SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
USA NETWORKS, INC.
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[LOGO]
April 30, 2002
Dear Stockholder:
You are invited to attend the 2002 Annual Meeting of Stockholders of USA
Networks, Inc., which will be held at USA's offices at 8800 Sunset Boulevard,
West Hollywood, California, on Tuesday, June 4, 2002, at 8:30 a.m., local time.
At this year's stockholders meeting, you will be asked to elect 12 directors
and to ratify the appointment of Ernst & Young LLP as independent auditors. The
Board of Directors unanimously recommends a vote FOR the directors recommended
by the Board and FOR ratification of the appointment of Ernst & Young LLP as
independent auditors.
It is important that your shares be represented and voted at the Annual
Meeting regardless of the size of your holdings. Whether or not you plan to
attend the Annual Meeting, please complete, sign, date and return the
accompanying proxy card in the enclosed envelope in order to make certain that
your shares will be represented at the Annual Meeting. You may also submit a
proxy for your shares of USA stock by telephone or through the internet by
following the instructions on the enclosed proxy card.
Attendance at the Annual Meeting will be limited to stockholders of record
as of April 25, 2002 and to guests of the Company. I look forward to greeting
those of you who will be able to attend the meeting.
Sincerely,
/s/ Barry Diller
Barry Diller
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
152 WEST 57TH STREET 42ND FLOOR NEW YORK, NEW YORK 10019 212.314.7300
FAX 212.314.7309
USA NETWORKS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 2002
To the Stockholders:
The Annual Meeting of Stockholders of USA Networks, Inc., a Delaware
corporation (the "Company" or "USA"), will be held at USA's offices, at 8800
Sunset Boulevard, West Hollywood, California, on Tuesday, June 4, 2002, at
8:30 a.m., local time, for the following purposes:
1. To elect 12 directors, each to hold office for a one-year term ending on
the date of the next succeeding annual meeting of stockholders or until
such director's successor shall have been duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of USA for the 2002 fiscal year; and
3. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Only holders of record of USA's common stock, Class B common stock and
preferred stock as of the close of business on April 25, 2002 are entitled to
notice of, and to vote at, the Annual Meeting. You may examine a list of the
stockholders of record as of the close of business on April 25, 2002 for any
purpose germane to the meeting during the 10-day period preceding the date of
the meeting at the offices of USA, located at 152 West 57th Street, New York,
New York 10019.
By order of the Board of Directors,
[LOGO]
Julius Genachowski
EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL
AND SECRETARY
New York, New York
April 30, 2002
IMPORTANT
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AT YOUR
EARLIEST CONVENIENCE IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOU MAY ALSO
SUBMIT A PROXY FOR YOUR SHARES OF USA STOCK THROUGH THE INTERNET OR BY
TELEPHONE BY VISITING THE WEBSITE, OR USING THE TOLL-FREE NUMBER, SHOWN OR
YOUR PROXY.
USA NETWORKS, INC.
152 WEST 52ND STREET
42ND FLOOR
NEW YORK, NY 10019
PROXY STATEMENT
This Proxy Statement (first mailed on or about May 1, 2002) is being
furnished to holders of common stock, Class B common stock and preferred stock
in connection with the solicitation of proxies by the Board of Directors of USA
Networks, Inc. ("USA" or the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held for the purposes described in
this Proxy Statement. Each copy of this Proxy Statement mailed to holders of
common stock, Class B common stock and preferred stock is accompanied by a form
of proxy for use at the Annual Meeting.
At the Annual Meeting, USA stockholders will be asked:
(1) To elect 12 members of the USA Board, each to hold office for a
one-year term ending on the date of the next succeeding annual meeting of
stockholders or until such director's successor shall have been duly elected
and qualified;
(2) To ratify the appointment of Ernst & Young LLP as independent
auditors of USA for the 2002 fiscal year; and
(3) To transact such other business as may be properly brought before
the meeting and any adjournments or postponements thereof.
DATE, TIME AND PLACE OF MEETING
The Annual Meeting will be held on Tuesday, June 4, 2002 at 8:30 a.m., local
time, at USA's offices, at 8800 Sunset Boulevard, West Hollywood, California.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Only holders of record of common stock, Class B common stock and preferred
stock at the close of business on April 25, 2002 (the "Record Date") are
entitled to notice of, and will be entitled to vote at, the Annual Meeting.
Preferred stock is entitled to two votes per share, Class B common stock is
entitled to ten votes per share and common stock is entitled to one vote per
share on each matter that preferred stock, Class B common stock and common stock
vote together as a single class. At the close of business on the Record Date,
there were 348,611,228 shares of common stock, 63,033,452 shares of Class B
common stock and 13,120,533 shares of preferred stock outstanding and entitled
to vote.
VOTING AND REVOCATION OF PROXIES
The proxy conferred by the proxy card accompanying this Proxy Statement is
solicited on behalf of the Board of Directors of USA for use at the Annual
Meeting. Stockholders of record may vote their shares of USA common stock,
Class B common stock or preferred stock in any of four ways:
- Submitting a Proxy by Mail. If you choose to submit your proxy by mail,
simply mark your proxy, date and sign it, and return it in the
postage-paid envelope provided.
- Submitting a Proxy by Telephone. Submit a proxy for your shares by
telephone proxy by using the toll-free telephone number provided on your
proxy card. Telephone proxy voting is available 24 hours a day.
- Submitting a Proxy by Internet. Submit your proxy via the internet. The
web site for internet proxy voting is on your proxy card, and internet
proxy voting is also available 24 hours a day.
- Voting in Person. Vote by appearing and voting in person at the Annual
Meeting.
Street name holders may submit a proxy by telephone or the internet if their
bank or broker makes those methods available, in which case the bank or broker
will enclose the instructions with this proxy statement. If you submit a proxy
by telephone or via the internet you should not return your proxy card.
Instructions on how to submit a proxy by telephone or via the internet are
located on the proxy card enclosed with this proxy statement.
