INFOSPACE INC FORM DEF 14A. (Proxy Statement (definitive)) Filed 04/26/02 for the Period Ending 05/20/02

Transcription

1 INFOSPACE INC FORM DEF 14A (Proxy Statement (definitive)) Filed 04/26/02 for the Period Ending 05/20/02 Address TH AVE NE SUITE 1200 BELLEVUE, WA Telephone CIK Symbol INSP SIC Code Computer Processing and Data Preparation and Processing Services Industry Computer Services Sector Technology Fiscal Year 12/31 Copyright 2012, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

2 SCHEDULE 14A (RULE 14A-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary Proxy Statement Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement Definitive Additional Materials Soliciting Material under a-12 INFOSPACE, INC. (Name of Registrant as Specified In Its Charter) Payment of Filing Fee (Check the appropriate box): No fee required. (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: Fee paid previously with preliminary materials: Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed:

3 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To be held on May 20, 2002 TO THE STOCKHOLDERS: Notice is hereby given that the Annual Meeting of Stockholders of InfoSpace, Inc., a Delaware corporation, will be held on May 20, 2002 at 10:00 a.m., local time, at the Hyatt Regency Bellevue located at 900 Bellevue Way NE, Bellevue, Washington 98004, for the following purposes: 1. To elect one Class III director to serve for the ensuing three years and until his successor is duly elected. 2. To approve an amendment to our Restated 1996 Flexible Stock Incentive Plan (the 1996 Plan ) to increase the number of shares added on an annual basis to the number of shares reserved for issuance to an amount equal to the lesser of (A) five percent (5%) of our outstanding shares at the end of our preceding fiscal year and (B) a lesser amount determined by the Board, on the first day of each fiscal year beginning in To ratify the appointment of Deloitte & Touche LLP as independent auditors for InfoSpace for the fiscal year ending December 31, To transact such other business as may properly come before the meeting or any adjournment or adjournments thereof. The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed the close of business on April 2, 2002 as the record date for the determination of stockholders entitled to vote at this meeting. Only stockholders of record at the close of business on April 2, 2002 are entitled to notice of and to vote at the meeting. All stockholders are cordially invited to attend the meeting in person. However, to assure your representation at the meeting, you are urged to vote online, by telephone or by completing and mailing the enclosed proxy card as promptly as possible. For specific instructions for voting online, by telephone or by mail, please see the enclosed proxy card. Any stockholder attending the meeting may vote in person even if the stockholder has previously returned a proxy. By Order of the Board of Directors, Bellevue, Washington April 22, 2002 John M. Hall Senior Vice President, General Counsel and Secretary 3

4 INFOSPACE, INC. PROXY STATEMENT FOR 2002 ANNUAL MEETING OF STOCKHOLDERS INFORMATION CONCERNING PROXY SOLICITATION AND VOTING Our Board of Directors is soliciting proxies for the 2002 Annual Meeting of Stockholders. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. The Annual Meeting will be held at the Hyatt Regency Bellevue, which is located at 900 Bellevue Way NE, Bellevue, Washington Voting materials, which include the Proxy Statement, Proxy Card and Annual Report on Form 10-K for the year ended December 31, 2001, will be mailed to stockholders on or about April 26, Our principal executive offices are located at th Avenue NE, Suite 1200, Bellevue, Washington Our telephone number is (425) This solicitation of proxies is made on behalf of InfoSpace, and all related costs will be borne by us. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners. Proxies may also be solicited by certain of our directors, officers and regular employees, without additional compensation, personally or by telephone. Questions And Answers Q. Who may vote at the meeting? A: The Board set April 2, 2002 as the record date for the meeting. All stockholders who owned InfoSpace common stock at the close of business on April 2, 2002 may attend and vote at the meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. On April 2, 2002, 309,117,356 shares of our common stock were issued and outstanding and held of record by 1,353 stockholders. This number includes exchangeable shares of our subsidiaries, InfoSpace.com Canada Holdings Inc. and InfoSpace Speech Solutions Holdings Company, which are at any time exchangeable into, and have voting rights equivalent to, our common stock. Holders of exchangeable shares and employees who hold restricted stock through our employee benefit plans are entitled to vote their shares. Q: How many votes do you need at the meeting? A: A majority of InfoSpace s outstanding shares as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum. Shares that are voted FOR, AGAINST or WITHHELD FROM a matter are treated as being present at the meeting for purposes of establishing a quorum. Shares are counted as present at the meeting if you: are present and vote in person at the meeting; or have properly submitted a Proxy Card or voted by telephone or using the Internet. 1

