cunningham, IV………… Director
\nPeter L.S. Currie…………….. Director
\nRichard D. Hearney……………. Director
\nRufus W. Lumry, III…………… Director
\nWilliam D. Savoy……………… Director
\nLewis M. Taffer………………. Director
\n<\/s><\/c><\/caption>\n<\/table>\n The address of each director and executive officer is: c\/o InfoSpace, Inc.,
\n601 108\/th\/ Avenue N.E., Suite 1200, Bellevue, Washington 98004.<\/p>\n
38<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7855],"corporate_contracts_industries":[9510],"corporate_contracts_types":[9539,9545],"class_list":["post-40213","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-infospace-inc","corporate_contracts_industries-technology__programming","corporate_contracts_types-compensation","corporate_contracts_types-compensation__esp"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/40213","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=40213"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=40213"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=40213"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=40213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}