All proxies properly submitted, and that are not revoked, will be voted at
the Annual Meeting in accordance with the instructions indicated thereon. If no
instructions are indicated thereon, such proxies will be voted FOR each of the
proposals described in this Proxy Statement.
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Annual Meeting by (1) delivering to The Bank of New York a
written notice, bearing a date later than the proxy, stating that the proxy is
revoked, (2) submitting a later-dated proxy relating to the same shares by mail,
telephone or the internet prior to the vote at the Annual Meeting, or
(3) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not, by itself, revoke a proxy). You should send any
written notice or new proxy card to USA c/o The Bank of New York at the
following address: USA Networks, Inc., P.O. Box 11001, New York, New York
10203-0001 or follow the instructions provided on your proxy card to submit a
proxy by telephone or via the internet. You may request a new proxy card by
calling our proxy solicitor, MacKenzie Partners, Inc., at 1-800-322-2885
(toll-free).
If you hold your shares through a bank or broker, follow the voting
instructions on the form you receive from your bank or broker.
YOUR VOTE IS IMPORTANT. WE URGE YOU TO SUBMIT YOUR PROXY BY TELEPHONE,
INTERNET OR BY SIGNING AND RETURNING THE ACCOMPANYING PROXY CARD WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING.
The Board of Directors of USA does not presently intend to bring any
business before the Annual Meeting other than the proposals discussed in this
Proxy Statement and specified in the Notice of the Annual Meeting. So far as is
known to the USA Board, no other matters are to be brought before the Annual
Meeting. If any other business properly comes before the Annual Meeting,
however, it is intended that proxies, in the form enclosed, will be voted on
such matters in accordance with the judgment of the persons voting such proxies.
VOTE REQUIRED
Election of nine of the director nominees to be elected at the Annual
Meeting requires the affirmative vote of a plurality of the total number of
votes cast by the holders of the shares of common stock, Class B common stock
and preferred stock voting together as a single class (the "Total Voting
Power"). Election of three of the director nominees requires the affirmative
vote of a plurality of the total number of votes cast by the holders of the
shares of common stock, voting as a separate class.
Approval of the ratification of auditors requires the affirmative vote of
the holders of a majority of the Total Voting Power, present in person or
represented by proxy at the Annual Meeting and voting on this proposal.
Pursuant to a stockholders agreement, each of Universal Studios, Inc.
("Universal"), a subsidiary of Vivendi Universal S.A. ("Vivendi Universal"), and
Liberty Media Corporation ("Liberty") has granted to Mr. Diller an irrevocable
proxy over all USA securities owned by Universal, Liberty and their affiliates
for all matters except for a fundamental change, which requires the consent of
each of Mr. Diller, Universal and Liberty. As a result, Mr. Diller, through
shares owned by him as well as those owned by Liberty and Vivendi Universal,
generally controls the vote on 13% of the common stock, 100% of the Class B
common stock and 67.2% of the combined voting power of the common stock, the
Class B common stock and the preferred stock. Thus, regardless of the vote of
any other USA stockholder, Mr. Diller has control over the vote on each matter
to be considered by stockholders at
2
the Annual Meeting other than the election of the three directors to be elected
separately by the holders of the common stock.
QUORUM; BROKER NON-VOTES
The presence, either in person or by proxy, of the holders of USA's
securities representing a majority of USA's Total Voting Power entitled to vote
is necessary to constitute a quorum at the Annual Meeting. Shares of USA common
stock, Class B common stock and preferred stock represented by a properly
executed proxy will be treated as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining. Abstentions and broker non-votes, although counted for
purposes of determining whether there is a quorum at the Annual Meeting, will
not be voted. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote the shares on a proposal because the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner.
With respect to the ratification of auditors, abstentions will have the same
effect as votes against such proposal and broker non-votes will have no effect
on the outcome of such proposal.
If a quorum is not obtained, it is expected that the Annual Meeting will be
postponed or adjourned in order to permit additional time for soliciting and
obtaining additional proxies or votes, and, at any subsequent reconvening of the
Annual Meeting, all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the Annual Meeting, except
for any proxies that theretofore have been effectively revoked or withdrawn.
SOLICITATION OF PROXIES AND EXPENSES
USA will bear the cost of the solicitation of proxies from its stockholders.
In addition to solicitation by mail, the directors, officers and employees of
USA may solicit proxies from stockholders by telephone, letter, facsimile or in
person. Following the original mailing of the proxies and other soliciting
materials, USA will request brokers, custodians, nominees and other record
holders to forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of common stock and preferred stock and to request
authority for the exercise of proxies. In such cases, USA, upon the request of
the record holders, will reimburse such holders for their reasonable expenses.
USA has retained MacKenzie Partners, Inc. to distribute proxy solicitation
materials to brokers, banks and other nominees and to assist in the solicitation
of proxies from USA stockholders. The fee for such firm's services is estimated
not to exceed $12,500 plus reimbursement for reasonable out-of-pocket costs and
expenses in connection therewith.
ITEM 1
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
INFORMATION CONCERNING NOMINEES
At the upcoming Annual Meeting, a board of 12 directors will be elected to
hold office until the next Annual Meeting of Stockholders and until their
successors are elected and qualified. The Board of USA has designated
Messrs. Keough and Schwarzkopf and Ms. Busquet as nominees for the positions on
the USA Board to be elected by the holders of USA common stock voting as a
separate class. Although management does not anticipate that any of the persons
named below will be unable or unwilling to stand for election, in the event of
such an occurrence, proxies may be voted for a substitute designated by the
Board. All of the Board's nominees are incumbent directors of the Company.
3
Background information about the Board's nominees for election is set forth
below. Each of the following persons is also a director of USANi LLC, a
subsidiary of USA.
ROBERT R. BENNETT, age 43, has been a director of USA since October 2001.
Mr. Bennett has also served as the President and Chief Executive Officer of
Liberty since April 1997 and a director of Liberty since September 1994.
Mr. Bennett served as Executive Vice President of TCI from April 1997 until the
acquisition of TCI by AT&T Corp. in March 1999. Mr. Bennett served as the
Executive Vice President, Secretary and Treasurer of Liberty from June 1995
through March 1997, Chief Financial Officer from May 1996 through March 1997,
and in various executive positions since Liberty's inception in 1990.