5 Q: What proposals will be voted on at the meeting? A: There are three board proposals scheduled to be voted on at the meeting: Election of the Class III member of the Board of Directors; Approval of amendment to InfoSpace s Restated 1996 Flexible Stock Incentive Plan; and Ratification of Deloitte & Touche LLP as InfoSpace s independent auditors. Q: What is the voting requirement to approve each of the proposals? A: For the election of the Class III Director, the nominee who receives the greatest number of votes from shares present and entitled to vote at the meeting will be elected. To be passed, Proposals 2 and 3 require the affirmative FOR vote of a majority of the shares cast at the meeting and entitled to vote. Q: How are votes counted? A: In the election of the director, you may vote FOR the nominee or your vote may be WITHHELD with respect to the nominee. You may vote FOR, AGAINST or ABSTAIN on the other proposals. Abstentions will have the same effect as a vote against the proposal. If you just sign your Proxy Card with no further instructions, your shares will be counted as a vote FOR each Director and FOR each of the approval of the amendment to the Restated 1996 Flexible Stock Incentive Plan and the ratification of Deloitte & Touche LLP as InfoSpace s independent public accountants. If you do not vote and you hold your shares in a brokerage account in your broker s name (this is called street name ), your broker will have discretionary authority to vote your shares FOR each director or to withhold votes for each or every director. Your broker will also have the discretionary authority to vote your shares FOR or AGAINST Proposals 2 and 3, the approval of the amendment to the Restated 1996 Flexible Stock Incentive Plan and the ratification of the appointment of Deloitte & Touche LLP, respectively. A broker non-vote will not have any effect on the outcome of the voting on a proposal. If any other matters are properly presented for consideration at the Annual Meeting, the persons named in the enclosed proxy will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any other matters will be raised at the Annual Meeting. Q: How may I vote my shares in person at the meeting? A: Shares held directly in your name as the stockholder of record may be voted in person at the meeting. If you choose to attend the meeting, please bring the enclosed Proxy Card or proof of identification for entrance to the meeting. If you hold your shares in street name, you must request a legal proxy from your stockbroker in order to vote at the meeting. Q: How can I vote my shares without attending the meeting? A: Whether you hold shares directly as a stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your stockbroker or nominee. In most cases, you will be able to do this by telephone, using the Internet or by mail. Please refer to the summary instructions included on your Proxy Card. For shares held in street name, the voting instruction card will be included by your stockbroker or nominee. BY TELEPHONE OR THE INTERNET If you have telephone or Internet access, you may submit your proxy by following the instructions on the Proxy Card. 2

6 BY MAIL You may submit your proxy by mail by signing your Proxy Card or, for shares held in street name, by following the voting instruction card included by your stockbroker or nominee and mailing it in the enclosed, postage-paid envelope. If you provide specific voting instructions, your shares will be voted as you have instructed. Q: How can I change my vote after I return my Proxy Card? A: You may revoke your proxy and change your vote at any time before the final vote at the meeting. You may do this by signing and submitting a new Proxy Card with a later date, voting by telephone or using the Internet as instructed above (your latest telephone or Internet proxy is counted) or by attending the meeting and voting in person (as described above). Attending the meeting will not revoke your proxy unless you specifically request it. Q: What is InfoSpace s voting recommendation? A: Our Board of Directors recommends that you vote your shares FOR the nominee to the Board and FOR each of the approval of the amendment to InfoSpace s Restated 1996 Flexible Stock Incentive Plan and the ratification of Deloitte & Touche LLP as InfoSpace s independent auditors for fiscal year Q: Where can I find the voting results of the meeting? A: The preliminary voting results will be announced at the meeting. The final results will be published in our quarterly report on Form 10-Q for the second quarter of fiscal year

7 Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of common stock of the Company as of March 31, 2002 as to (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of common stock, (ii) each director and each nominee for director of the Company, (iii) each of the executive officers named in the Summary Compensation Table in Additional Information Relating to Directors and Executive Officers of the Company and (iv) all directors and executive officers as a group. Percentages are based on total shares outstanding as of March 31, This number includes exchangeable shares of our subsidiaries, InfoSpace.com Canada Holdings Inc. and InfoSpace Speech Solutions Holdings Company, which are at any time exchangeable into, and have voting rights equivalent to, our common stock. Principal Stockholders, Directors and Executive Officers Shares Beneficially Owned (1) Number Percent Naveen Jain(2) 64,227, % c/o InfoSpace, Inc th Avenue NE Suite 1200 Bellevue, WA Acorn Ventures-IS, LLC(3) 19,660, % th Avenue S.E. Suite 200 Bellevue, WA Rasipuram V. Arun(4) 1,027,242 * Edmund O. Belsheim, Jr.(5) 1,076,001 * John E. Cunningham, IV(6) 401,263 * Tammy D. Halstead (7) 462,924 * Richard D. Hearney 0 * Prakash Kondepudi(8) 415,528 * Rufus W. Lumry, III(9) 19,722, % William D. Savoy(10) 48,438 * Lewis M. Taffer 0 * All directors and executive officers as a Group (12 persons)(11) 87,381, % * Less than 1% (1) Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days are deemed outstanding, while such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated in the footnotes below, the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable. (2) Represents 42,844,465 shares of common stock held in the name of Naveen and Anuradha Jain, 3,965,383 shares of common stock held by the Jain Family Irrevocable Trust, 7,280,882 shares of common stock held by Naveen Jain GRAT No. 1, 7,280,882 shares of common stock held by Anuradha Jain GRAT No. 1, 2,740,666 shares subject to options exercisable by Naveen Jain within 60 days of March 31, 2002, 4

8 and 114,813 shares subject to options exercisable by Anuradha Jain within 60 days of March 31, Anuradha Jain is Mr. Jain s spouse. (3) Includes 13,750,208 shares of common stock issuable upon exercise of warrants currently exercisable and 115,000 shares of common stock beneficially owned by Rufus W. Lumry, III. Mr. Lumry is the principal stockholder, sole director and President of Acorn Ventures, Inc., the sole member of Acorn Ventures-IS, LLC. (4) Includes 823,124 shares of common stock subject to options exercisable within 60 days of March 31, (5) Includes 958,334 shares of common stock subject to options exercisable within 60 days of March 31, (6) Includes 125,000 shares of common stock subject to options exercisable within 60 days of March 31, 2002, and 92,806 shares of common stock held by Clear Fir Partners LP. Mr. Cunningham is the President of Clear Fir Partners, LP. (7) Includes 322,620 shares of common stock subject to options exercisable within 60 days of March 31, (8) Includes 330,703 shares of common stock subject to options exercisable within 60 days of March 31, (9) Includes 115,000 shares of common stock subject to options exercisable within 60 days of March 31, 2002, and 19,545,518 shares beneficially owned by Acorn Ventures-IS, LLC. See note (3) above. (10) Consists of shares of common stock subject to options exercisable within 60 days of March 31, (11) Includes 19,328,906 shares of common stock subject to options and warrants exercisable within 60 days of March 31,

