Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2001, 2000 and 1999
acquisition of FreeYellow that closed in October of 1999, and in the alternative, seeking damages. Molino denied the allegations, and asserted a
counterclaim for breach of the merger agreement. In October 2000, Go2Net was acquired by and become a wholly owned subsidiary of
InfoSpace. On August 6, 2001, Go2Net amended the complaint to add a claim against FreeYellow and Molino under the Securities Act of
Washington ( WSA ). Both parties moved for summary judgment on the merits of their respective claims, and those motions were denied. In
February of 2002, Go2Net moved for summary judgment to dismiss Molino's equitable defenses of waiver and estoppel to Go2Net's WSA
claim. Molino opposed that motion, and moved to dismiss Go2Net's WSA claim. On March 8, 2002, the court granted Go2Net's summary
judgment motion and denied Molino's motion to dismiss. The case is scheduled to go to trial on July 1, 2002. The Company's management
believes the Company has meritorious defenses to these claims but litigation is inherently uncertain and the Company may not prevail in this
Two of nine founding shareholders and three other shareholders of Authorize.Net Corporation, a subsidiary acquired through the
Company's merger with Go2Net, filed a lawsuit on May 2, 2000 in Utah State Court in Provo, Utah. This action was brought to reallocate
amongst the founding shareholders the consideration received in the acquisition of Authorize.Net by Go2Net. The plaintiffs allege that the
corporate officers of Authorize.Net fraudulently obtained a percentage of Authorize.Net shares greater than what was anticipated by the
founding shareholders, and are making claims under the Utah Uniform Securities Act as well as claims of fraud, negligent misrepresentation,
breach of fiduciary duty, conflict of interest, breach of contract and related claims. Plaintiffs seek compensatory and punitive damages in the
amount of $200 million, rescission of certain transactions in Authorize.Net securities, and declaratory and injunctive relief. The plaintiffs
subsequently amended the claim to name Authorize.Net as a defendant with regard to the claims under the Utah Uniform Securities Act and
have asserted related claims against Go2Net. The case is currently in the expert witness discovery phase, which is expected to end on March
29, 2002. The Company has filed a motion for summary judgment on behalf of Authorize.Net and has asserted counterclaims against the
plaintiffs. The Company's management believes the Company has meritorious defenses to these claims but litigation is inherently uncertain
and the Company may not prevail in this matter.
One of the shareholders of INEX Corporation filed a complaint with the Ontario Superior Court of Justice in Canada on September 22,
1999 alleging that the original shareholders of INEX and INEX itself were bound by a shareholders agreement that entitled the shareholder to
pre emptive rights and rights of first refusal. The complaint was amended on December 20, 1999 to allege that the Company assumed the
obligations of INEX under the alleged shareholders agreement as a result of the Company's acquisition of INEX on October 14, 1999. The
plaintiff has agreed to dismiss the complaint with prejudice and release all claims against defendants in exchange for the defendants' agreement
to forego collection of litigation costs assessed against the plaintiff to date in the suit. Defendants have submitted settlement documents to
plaintiff's counsel who has approved them. The parties are awaiting final signatures to complete the settlement.
On December 5, 2001, a complaint entitled The boxLot Company v. InfoSpace, Inc., et. al. was filed in the Superior Court of California
for San Diego County. The complaint names as defendants the Company and certain of the Company's current and former directors, and
alleges violations of state law in connection with the asset purchase transaction between the Company and The boxLot Company in December
of 2000. Plaintiffs filed an amended complaint on February 15, 2002, and the defendants have not yet responded to the amended complaint.
The Company's management believes the Company has meritorious defenses to these claims but litigation is inherently uncertain and the
Company may not prevail in this matter.
In addition, from time to time the Company is subject to various other legal proceedings that arise in the ordinary course of business.
Although the Company cannot predict the outcomes of these proceedings with certainty, the Company's management does not believe that the
disposition of these matters and the matters discussed above will have a material adverse effect on the Company's financial position, results of
operations or cash flows.