Mr. Bennett also served as acting Chief Financial Officer of Liberty
Digital, Inc. from June 1997 to July 1997. Mr. Bennett is a director of
UnitedGlobalCom, Inc., Liberty Livewire Corporation, Liberty Satellite &
Technology, Inc., and Telewest Communications plc and serves as Chairman of the
Board of Liberty Digital, Inc.
EDGAR BRONFMAN, JR., age 45, has been a director of USA since
February 1998. He has been Chief Executive Officer of Lexa Partners LLC since
April 2002. Previously, Mr. Bronfman was Executive Vice Chairman of Vivendi
Universal from December 2000 through December 2001 when he resigned his
executive responsibilities with that company. Prior to December 2000, he had
been President and Chief Executive Officer of The Seagram Company Ltd. since
June 1994 and before that he was President and Chief Operating Officer of
Seagram. Mr. Bronfman is a director of Vivendi Universal and Equitant, Inc. and
a member of the Board of New York University Medical Center and the Board of
Governors of The Joseph H. Lauder Institute of Management & International
Studies at the University of Pennsylvania.
ANNE M. BUSQUET, age 52, has been a director of USA since March 1999. She is
the President of AMB Advisors, LLC, an independent consulting firm. Previously,
she was President, Interactive Services and New Businesses, an American Express
division, from July 2000 to April 2001, and before that she was President of
American Express Relationship Services from October 1995 to July 2000 and the
Executive Vice President of American Express' Consumer Card Group since
November 1993. She also serves on the Board of Directors of Protege Group.
BARRY DILLER, age 60, has been a director and the Chairman and Chief
Executive Officer of USA (or its predecessors) since August 1995. He was
Chairman of the Board and Chief Executive Officer of QVC, Inc. from
December 1992 through December 1994. From 1984 to 1992, Mr. Diller served as the
Chairman of the Board and Chief Executive Officer of Fox, Inc. Prior to joining
Fox, Inc., Mr. Diller served for 10 years as Chairman of the Board and Chief
Executive Officer of Paramount Pictures Corporation. Mr. Diller currently serves
as a director of Ticketmaster, Expedia, Inc., The Washington Post Company and
The Coca-Cola Company. He also serves on the Board of the Museum of Television
and Radio, the New York Public Library, Conservation International and 13/WNET.
In addition, Mr. Diller is a member of the Board of Councilors for the
University of Southern California's School of Cinema-Television, the New York
University Board of Trustees, the Tisch School of the Arts Dean's Council and
the Executive Board for the Medical Sciences of University of California, Los
Angeles.
PHILIPPE GERMOND, age 45, has been a director of USA since March 2001. He
has been Chief Executive Officer of Cegetel since January 1997, Chairman of
Cegetel since November 2000 and Chairman and Chief Executive Officer of
Vivendinet since December 2000. In addition, Mr. Germond is a member of the
Executive Committee of Vivendi Universal. Prior to his employment at Cegetel,
Mr. Germond served as Chief Executive Officer of SFR, a subsidiary of Cegetel,
from 1995 until 1996, and as Managing Director of Hewlett Packard Europe
(Personal Computers and Peripherals group) from 1994 until 1995.
VICTOR A. KAUFMAN, age 58, has been a director of USA since December 1996
and has been Vice Chairman of USA since October 1999. Previously, Mr. Kaufman
served in the Office of the Chairman for USA since January 1997 and as Chief
Financial Officer of USA since November 1, 1997. Prior to
4
that time, he served as Chairman and Chief Executive Officer of Savoy Pictures
Entertainment, Inc. since March 1992 and as a director of Savoy since
February 1992. Mr. Kaufman was the founding Chairman and Chief Executive Officer
of Tri-Star Pictures, Inc. from 1983 until December 1987, at which time he
became President and Chief Executive Officer of Tri-Star's successor company,
Columbia Pictures Entertainment, Inc. He resigned from these positions at the
end of 1989 following the acquisition of Columbia by Sony USA, Inc. Mr. Kaufman
joined Columbia in 1974 and served in a variety of senior positions at Columbia
and its affiliates prior to the founding of Tri-Star. Mr. Kaufman also serves as
a director of Ticketmaster, Hotels.com and Expedia, Inc.
DONALD R. KEOUGH, age 75, has been a director of USA since September 1998.
He is Chairman of the Board of Allen & Company Incorporated, a New York
investment banking firm. He was elected to that position in April 1993.
Mr. Keough retired as President, Chief Operating Officer and a director of The
Coca-Cola Company in April 1993. Mr. Keough serves as a director on the boards
of The Washington Post Company, McDonald's Corporation and YankeeNets, LLC. He
is a past chairman of the board of trustees of the University of Notre Dame and
a trustee of several other educational institutions. He also serves on the
boards of a number of national charitable and civic organizations.
MARIE-JOSEE KRAVIS, age 52, has been a director of USA since March 2001. She
is a Senior Fellow of the Hudson Institute as well as the Council on Foreign
Relations. Mrs. Kravis has been associated with the Hudson Institute since 1973
when she joined as a senior economist. She held a number of positions with the
Hudson Institute before being elected executive director of the Hudson Institute
of Canada in 1976. She returned to the U.S. and became a Senior Fellow of the
Institute in 1994. Mrs. Kravis received an honorary doctorate of law at the
University of Windsor and Laurentian University. She obtained a master's degree
in economics from the University of Ottawa. She was a member of the Quebec
government's Consultative Committee on Financial Institutions, Vice Chair of the
federal Royal Commission on National Passenger Transportation, member of the
Canadian government's Communications Research Advisory Board and the Canadian
Council for Research on Social Science and the Humanities. Mrs. Kravis is also a
director of Vivendi Universal S.A., Canadian Imperial Bank of Commerce,
Hollinger International Inc. and Ford Motor Company.