9 PROPOSAL ONE ELECTION OF DIRECTORS General Our Board of Directors is currently set at eight members, which are divided into three classes with overlapping three-year terms. A director serves in office until his or her respective successor is duly elected and qualified unless the director resigns or by reason of death or other cause is unable to serve in the capacity of director. Any additional directorships resulting from an increase in the number of directors are distributed among the three classes so that, as nearly as possible, each class consists of an equal number of directors. There currently are seven directors serving on the Board of Directors, and one vacancy. Nominees For Directors One Class III director is to be elected at the Annual Meeting for a three-year term ending in The Board of Directors has nominated Naveen Jain for re-election as a Class III director. Unless otherwise instructed, the proxy holders will vote the proxies received by them for this nominee. In the event that the nominee of the Board of Directors is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. It is not expected that the nominee will be unable or will decline to serve as a director. In the event that additional persons are nominated for election as directors, the specific nominees to be voted for will be determined by the proxy holders. Vote Required; Election of Directors If a quorum is present and voting, the nominee receiving the highest number of votes will be elected to the Board of Directors. Votes withheld from any nominee, abstentions and broker non-votes will be counted for purposes of determining the presence or absence of a quorum. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE. Class III Director Nominee The name of the nominee of the Board of Directors and certain information about him are set forth below: Name of Director Age Positions with the Company Director Since Naveen Jain 42 Chairman and Chief Executive Officer 1996 Naveen Jain founded InfoSpace in March Mr. Jain served as our Chief Executive Officer from our inception in March 1996 to April 2000 and was reappointed as our Chief Executive Officer in January He also served as our President from inception to November 1998 and as our sole director from our inception to June 1998, when he was appointed Chairman of the Board. From June 1989 to March 1996, Mr. Jain held various positions at Microsoft Corporation, including Group Manager for MSN, Microsoft s online service. From 1987 to 1989, Mr. Jain served as Software Development Manager for Tandon Computer Corporation, a PC manufacturing company. From 1985 to 1987, Mr. Jain served as Software Manager for UniLogic, Inc., a PC manufacturing company and from 1982 to 1985, he served as Product Manager and Software Engineer at Unisys Corporation/Convergent Technologies, a computer manufacturing company. Mr. Jain holds a B.S. from the University of Roorkee and an M.B.A. from St. Xavier s School of Management. 6

10 Continuing Directors Class I Terms expiring in 2003 The names of our Class I directors, whose terms end in 2003, and certain information about them are set forth below: Name of Director Age Positions with the Company Director Since John E. Cunningham, IV (1) 44 Director 1998 Edmund O. Belsheim, Jr. 49 President, Chief Operating Officer and 2001 Director Lewis M. Taffer(2) 54 Director 2001 (1) Member of the Compensation Committee. (2) Member of the Audit Committee. Edmund O. Belsheim, Jr. joined InfoSpace in November 2000 as Senior Vice President and General Counsel, and was appointed Chief Operating Officer in January 2001 and President in July He has served as a director since January From April 1999 until he joined InfoSpace, he was a partner at Perkins Coie LLP, a Seattle-based law firm. From 1996 to 1999, Mr. Belsheim served as Vice President, Corporate Development, General Counsel and Secretary of Penford Corporation, a maker of specialty starches. He also served as Senior Vice President, Corporate Development, General Counsel and Secretary of Penwest Pharmaceuticals Co., an oral drug delivery technology and products company. Prior to joining Penford Corporation, Mr. Belsheim was a member of the law firm Bogle & Gates, P.L.L.C. Mr. Belsheim holds an A.B. from Carlton College, an M.A. from the University of Chicago, and a J.D. from the University of Oregon. John E. Cunningham, IV has served as a director of InfoSpace since July Since April 1995 he has served as President of Kellett Investment Corporation, an investment fund for early-stage, high-growth private companies. He is on the Board of Directors of Petra Capital, LLC and digimine.com. Mr. Cunningham also serves as an advisor to Petra Mezzanine Fund, LP and Virtual Bank.com. During 1997, Mr. Cunningham was interim Chief Executive Officer of Real Time Data. From December 1994 to August 1996, he was President of Pulson Communications, Inc. From February 1991 to November 1994, he served as Chairman and Chief Executive Officer of RealCom Office Communications, a privately held telecommunications company that merged with MFS Communications Company, Inc., and was subsequently acquired by WorldCom, Inc. Mr. Cunningham holds a B.A. from Santa Clara University and an M.B.A. from the University of Virginia. Lewis M. Taffer has served as a director since June Since May 2001, Mr. Taffer has been an independent consultant specializing in marketing, business development and strategic partnerships. From 1979 through April 2001, Mr. Taffer served in various positions at American Express Company, most recently as Senior Vice President Corporate Business Development. Mr. Taffer s career at American Express focused primarily on managing the company s relationships with large, U.S.-based airlines, hotels, retailers, restaurants and entertainment companies. Mr. Taffer serves on the board of directors of Cure for Lymphoma Foundation, a nonprofit entity. Mr. Taffer holds a B.A. from the University of Pittsburgh and a J.D. from the University of Michigan. Class II Terms expiring in 2004 The names of our Class II directors, whose terms end in 2004, and certain information about them are set forth below: Name of Director Age Positions with the Company Director Since Rufus W. Lumry, III 55 Director 1998 William D. Savoy(1) 37 Director 2000 Richard D. Hearney 62 Director 2001 (1) Member of the Audit Committee. 7

11 Rufus W. Lumry, III has served as a director of InfoSpace since December Since 1992, Mr. Lumry has served as President of Acorn Ventures, Inc., a venture capital firm he founded. Prior to founding Acorn Ventures, Mr. Lumry served as a director and officer of McCaw Cellular Communications. Mr. Lumry was one of the founders of McCaw in 1982, and retired from McCaw in 1990 as Executive Vice President and Chief Financial Officer. Mr. Lumry holds an A.B. from Harvard University and an M.B.A. from the Harvard Graduate School of Business Administration. William D. Savoy has served as a director of InfoSpace since October He served as a director of Go2Net, Inc. from May 1999 until its acquisition by InfoSpace. Currently, Mr. Savoy serves as a President of Vulcan Inc., managing the personal finances of Paul G. Allen, and President of Vulcan Ventures Inc., an investment organization wholly owned by Paul G. Allen. From 1987 until November 1990, Mr. Savoy was employed by Layered, Inc. and became its President in Mr. Savoy serves on the Advisory Board of DreamWorks SKG and also serves as director of Charter Communications, Inc., drugstore.com, INVESTools, Inc., Peregrine Systems, Inc., RCN Corporation and USA Networks, Inc. Mr. Savoy holds a B.S. from Atlantic Union College. Richard D. Hearney has served as a director since September General Hearney served as President and Chief Executive Officer of Business Executives for National Security, an organization focusing on national security policy from January 2000 to April He joined McDonnell Douglas Corporation in 1996 and served as Regional Vice President of Business Development Western Europe until the acquisition of McDonnell Douglas by The Boeing Company in 1997, and subsequently served as Vice President of the Military Aircraft and Missile Systems Group of Boeing until November General Hearney served in the United States Marine Corps for over 30 years, and retired from military service in 1996 as Assistant Commandant of the Marine Corps. He holds a B.A. from Stanford University, an M.A. from Pepperdine University and graduated from the Naval War College. Board Meetings and Committees The Board of Directors of the Company held a total of 27 meetings, and acted by unanimous written consent two times, during The Board of Directors has an Audit Committee and a Compensation Committee. The Board of Directors does not have a nominating committee or any committee performing similar functions. The Audit Committee. The Audit Committee, which currently consists of directors William D. Savoy and Lewis M. Taffer, met six times during Among other functions, the Audit Committee makes recommendations to the Board of Directors regarding the selection of independent auditors, reviews the results and scope of the audit and other services provided by our independent auditors, reviews our balance sheet, statement of operations and cash flows and reviews and evaluates our internal control functions. There is currently a vacancy on the Audit Committee, which the Board intends to fill with another director who meets the definition of an independent director as defined in Rule 4200(a)(14) of the Nasdaq Marketplace Rules. Messrs. Savoy and Taffer are independent directors under this definition. On April 21, 2000, the Board of Directors adopted a formal charter for the Audit Committee, a copy of which is attached as Exhibit A to this Proxy Statement. The Audit Committee reviews and reassesses the adequacy of its charter on an annual basis. The Compensation Committee. The Compensation Committee, which currently consists of nonemployee director John E. Cunningham, IV, met ten times, and acted by unanimous written consent two times, during The Compensation Committee reviews and approves the compensation and benefits for our executive officers, administers our stock plans and makes recommendations to the Board of Directors regarding these matters. There is currently a vacancy on the Compensation Committee, which the Board intends to fill with another director who is not an InfoSpace employee. 8

12 For the fiscal year ended December 31, 2001, no incumbent director attended fewer than 75% of the aggregate of the meetings of the Board of Directors and committees thereof, if any, upon which such director served during the period for which he has been a director or committee member, except that Naveen Jain attended 74% of the Board meetings. However, most of the meetings not attended by Mr. Jain were called solely for nonemployee directors, and accordingly, Mr. Jain was not eligible to attend those meetings. Compensation of Directors Each director is paid $750 for each Board of Directors meeting attended in person, $500 for each Board of Directors meeting attended by telephone and $500 for each committee meeting attended. Each Director is reimbursed for travel expenses incurred to attend meetings of the Board of Directors or committee meetings. Under our Restated 1996 Flexible Stock Incentive Plan, as amended, we grant a nonqualified stock option to purchase 55,000 shares of common stock to each nonemployee director on the date the director is first appointed or elected to the Board of Directors. In addition, immediately following each Annual Meeting of Stockholders, we grant to each nonemployee director an additional nonqualified stock option to purchase 25,000 shares of common stock immediately following such Annual Meeting of Stockholders, except for those nonemployee directors who were newly elected to the Board of Directors at such Annual Meeting or within the three-month period prior to such Annual Meeting. All options granted under the program for nonemployee directors fully vest on the first anniversary of the date of such grant. Proposed Amendment PROPOSAL TWO APPROVAL OF AMENDMENT TO THE STOCK INCENTIVE PLAN TO ANNUALLY INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER We are asking our stockholders to approve an amendment to the Company s Restated 1996 Flexible Stock Incentive Plan (the 1996 Plan ) so that we can continue to use the Plan to achieve the Company s goals. The 1996 Plan was originally adopted by our Board of Directors and approved by our stockholders in In 1999, our Board and stockholders approved an amendment to the 1996 Plan to increase the number of shares reserved for issuance at that time, and to annually increase the number of shares reserved for issuance on the first day of each fiscal year beginning in 2000 by an amount equal to the lesser of (i) 8,000,000 shares (as subsequently adjusted for stock splits), (ii) three percent (3%) of our outstanding shares at the end of the preceding fiscal year, and (iii) a lesser amount determined by the Board. A total of 53,967,866 shares of our common stock were reserved for issuance under the 1996 Plan as of December 31, 2001 (the Pool ). As of that date, 33,081,767 shares were subject to outstanding awards granted under 1996 Plan and 7,138,863 shares remained available for any new awards to be granted in the future. On January 15, 2002, we offered a limited non-compulsory exchange of stock options to our employees. Under the exchange offer, eligible employees had the opportunity to exchange stock options with a per share exercise price of $10.00 or more for the promise to grant new options in the future under the 1996 Plan. The exchange offer period expired on February 15, 2002, and the Company accepted for exchange options covering 12,734,035 shares of common stock. As of February 28, 2002, after completion of the exchange offer and the annual increase in shares available under the 1996 Plan, 28,770,902 shares were subject to outstanding awards under the 1996 Plan and 19,354,122 shares remained available for new awards to be granted in the future. In April 2002, the Board approved an amendment to the 1996 Plan, subject to approval from the stockholders, that would provide for an annual increase in the number of shares in the Pool on the first day of 9