JOHN C. MALONE, age 60, has been a director of USANi LLC since
September 1998 and became a director of USA in October 2001. Dr. Malone has
served as Chairman of the Board and a director of Liberty since 1990, and as
Chairman of the Board and a director of TCI Satellite Entertainment, Inc. since
December 1996. Dr. Malone served as Chairman of the Board of TCI from
November 1996 until the acquisition of TCI by AT&T Corp. in March 1999, as Chief
Executive Officer of TCI from January 1994 to March 1999, and as President of
TCI from January 1994 to March 1997. Dr. Malone served as Chief Executive
Officer of TCI Communications, Inc., the domestic cable subsidiary of TCI prior
to the AT&T merger ("TCIC"), from March 1992 to October 1994, and as President
of TCIC from 1973 to October 1994. Dr. Malone is also a director of The Bank of
New York, United Global Communications, CATO Institute, Discovery
Communications, Cable Television Laboratories, Inc. (Chairman Emeritus), Cendant
Corp. and the Nature Conservancy.
JEAN-MARIE MESSIER, age 45, has been a director of USA since March 2001. He
became Chairman and Chief Executive Officer of Vivendi Universal S.A. in
December 2000, upon the merger of Vivendi, The Seagram Company Ltd. and Canal
Plus S.A. Prior to the creation of Vivendi Universal S.A., Mr. Messier was
Chairman and Chief Executive Officer of Vivendi from June 1996. Mr. Messier
joined Compagnie Generale des Eaux (renamed Vivendi in 1998) in November 1994 as
Chief Executive Officer and Chairman of the Executive Committee. Mr. Messier
also serves as a director of Alcatel, BNP-Paribas, Cegetel, Compagnie de
Saint-Gobain, LVMH-Moet Hennessy Louis Vuitton, New York Stock Exchange, UGC and
is charman of the Supervisory Board of Groupe Canal +.
GEN. H. NORMAN SCHWARZKOPF, age 67, has been a director of USA since
December 1996. He previously had served as a director of Home Shopping Network
since May 1996. Since his retirement
5
from the military in August 1991, Gen. Schwarzkopf has been an author, a
lecturer and a participant in several television specials and works with NBC as
a consultant. From August 1990 to August 1991, he served as Commander-in-Chief,
United States Central Command and Commander of Operations, Desert Shield and
Desert Storm. General Schwarzkopf had 35 years of service with the military. He
is also on the Nature Conservancy's President's Conservation Council, Chairman
of the Starbright Capital Campaign, co-founder of the Boggy Creek Gang, a member
of the University of Richmond Board of Trustees, and serves on the Boards of
Directors of Remington Arms Company and Cap CURE, Association for the Cure of
Cancer of the Prostate.
DIANE VON FURSTENBERG, age 55, has been a director of USA since March 1999.
She is a designer and the founder of Diane Von Furstenberg Studio L.P. and has
served as its Chairman since August 1995. Previously, she was the Chairman of
Diane Von Furstenberg Studio, which she also founded.
Mr. Diller and Ms. Von Furstenberg are married.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF
ITS NOMINEES FOR DIRECTOR NAMED ABOVE.
INFORMATION CONCERNING EXECUTIVE OFFICERS
Background information about the Company's executive officers who are not
nominees for election as director is set forth below.
DARA KHOSROWSHAHI, age 32, has been Executive Vice President and Chief
Financial Officer of USA since January 2002 and had previously been Executive
Vice President, Operations and Strategic Planning of USA since July 2000. From
August 1999 to July 2000, Mr. Khosrowshahi served as President, USA Networks
Interactive, a division of USA. Mr. Khosrowshahi joined USA in 1998 as Vice
President of Strategic Planning for USA, and was later promoted to Senior Vice
President in May 1999. Prior to joining USA, Mr. Khosrowshahi worked at Allen &
Company Incorporated from 1991 to 1998 where he served as Vice President from
1995 to 1998. He is a member of the Board of Directors of BET.com, Hotels.com,
Ticketmaster, Expedia, Inc. and ARTISTDirect.
JULIUS GENACHOWSKI, age 39, has been Executive Vice President, General
Counsel and Secretary of USA since January 2002 and Senior Vice President,
General Counsel and Secretary of USA since August 2000. Mr. Genachowski joined
the Company in December 1997 as General Counsel and Senior Vice President,
Business Development of USA Broadcasting. He has also held the position of Vice
President, Corporate Development at Ticketmaster Online-Citysearch, Inc. From
1994-1997, Mr. Genachowski served at the Federal Communications Commission, as
Chief Counsel to Chairman Reed Hundt and, before that, as Special Counsel to
General Counsel William E. Kennard. He served as a law clerk to Supreme Court
Justice David H. Souter in 1993-1994 and, in 1992-1993, to retired Supreme Court
Justice William J. Brennan, Jr. He was also a law clerk to Chief Judge Abner J.
Mikva of the U.S. Court of Appeals for the D.C. Circuit. Mr. Genachowski has
worked for Representative (now Senator) Charles Schumer, as well as the U.S.
House of Representatives Iran-Contra Committee. Mr. Genachowski serves as a
director of Expedia, Inc., Hotels.com, and Styleclick, Inc.
DANIEL MARRIOTT, age 33, joined USA as Senior Vice President, Strategic
Planning as of March 1, 2002. He has served as Executive Vice President,
Corporate Strategy and Development of Ticketmaster since January 2000, and also
served concurrently as President of Citysearch since October 2001. Prior to such
positions, Mr. Marriott served as Executive Vice President, Business Development
of Ticketmaster from February 1999 to December 1999 and Executive Vice
President, Product Development and Marketing of Ticketmaster from August 1997 to
January 1999. Prior to joining Ticketmaster, Mr. Marriott was employed by
PepsiCo for more than seven years, most recently in the
6
position of Senior Product Manager for PepsiCo's Frito-Lay division. He is a
member of the Board of Directors of Expedia, Inc., Hotels.com and
Styleclick, Inc.