13 each fiscal year of the Company beginning in 2002 in an amount equal to the lesser of (i) five percent (5%) of our outstanding shares at the end of the preceding fiscal year and (ii) a lesser amount determined by the Board. Our named executive officers and directors have an interest in this proposal. Reasons for the Amendment InfoSpace relies upon the 1996 Plan as one of the benefits necessary to attract and retain outstanding and highly skilled service providers, especially in the competitive labor markets in which we must compete. In addition, InfoSpace has grown significantly since the adoption and prior amendment of the 1996 Plan. Accordingly, the Board of Directors believes it is in our best interests to provide for an increase in the number of shares currently reserved for issuance under the 1996 Plan, as well as in the number of shares that may be added annually to the Plan, so that we may continue to use the Plan to promote the long-term success of the Company. The following paragraphs provide a summary of the principal features of the 1996 Plan, as amended, which is set forth in its entirety as Exhibit B to this proxy statement. The following summary is qualified in its entirety by reference to Exhibit B. Vote Required for Approval of Amendment The affirmative vote of a majority of the votes cast will be required to approve the amendment to the 1996 Plan. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 1996 PLAN. Summary of the 1996 Plan Purpose. The purpose of the 1996 Plan is to provide a means whereby eligible employees, officers, directors, consultants and independent contractors of InfoSpace or its affiliates can acquire our common stock. The Plan provides for the grant of incentive stock options (which are entitled to favorable federal tax treatment), nonstatutory stock options (that is, options that are not incentive stock options), stock appreciation rights ( SARs ) and restricted stock purchase or bonus awards (collectively, awards ). Administration. The 1996 Plan is administered by the Compensation Committee of the Board (the Plan Administrator ). Subject to the provisions of the 1996 Plan, the Plan Administrator has the discretion and authority to administer the Plan and to control its operation, including, for example, the power to determine which eligible individuals will be granted awards, the terms and conditions of each such award, and interpret the terms of the Plan and the outstanding awards. Eligibility. The Plan Administrator has the discretion to select the employees, officers, directors, consultants and independent contractors to whom awards will be granted under the 1996 Plan. However, incentive stock options may be granted only to employees of InfoSpace and any parent or subsidiary of InfoSpace at the time of grant. Limitations. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code ), InfoSpace may not receive a federal income tax deduction for compensation paid to our Chief Executive Officer or any of the four other most highly compensated executive officers to the extent that any of these persons receives more than $1 million in any one year. However, we can preserve the deductibility of compensation over $1 million if the conditions of Section 162(m) are met. These conditions include stockholder approval of the 1996 Plan and setting limits on the number of awards that any individual may receive. The 1996 Plan has been designed to permit the Plan Administrator to grant options that qualify as performance-based compensation for purposes of satisfying the conditions of Section 162(m). For example, the 1996 Plan provides that no individual 10