JONATHAN MILLER, age 45, has been President and Chief Executive Officer of
USA Information and Services ("USAIS") since June 2000. Prior to his role with
USAIS, Mr. Miller served as President and Chief Executive Officer of USA
Electronic Commerce Solutions, since October 1999. Previously, Mr. Miller also
served as President and Chief Executive Officer of USA Broadcasting. Before
joining USA Broadcasting in July 1997, Mr. Miller served as the Managing
Director of Nickelodeon International. Mr. Miller joined Nickelodeon as the
Chief Executive Officer/Managing Director of Nick UK in 1993. He also served as
Chief Executive of Paramount's first branded international channel, launching
the Paramount Comedy Channel in London, UK. Prior to joining Nickelodeon,
Mr. Miller was Vice President of Programming and NBA Entertainment at the
National Basketball Association in New York. He is a member of the Board of
Directors of Ticketmaster, Expedia, Inc. and Styleclick, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
The Board has four standing committees: the Executive Committee, the Audit
Committee, the Compensation/Benefits Committee, and the Performance-Based
Compensation Committee. The Board does not have a nominating committee.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors consisted of
Messrs. Keough and Savoy and Gen. Schwarzkopf during 2001, each of whom is
"independent" in accordance with the standards imposed by the National
Association of Securities Dealers listing standards. The Audit Committee
functions pursuant to a written charter adopted by the Board of Directors. The
Audit Committee is authorized to recommend to the Board of Directors independent
certified public accounting firms for selection as auditors of the Company; make
recommendations to the Board of Directors on auditing matters; examine and make
recommendations to the Board of Directors concerning the scope of audits; and
review and approve the terms of transactions between or among the Company and
related parties. Mr. Keough is Chairman of the Audit Committee. The Audit
Committee met four times during 2001. The formal report of the Audit Committee
with respect to the year 2001 is set forth under the heading "Audit Committee
Report" below.
COMPENSATION/BENEFITS COMMITTEE. The Compensation/Benefits Committee of the
Board of Directors, consisting of Messrs. Keough and Savoy and Ms. Busquet
during 2001, is authorized to exercise all of the powers of the Board of
Directors with respect to matters pertaining to compensation and benefits,
including, but not limited to, salary matters, incentive/bonus plans, stock
option plans, investment programs and insurance plans, except that the
Performance-Based Compensation Committee exercises such powers with respect to
performance-based compensation of corporate officers who are, or who may become,
subject to Section 162(m) of the Internal Revenue Code. The
Compensation/Benefits Committee is also authorized to exercise all of the powers
of the Board of Directors in matters pertaining to employee promotions and the
designation and/or revision of employee positions and job titles. None of the
members of the Compensation/Benefits Committee is an employee of the Company.
Mr. Savoy served as Chairman of the Compensation/Benefits Committee during 2001.
The Compensation/Benefits Committee met ten times and acted by written consent
two times during 2001.
PERFORMANCE-BASED COMPENSATION COMMITTEE. The Performance-Based
Compensation Committee of the Board of Directors, consisting of Mr. Savoy and
Ms. Busquet during 2001, is authorized to exercise all of the powers of the
Board of Directors with respect to matters pertaining to performance-based
compensation of corporate officers who are, or may become, subject to
Section 162(m) of the Internal Revenue Code. Section 162(m) limits the
deductibility of compensation in excess of $1,000,000 paid to a corporation's
chief executive officer and four other most highly compensated executive
officers, unless certain conditions are met. None of the members of the
Performance-Based
7
Compensation Committee is an employee of the Company. The Performance-Based
Compensation Committee met six times during 2001.
EXECUTIVE COMMITTEE. The Executive Committee of the Board of Directors
consisted of Messrs. Diller, Kaufman and Bronfman during 2001. The Executive
Committee has all the power and authority of the Board of Directors of the
Company, except those powers specifically reserved to the Board by Delaware law
or the Company's organizational documents. The Executive Committee did not meet
during 2001.
The Board met six times and acted by written consent three times during
2001. During 2001, all then incumbent directors attended at least 75% of the
meetings of the Board and the Board committees on which they served with the
exception of Messrs. Germond, Messier and Lescure (a director not nominated for
re-election).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents, as of February 15, 2002, information relating
to the beneficial ownership of USA's common stock by (1) each person known by
USA to own beneficially more than 5% of the outstanding shares of USA's common
stock, (2) each director of USA, (3) each of the Chief Executive Officer and the
four other most highly compensated executive officers of USA who served in such
capacities as of December 31, 2001 (the "Named Executive Officers"), and
(4) all executive officers and directors of USA as a group. The table also
presents, as of February 15, 2002, information relating to the beneficial
ownership of shares of Class A common stock of Hotels.com, a subsidiary of USA
("Hotels"), shares of Class A common stock of Expedia, Inc., a subsidiary of USA
("Expedia"), shares of Class A common stock of Styleclick, Inc., a subsidiary of
USA ("Styleclick"), and shares of Class B common stock of Ticketmaster, a
subsidiary of USA ("TM"), by (1) each director of USA, (2) each of the Named
Executive Officers, and (3) all executive officers and directors of USA as a
group.
Unless otherwise indicated, beneficial owners listed here may be contacted
at USA's corporate headquarters address, 152 West 57th Street, New York, New
York 10019. For each listed person, the number of shares of USA common stock,
Hotels Class A common stock, Styleclick Class A common stock, TM Class B common
stock and percent of each such class listed assumes the conversion of any shares
of USA Class B common stock, Hotels Class B common stock, Styleclick Class B
common stock and TM Class A common stock owned by such person, but does not
assume the conversion of those shares owned by any other person. Shares of USA
Class B common stock may at the option of the holder be converted on a
one-for-one basis into shares of USA common stock. Shares of Hotels Class B
common stock may at the option of the holder be converted on a one-for-one basis
into shares of Hotels Class A common stock. Shares of Styleclick Class B common
stock may at the option of the holder be converted on a one-for-one basis into
shares of Styleclick Class A common stock. Shares of TM Class A common stock may
at the option of the holder be converted on a one-for-one basis into shares of
TM Class B common stock. Under the rules of the Securities and Exchange
Commission, a person is deemed to be a beneficial owner of a security if that
person has or shares voting power, which includes the power to vote or to direct
the voting of such security, or investment power, which includes the power to
dispose of or to direct the disposition of such security. A person is also
deemed to be the beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days. Under these rules, more
than one person may be deemed to be a beneficial owner of the same securities
and a person may be deemed to be a beneficial owner of securities as to which
that person has no economic interest. For each listed person, the number of
shares and percent of class listed includes shares of USA common stock, Hotels
Class A common stock, Styleclick Class A common stock and TM Class B common
stock that may be acquired by such person upon exercise of stock options that
are or will be exercisable within 60 days of February 15, 2002. Unless
specifically set forth in the following table, the listed person did not
beneficially own, as of February 15, 2002, any
8
shares of Hotels common stock, TM common stock, Styleclick common stock or
Expedia common stock.