14 may be granted, in any fiscal year, options to purchase more than 12,000,000 shares of our common stock, except that in connection with his or her initial service, an individual may be granted options to purchase up to an additional 12,000,000 shares. Terms and Conditions of Options. Each option granted under the 1996 Plan is evidenced by a written stock option agreement between the optionee and InfoSpace, and is subject to the following additional terms and conditions: Exercise Price. The Plan Administrator has the discretion to determine the exercise price of options to purchase shares of our common stock, except that the exercise price of an incentive stock option or a nonstatutory stock option that is intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code may not be less than 100% of the fair market value of the shares subject to the option on the date of grant. (In the case of an incentive stock option granted to a 10% shareholder, the exercise price of an incentive stock option must be at least 110% of the fair market value of the shares subject to the option at the time of grant.) For purposes of the 1996 Plan, the fair market value of a share of our common stock generally means the closing sale price for the stock as quoted on the Nasdaq National Market for the day in question. Value Limitation. The aggregate fair market value (determined at the time of grant) of all shares of common stock subject to an optionee s incentive stock option that are exercisable for the first time during any calendar year may not exceed $100,000. In the event the optionee holds two or more such options that become exercisable for the first time in the same calendar year, such limitation will be applied on the basis of the order in which such options are granted. Form of Consideration. The consideration to be paid for the shares of common stock issued upon exercise of an option shall be cash, certified check, bank draft, or postal or express money order payable to InfoSpace. However, the Plan Administrator, in its sole discretion, may permit an optionee to pay the exercise price in whole or in part by tendering other shares of our common stock meeting certain criteria, a promissory note, or any combination thereof. The Plan Administrator, in its sole discretion, also may authorize the surrender by an optionee of all or part of an unexercised option and authorize a payment in consideration thereof of an amount equal to the difference between the aggregate fair market value of the stock subject to the option and the aggregate exercise price of such stock. Exercise and Term of Options. Each stock option agreement will specify the term of the option and the exercisability of the option. The terms of such vesting are determined by the Plan Administrator in its discretion. Options granted under the 1996 Plan generally have a ten-year term (or, in the case of an incentive stock option granted to a 10% shareholder, a five-year term) and generally become exercisable over four years at a rate of one-fourth of the shares subject to the options at the end of twelve months from the date of grant and one forty-eighth of the shares every month thereafter, subject to the optionee s continuation as a service provider. During 2001, however, we made a number of grants that vest over a two-year period, with 50% of the grant vesting ratably on a monthly basis for the first 24 months, and the remaining 50% vesting at the end of the two-year period. An option is exercised by giving written notice of exercise to InfoSpace and by tendering full payment of the exercise price and any applicable withholding taxes to us. No option may be exercised after the expiration of its term. Termination of Employment. The Plan Administrator will establish and set forth in each stock option agreement whether the option will continue to be exercisable, and the terms and conditions of such exercise, if the optionee ceases to be employed by, or to provide services to, InfoSpace or an affiliate of ours, which provisions may be waived or modified by the Plan Administrator at any time. Nontransferability of Options. Each option granted pursuant to the 1996 Plan generally is not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee s lifetime only by the optionee. 11

15 Other Provisions. A stock option agreement may contain other terms, provisions and conditions not inconsistent with the 1996 Plan as may be determined by the Plan Administrator. Terms and Conditions of Restricted Stock Purchase and Restricted Stock Bonus Awards. Each restricted stock purchase or bonus award granted under the 1996 Plan will be evidenced by a written restricted stock purchase agreement or restricted stock bonus agreement executed by InfoSpace and the recipient. The restricted stock purchase agreement or restricted stock bonus agreement may contain such terms, provisions and conditions consistent with the 1996 Plan as may be determined by the Plan Administrator, including not by way of limitation, restrictions on transfer, forfeiture provisions, repurchase provisions and vesting provisions. To the extent required by applicable law, if any right of InfoSpace to repurchase stock granted pursuant to a restricted stock purchase or restricted stock bonus agreement at the original purchase price is assignable, the assignee must pay InfoSpace upon assignment of the right cash equal to the difference between the original price and fair value if the original purchase price is less than fair value. Furthermore, the purchase price of stock sold pursuant to a restricted stock purchase agreement shall be the price determined by the Plan Administrator on the date the right to purchase stock is granted; provided, however, that (i) such price shall not be less than 85% of the price per share fair market value of such stock on the day the right to purchase stock is granted and (ii) to the extent required by applicable law, in the case of any 10% stockholder such price shall be 100% of the per share fair market value of such stock at the time the right to purchase stock is granted, or at the time the purchase is consummated. SARs. The Plan Administrator may, under such terms and conditions as it deems appropriate, authorize the issuance of SARs evidenced by a written SAR agreement executed by InfoSpace and the person to whom such SAR is granted. The SAR agreement may contain such terms, provisions and conditions consistent with the 1996 Plan as may be determined by the Plan Administrator. Adjustment Upon Changes in Capitalization. If there is any change in the stock subject to the 1996 Plan or outstanding awards through merger, consolidation, reorganization, reincorporation, stock split, stock dividend, or other change in the capital structure of InfoSpace, appropriate adjustments will be made by the Plan Administrator in order to preserve, but not to increase the benefits to the individual, including adjustments to the aggregate number, kind and price per share of shares subject to the 1996 Plan or outstanding awards. If an award expires or is cancelled without having been fully exercised or vested, the unvested or cancelled shares generally will be returned to the Pool. Corporate Transaction. In the event of any Corporate Transaction (as defined in the Plan), any option or outstanding SARs shall terminate and any restricted stock shall be reconveyed to or repurchased by InfoSpace immediately prior to the specified effective date of the Corporate Transaction; provided, however, that to the extent permitted by applicable law, any unvested option, SAR or any restricted stock shall vest and become exercisable as to 25% of the unvested shares or become nonforfeitable as to 25% of the forfeitable shares, as the case may be, immediately prior to the specified effective date of the Corporate Transaction. Notwithstanding the foregoing, options, SARs or restricted stock shall not terminate if, in connection with the Corporate Transaction, they are to be assumed or substituted for by the successor corporation or its parent company, pursuant to options, SARs or restricted stock agreements providing substantially equal value and having substantially equivalent provisions as the options, SARs or restricted stock granted pursuant to the 1996 Plan. If options, SARs or restricted stock are not so assumed or substituted for by the successor corporation or its parent company, such options, SARs or restricted stock shall vest and become exercisable or nonforfeitable, as the case may be, as to an additional 25% of the unvested shares or forfeitable shares, immediately prior to the effective date of the Corporate Transaction. For the purpose of the 1996 Plan, a Corporate Transaction shall include any of the following stockholder-approved transactions to which we are a party: (i) a merger or consolidation in which InfoSpace is not the surviving entity, except for (1) a transaction the principal purpose of which is to change the state of our incorporation, or (2) a transaction in which 12

16 our stockholders immediately prior to such merger or consolidation hold (by virtue of securities received in exchange for their InfoSpace shares) securities of the surviving entity representing more than fifty percent (50%) of the total voting power of such entity immediately after such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the assets of InfoSpace unless our stockholders immediately prior to such sale, transfer or other disposition hold (by virtue of securities received in exchange for their InfoSpace shares) securities of the purchaser or other transferee representing more than fifty percent (50%) of the total voting power of such entity immediately after such transaction; or (iii) any reverse merger in which InfoSpace is the surviving entity but in which our stockholders immediately prior to such merger do not hold (by virtue of their InfoSpace shares held immediately prior to such transaction) securities of InfoSpace representing more than fifty percent (50%) of the total voting power of InfoSpace immediately after such transaction. Amendment and Termination of the 1996 Plan. The Board of Directors generally may at any time amend, suspend or terminate the 1996 Plan as it deems advisable. However, no such amendment, suspension or termination may, without the consent of the affected individual, alter or impair any rights or obligations under any outstanding option. The 1996 Plan will terminate with respect to the grant of incentive stock options on April 10, 2006, unless previously terminated by the Board. Awards Granted to Certain Individuals and Groups. The number of awards (if any) that may be granted to employees, officers, directors, consultants or independent contractors under the 1996 Plan is subject to the discretion of the Plan Administrator and therefore future awards under the Plan are not determinable. To date, only stock options and restricted stock awards have been granted under the 1996 Plan. The following table sets forth information with respect to the grant of options and restricted stock (if any) under the 1996 Plan during the last fiscal year to (i) each of the Named Executive Officers, (ii) all current executive officers as a group, (iii) all current directors who are not executive officers as a group, and (iv) all employees who are not executive officers as a group: Name and Position Number of Shares Subject to Options Granted(#) Weighted Average Exercise Price Per Share ($/sh) Number of Shares of Restricted Stock Granted(#) Dollar Value of Restricted Stock Granted(1) Naveen Jain 6,100,000 $ 3.39 Chairman and Chief Executive Officer Edmund O. Belsheim, Jr. 2,975, ,000 $ 205,000 President, Chief Operating Officer and Director Rasipuram V. Arun 1,850, , ,000 Executive Vice President and Chief Technology Officer Tammy D. Halstead 600, , ,000 Chief Financial Officer Prakash Kondepudi 850, , ,000 Executive Vice President, Merchant All current executive officers as a group 13,875, , ,000 All current directors who are not executive officers as a group 135, All employees who are not executive officers as a group 36,245, ,403,893 6,977,981 (1) Based on $2.05 per share, the closing price for the Company s common stock on December 31, 2001, as reported on the Nasdaq National Market. 13

17 Federal Income Tax Information The following paragraphs summarize certain U.S. federal income tax consequences to U.S. taxpayers and the Company of awards granted under the 1996 Plan. However, the summary does not purport to be complete, and does not discuss the provisions of the income tax laws of any municipality, state or foreign country in which a participant may reside. Tax consequences to any particular individual may be different. Incentive Stock Options. An optionee who is granted an incentive stock option will not recognize taxable income either at the time the option is granted or upon its exercise, although the exercise is an adjustment item for alternative minimum tax purposes and may subject the optionee to alternative minimum tax. Upon the disposition of the shares more than two years after grant of the option and one year after exercise of the option, any gain or loss will be treated as long-term capital gain or loss. If these holding periods are not satisfied, the optionee will recognize ordinary income at the time of disposition equal to the difference between the exercise price and the lower of (i) the fair market value of the shares at the date of the option exercise, or (ii) the sale price of the shares. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income will be characterized as long-term or short-term capital gain or loss, depending on the holding period. The Company generally will be entitled to a deduction in the same amount as the ordinary income recognized by the optionee. Nonstatutory Stock Options and SARs. A recipient will not recognize any taxable income at the time he or she is granted a nonstatutory option or SAR. However, upon its exercise, the recipient will recognize taxable income generally measured as the excess of the then fair market value of the shares purchased over the exercise price. Any taxable income recognized in connection with an option or SAR exercise by an employee of the Company will be subject to tax withholding by the Company. The Company generally will be entitled to a tax deduction in the same amount as the ordinary income recognized by the recipient. Upon a disposition of such shares by the recipient, any difference between the sales price and the recipient s exercise price, to the extent not recognized as taxable income as described above, will be treated as long-term or short-term capital gain or loss, depending on the holding period. Restricted Stock. A recipient will not have taxable income at the time of grant of restricted stock, unless he or she elects to be taxed at that time by making a timely election under Section 83(b) of the Code. Instead, he or she will recognize ordinary income when (and if) the restricted stock vests and no longer can be forfeited. If a Section 83(b) election is made, the recipient will recognize ordinary income at the time of purchase of the shares of restricted stock. In all cases, the amount of ordinary income that the recipient recognizes will equal the excess of the fair market value of the shares at the time he or she recognizes income over the purchase price (if any) of the shares. Upon a disposition of such shares by the recipient, any gain or loss will be treated as capital gain or loss. The ordinary income recognized by a recipient who is an employee of the Company will be subject to tax withholding by the Company. The foregoing is only a summary of the effect of federal income taxation upon optionees, holders of stock purchase rights, and the company with respect to the shares purchased under the 1996 Plan. It does not purport to be complete, and reference should be made to the applicable provisions of the tax code. In addition, this summary does not discuss the tax consequences of the employee s or consultant s death or the income tax laws of any municipality, state or foreign country in which the employee or consultant may reside. 14