The percentage of votes for all classes of USA common stock is based on one
vote for each share of USA common stock, ten votes for each share of USA
Class B common stock and two votes for each share of USA preferred stock. These
figures do not include any unissued shares of USA common stock or USA Class B
common stock issuable upon conversion of Liberty's Home Shopping Network, Inc.
("Holdco") shares and USANi LLC shares beneficially owned by Liberty or Vivendi
Universal. The percentage of votes for all classes of Hotels common stock is
based on one vote for each share of Hotels Class A common stock and 15 votes for
each share of Hotels Class B common stock. The percentage of votes for all
classes of Styleclick common stock is based on one vote for each share of
Styleclick Class A common stock and 15 votes for each share of Styleclick
Class B common stock. The percentage of votes for all classes of TM common stock
is based on 15 votes for each share of TM Class A common stock and one vote for
each of TM Class B common stock.
NUMBER OF PERCENT PERCENT OF VOTES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS SHARES OF CLASS (ALL CLASSES)
------------------------------------ ------------------ ----------------- -------- ----------------
Capital Research & Management Co... USA common 27,503,520(1) 8.1% 2.8%
333 South Hope Street
Los Angeles, CA 90071
Liberty Media Corporation.......... USA common 74,442,234(2) 19.1% 52.2%
12300 Liberty Boulevard
Englewood, CO 80112
Microsoft Corporation.............. USA common 53,318,277(3) 14.3% 5.3%
One Microsoft Way USA preferred 12,808,605(3)
Redmond, WA 98052
Vivendi Universal S.A.............. USA common 31,611,308(4) 8.9% 15.3%
42, Avenue Friedland
75380 Paris cedex 08/France
Wellington Management USA common 15,849,317 4.7% 1.6%
Company LLC.....................
75 State Street
Boston, MA 02109
Barry Diller....................... USA common 155,472,777(2)(5) 34.5% 71.0%
Hotels Class A --(6) * *
Styleclick Class A --(7) * *
TM Class B --(8) * *
Expedia Class A --(9) * *
Paul Allen......................... USA common 20,024,026(10) 5.9% 2.0%
Robert R. Bennett.................. USA common 26,096(26) * *
Edgar Bronfman, Jr................. USA common -- * *
Anne M. Busquet.................... USA common 18,998(11) * *
Julius Genachowski................. USA common 155,895(12) * *
TM Class B 700 * *
Philippe Germond................... USA common 1,666(13) * *
Victor A. Kaufman.................. USA common 1,045,000(14) * *
Donald R. Keough................... USA common 204,674(15) * *
9
NUMBER OF PERCENT PERCENT OF VOTES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS SHARES OF CLASS (ALL CLASSES)
------------------------------------ ------------------ ----------------- -------- ----------------
Dara Khosrowshahi.................. USA common 355,676(16) * *
Hotels Class A 29,383(17) * *
TM Class B 500 * *
Georg Kofler....................... USA common 1,600,000(18) * *
Marie-Josee Kravis................. USA common 1,666(19) * *
Pierre Lescure..................... USA common 1,666(20) * *
John C. Malone..................... USA common --(26) * *
Jean-Marie Messier................. USA common 1,666(20) * *
William D. Savoy................... USA common 59,998(22) * *
Gen. H. Norman Schwarzkopf......... USA common 165,998(23) * *
Michael Sileck..................... USA common 13,156(24) * *
Diane Von Furstenberg.............. USA common 14,998(25) *
All executive officers and directors
as a group (19 persons).......... USA common 179,160,430 39.4% 73.1%
Hotels Class A 29,383 * *
TM Class B 1,200 * *
------------------------
* The percentage of shares beneficially owned does not exceed 1% of the class.
(1) Based upon information filed with the Securities and Exchange Commission as
of February 15, 2002.
(2) Consists of 24,838,738 shares of USA common stock and 756,644 shares of USA
Class B common stock held by Liberty and 44 shares of USA common stock held
collectively by the BDTV Entities and 8,000,000, 31,236,444, 8,010,364 and
1,600,000 shares of USA Class B common stock held by BDTV Inc., BDTV
II Inc., BDTV III Inc. and BDTV IV Inc. (collectively, the "BDTV
Entities"), respectively. Mr. Diller owns all of the voting stock of the
BDTV Entities and Liberty owns all of the non-voting stock, which
non-voting stock represents in excess of 99% of the equity of the BDTV
Entities. Pursuant to a stockholders agreement among Liberty, Universal,
Vivendi Universal (as the successor to The Seagram Company Ltd.), the
parent of Universal, USA and Mr. Diller (the "Stockholders Agreement"),
Mr. Diller generally has the right to vote all of the shares of USA common
stock and USA Class B common stock held by Liberty and BDTV Entities.
(3) Based on information filed with the Securities and Exchange Commission as
of February 15, 2002. Consists of 20,096,634 shares of USA common stock,
14,245,932 shares of USA common stock issuable upon exercise of the same
number of USA warrants and 18,975,711 shares of USA common stock issuable
upon conversion of 12,808,605 shares of USA preferred stock.
(4) Consists of 18,181,308 shares of USA common stock and 13,430,000 shares of
USA Class B common stock held by Vivendi Universal. Pursuant to the
Stockholders Agreement, Mr. Diller generally has the right to vote all of
the shares of USA common stock and USA Class B common stock held by Vivendi
Universal.