18 PROPOSAL THREE RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS The Board of Directors has selected Deloitte & Touche LLP, independent auditors, to audit the financial statements of the Company for the fiscal year ending December 31, 2002, and recommends that stockholders vote for ratification of such appointment. In the event of a negative vote on ratification, the Board of Directors will reconsider its selection. Deloitte & Touche LLP has audited our financial statements annually since Representatives of Deloitte & Touche LLP are expected to be present at the meeting, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions. Required Vote; Ratification of Appointment of Independent Auditors The affirmative vote of the holders of a majority of the votes cast is required to approve the appointment of the independent auditors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. Fees Paid to Independent Auditors for 2001 Audit Fees. The aggregate fees billed by Deloitte & Touche, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, Deloitte & Touche ) for professional services rendered for the audit of the Company s annual consolidated financial statements for the fiscal year ended December 31, 2001 and for reviews of the consolidated financial statements included in our Quarterly Reports on Form 10-Q for that fiscal year, were approximately $842,000. Financial Information Systems Design and Implementation Fees. The aggregate fees billed by Deloitte & Touche for professional services rendered for information technology services relating to financial information systems design and implementation for the fiscal year ended December 31, 2001 were approximately $146,000. All Other Fees. The aggregate fees billed by Deloitte & Touche for services rendered to the Company, other than the services described above under Audit Fees and Financial Information Systems Design and Implementation Fees, for the fiscal year ended December 31, 2001 were approximately $881,000 and can be sub-categorized as follows: Audit-Related Fees: The aggregate fees for audit-related services rendered by Deloitte & Touche for matters such as consultation on and consents related to SEC filings and registration statements, audits of employee benefit plans, statutory audits required by the Company s foreign subsidiaries, consultation on accounting standards or transactions and consulting on security controls, were approximately $286,000. Non-Audit Related Fees: The aggregate fees for all other services were approximately $595,000 and related entirely to professional services rendered in the areas of tax planning and tax compliance. The Audit Committee has considered whether the provision by Deloitte & Touche of the non-audit services described above is compatible with Deloitte & Touche s independence and has determined that Deloitte & Touche s independence as an auditor has not been compromised by its provision of these services. 15

19 AUDIT COMMITTEE REPORT The following Report of the Audit Committee of the Company shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission and such information shall not be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference into such filing. During the fiscal year ended December 31, 2001, the Audit Committee of the Board of Directors was comprised of three nonemployee directors through May 21 and two non-employee directors thereafter. Each current member of the Audit Committee is, and each former member serving during 2001 was, an independent director as defined in Rule 4200(a)(14) of the Nasdaq Marketplace Rules. The Board intends to fill the vacant position on the Audit Committee with another director who meets the definition of an independent director as defined in Rule 4200(a)(14) of the Nasdaq Marketplace Rules. The Audit Committee met six times during the 2001 fiscal year. The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and reporting practices of the Company and other such duties as directed by the Board. The Audit Committee is also responsible for maintaining free and open means of communication between the directors, the independent auditors, and the financial management of the Company. In addition to specified duties, the Committee may meet with various employees during the year and has access to any of the Company s employees or advisors with whom it wishes to communicate. Management is responsible for the Company s internal controls, preparation of financial statements and the financial reporting process. The Company s independent auditors are responsible for performing an independent audit of the Company s consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee monitors and oversees these processes. The Committee members rely, without independent verification, on the information provided to them and on the representations made by management and the independent auditors. In this context, the Audit Committee has: discussed with the Company s independent auditors the overall scope and plans for their audits; met and held discussions with the independent auditors, both with and without management present, to discuss the results of their examinations, their evaluations of the Company s internal controls, and the overall quality of the Company s financial reporting; reviewed and discussed the audited financial statements with management of the Company and with the Company s independent auditors, including discussion of the quality, not just acceptability, of the application of accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements; discussed with the auditors the matters required to be discussed by SAS 61 ( Communications with Audit Committees ); and discussed with the auditors their independence and have received the written disclosures and letter required by Independence Standards Board Standard No. 1 ( Independence Discussions with Audit Committees ). Based on our reviews and discussions referred to above, we have recommended to the Board of Directors that the audited financial statements be included in the annual report on Form 10-K for the year ended December 31, The Audit Committee and the Board of Directors have also recommended, subject to stockholder approval, the selection of Deloitte & Touche LLP as the Company s independent auditors for the fiscal year ending December 31, Me mbers of the Audit Committee: Wi lliam D. Savoy Le wis M. Taffer 16

20 ADDITIONAL INFORMATION RELATING TO OUR DIRECTORS AND EXECUTIVE OFFICERS Compensation of Executive Officers The following table sets forth information concerning the compensation we paid to Naveen Jain, our chief executive officer, and the other most highly compensated executive officers of the Company during 2001 (collectively, the Named Executive Officers ). Summary Compensation Table Annual Compensation Name and Principal Position Fiscal Year Salary Bonus Long-Term Compensation Awards Restricted Stock Award(s) ($) Securities Underlying Options(#) All Other Compensation Naveen Jain 2001 $ 250,000 6,100,000 $ 6,769 (1) Chairman and Chief Executive Officer , ,571 $ 500 (2) 1,400,000 Edmund O. Belsheim, Jr ,000 $ 205,000 2,975,000 President, Chief Operating Officer and Director , ,000 Rasipuram V. Arun , ,000 1,850,000 6,769 (1) Executive Vice President and Chief Technology , ,000 Officer Tammy D. Halstead , , ,000 6,769 (1) Chief Financial Officer , , ,500 19,476 Prakash Kondepudi , , ,000 6,769 (1) Executive Vice President, Merchant (1) Consists of $6,769 for the distribution to employees of InfoSpace s contribution to the Venture Fund prior to dissolution. All eligible employees shared equally in this distribution. (2) Consists of an award to Mr. Jain in connection with patent filings. 17