(5) Consists of 2,043,805 shares of USA common stock owned by Mr. Diller,
options to purchase 47,120,888 shares of USA common stock granted under
USA's stock option plans, 254,542 shares of USA common stock held by a
private foundation as to which Mr. Diller disclaims beneficial ownership,
44 shares of USA common stock and 48,846,808 shares of USA Class B common
stock
10
held by the BDTV Entities, 24,838,738 shares of USA common stock and
756,644 shares of USA Class B common stock which are held by Liberty, and
18,181,308 shares of USA common stock and 13,430,000 shares of USA Class B
common stock, which are held by Universal and otherwise beneficially owned
by Vivendi Universal, as to which Mr. Diller has general voting authority
under the Stockholders Agreement. Excludes options to purchase 14,998
shares of USA common stock held by Ms. Von Furstenberg, as to which
Mr. Diller disclaims beneficial ownership.
(6) Excludes 38,999,100 shares of Hotels Class B common stock owned by USA, as
to which Mr. Diller disclaims beneficial ownership. These shares are
convertible into an equal number of shares of Hotels Class A common stock.
(7) Excludes 23,153,713 shares of Styleclick Class B common stock owned by USA,
as to which Mr. Diller disclaims beneficial ownership. These shares are
convertible into an equal number of shares of Styleclick Class A common
stock.
(8) Excludes 42,480,143 shares of TM Class A common stock and 53,302,401 shares
of TM Class B common stock owned by USA, as to which Mr. Diller disclaims
beneficial ownership. The shares of TM Class A common stock are convertible
into an equal number of shares of TM Class B common stock.
(9) Excludes 936,815 shares of Expedia Class A common stock and 34,507,275
shares of Expedia Class B common stock owned by USA, as to which
Mr. Diller disclaims beneficial ownership. The common stock has one vote
per share and the Class B common stock generally has 15 votes per share.
(10) Consists of 19,954,028 shares of USA common stock and options to purchase
69,998 shares of USA common stock granted under USA's stock option plans.
(11) Consists of 4,000 shares of USA common stock and options to purchase
14,998 shares of USA common stock granted under USA's stock option plans.
(12) Consists of 20,062 shares of USA common stock, 25,000 shares of USA
restricted stock and options to purchase 110,833 shares of USA common
stock granted under USA's stock option plans.
(13) Consists of options to purchase 1,666 shares of USA common stock granted
under USA's stock option plans.
(14) Consists of 45,000 shares of USA restricted stock and options to purchase
1,000,000 shares of USA common stock granted under USA's stock option
plans.
(15) Consists of 84,676 shares of USA common stock and options to purchase
119,998 shares of USA common stock granted under USA's stock option plans.
Excludes shares of USA common stock beneficially owned by Allen & Co., for
which Mr. Keough serves as Chairman. Mr. Keough disclaims beneficial
ownership of such shares.
(16) Consists of 23,593 shares of USA common stock, 45,000 shares of USA
restricted stock and options to purchase 287,083 shares of USA common
stock granted under USA's stock option plans.
(17) Consists of options to purchase 29,383 shares of Hotels Class A common
stock granted under Hotels' stock option plans.
(18) Consists of options to purchase 1,600,000 shares of USA common stock
granted under USA's stock plans.
(19) Consists of options to purchase 1,666 shares of USA common stock granted
under USA's stock option plans.
11
(20) Consists of options to purchase 1,666 shares of USA common stock granted
under USA's stock option plans.
(21) Consists of options to purchase 1,666 shares of USA common stock granted
under USA's stock option plans.
(22) Consists of 10,000 shares of USA common stock and options to purchase
49,998 shares of USA common stock granted under USA's stock option plans.
(23) Consists of options to purchase 165,998 shares of USA common stock granted
under USA's stock option plans.
(24) Consists of 13,156 shares of USA common stock.
(25) Consists of options to purchase 14,998 shares of USA common stock granted
under USA's stock option plans. Excludes shares beneficially owned by
Mr. Diller, as to which Ms. Von Furstenberg disclaims beneficial
ownership. Ms. Von Furstenberg is Mr. Diller's wife.
(26) Mr. Bennett and Mr. Malone became directors of USA on October 25, 2001.
Excludes shares beneficially owned by Liberty, as to which
Messrs. Bennett and Malone disclaim beneficial ownership.
The following table presents, as of February 15, 2002, information relating
to the beneficial ownership of USA's Class B common stock:
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------------------ ---------------- ----------------
Barry Diller(1)........................................ 63,033,452 100%
c/o USA Networks, Inc.
152 West 57th Street
New York, NY 10019
Liberty Media Corporation(1)(2)........................ 49,603,452 78.7%
9197 South Peoria Street
Englewood, CO 80112
BDTV Entities(1)(2).................................... 48,846,808 77.5%
(includes BDTV INC., BDTV II INC.,
BDTV III INC. and BDTV IV INC.)
8800 Sunset Boulevard
West Hollywood, CA 90069
Vivendi Universal S.A.(3).............................. 13,430,000 21.3%
42, Avenue de Friedland
75380 Paris cedex 08/France
------------------------
(1) These figures do not include any unissued shares of common stock or Class B
common stock issuable upon conversion of Liberty's Holdco shares and USANi
LLC shares beneficially owned by Liberty or Vivendi Universal.
(2) Liberty holds 756,644 shares of USA Class B common stock and the BDTV
Entities hold 48,846,808 shares of USA Class B common stock. Mr. Diller owns
all of the voting stock of the BDTV Entities and Liberty owns all of the
non-voting stock, which non-voting stock represents in excess of 99% of the
equity of the BDTV Entities. Pursuant to the Stockholders Agreement,
Mr. Diller generally has the right to vote all of the shares of USA Class B
common stock held by Liberty and the BDTV Entities.
12
(3) Mr. Diller generally votes all of the shares held by Vivendi Universal under
the terms of the Stockholders Agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company's equity securities, to file initial statements of beneficial ownership
(Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of
common stock and other equity securities of the Company with the Securities and
Exchange Commission. Executive officers, directors and greater than 10%
beneficial owners are required by rules of the Securities and Exchange
Commission to furnish the Company with copies of all such forms they file. Based
solely on a review of the copies of such forms furnished to the Company, and/or
written representations that no additional forms were required, the Company
believes that its officers, directors and greater than 10% beneficial owners
complied with these filing requirements in 2001.
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board has appointed Ernst & Young
LLP as independent auditors for the fiscal year ending December 31, 2002 and
until their successors are elected. The appointment was made upon the
recommendation of the Audit Committee, which is comprised of directors who are
not employees of the Company.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will be given an opportunity to make a statement if he or she
so chooses and will be available to respond to appropriate questions.
THE BOARD CONSIDERS ERNST & YOUNG TO BE WELL QUALIFIED AND RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR RATIFICATION OF THEIR APPOINTMENT AS INDEPENDENT
AUDITORS OF THE COMPANY FOR 2002.
EXECUTIVE COMPENSATION
GENERAL
This section of the Proxy Statement sets forth certain information
pertaining to compensation of the Chief Executive Officer and the Company's four
most highly compensated executive officers during 2001 other than the Chief
Executive Officer, as well as information pertaining to the compensation of
members of the Board of Directors of the Company.
The following table presents information concerning total compensation
earned by the Named Executive Officers: the Chief Executive Officer and the four
other most highly compensated executive officers of USA who served in such
capacities as of December 31, 2001 for services rendered to USA during each of
the last three fiscal years. The information presented below represents all
compensation earned by the Named Executive Officers for all services performed
for USA or any of its subsidiaries.
13
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -----------------------
OTHER ANNUAL RESTRICTED STOCK ALL OTHER
NAME AND FISCAL COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) ($)(1) ($)(2) (#)(3) ($)
------------------ -------- ---------- --------- ------------ ------------ -------- ------------
Barry Diller............ 2001 500,000 -- -- -- -- 254,139(6)(7)
Chairman and Chief 2000 500,000 1,675,000(4) 146,563(5) -- -- 316,736(6)(7)
Executive Officer 1999 500,000 -- -- -- -- 920,992(6)(7)
Victor A. Kaufman....... 2001 650,000 -- 5,953 -- 700,000 5,250(7)
Vice Chairman(8) 2000 650,000 1,500,000(4) 193,155(9) 278,438(10) 750,000 5,250(7)
1999 500,000 1,050,000 -- 837,188 700,000 4,800(7)
Dara Khosrowshahi....... 2001 450,000 -- -- -- 333,333 5,250(7)
Executive Vice 2000 421,148 650,000(4) 81,250(5) 278,438(10) 565,000(12) 5,250(7)
President and Chief 1999 341,552 400,000(13) -- 837,188 100,000 4,800(7)
Financial Officer(11)
Julius Genachowski...... 2001 400,000 -- 100,000(15) -- 333,333 5,250(7)
Executive Vice 2000 338,173(16) 500,000(4) 95,149(17) 278,438(10) 450,000 5,250(7)
President, General
Counsel and Secretary
(14)
Michael Sileck.......... 2001 400,000 -- -- -- 83,333 5,250(7)
Senior Vice President 2000 400,000 500,000(4) -- 278,438(10) 350,000 5,250(7)
and Chief Financial 1999 107,688 65,000 -- -- 100,000 --
Officer(18)
--------------------------
(1) Disclosure of perquisites and other personal benefits, securities or
property received by each of the Named Executive Officers is only required
where the aggregate amount of such compensation exceeded the lesser of
$50,000 or 10% of the total of the Named Executive Officer's salary and
bonus for the year.
(2) Reflects the dollar value of a restricted stock award determined by
multiplying the number of shares in the award by the closing price of USA
common stock as of the date of the grant. Restricted stock awards vest on
the third anniversary of the date of the grant and are forfeited if, before
vesting, the award recipient voluntarily terminates his employment.
(3) All figures in this column reflect options to purchase USA common stock, as
adjusted, to the extent applicable, for the two-for-one stock split that
became effective for holders of record as of the close of business on
February 10, 2000.
(4) Of this amount, Messrs. Diller, Kaufman, Khosrowshahi, Genachowski and
Sileck elected to defer $586,250, $750,000, $325,000, $175,000 and $100,000,
respectively, under USA's 2000 Bonus Stock Purchase Program. Under the 2000
Bonus Stock Purchase Program, in lieu of receiving a cash payment for the
entire amount of their 2000 bonuses, all bonus eligible employees of USA had
a right to elect to purchase shares of common stock with up to 50% of the
value of their 2000 bonus payments. Employees were entitled to purchase
these shares at a 20% discount to the then current market value of USA
common stock, as determined in accordance with terms of the program.
(5) Reflects the 20% discount on the purchase price of USA shares purchased
under the 2000 Bonus Stock Purchase Program (described in Note 4 above).
(6) Mr. Diller has an interest-free, secured, non-recourse promissory note in
the amount of $4,997,779 payable to USA which was used to purchase 883,976
shares of common stock. As a result, Mr. Diller had non-cash compensation
for imputed interest of $286,368 in 1999, $311,486 in 2000 and $248,889 in
2001. In addition, Mr. Diller was granted options in 1995 to purchase
7,583,388 shares of common stock, vesting over a four-year period, at an
exercise price below the fair market value of common stock on the date of
grant. USA has amortized non-cash compensation of $630,912 in 1999.
(7) Includes USA's matching contributions under its 401(k) Retirement Savings
Plan. Under the 401(k) Plan as in effect through December 31, 2001, USA
matches $.50 for each dollar a participant contributes up to the first 6% of
compensation. For fiscal 1999, USA's matching contributions for
Messrs. Diller, Kaufman and Khosrowshahi were $3,712, $4,800 and $4,800,
respectively. For each of fiscal 2000 and fiscal 2001, USA's
14
matching contribution for each of Messrs. Diller, Kaufman, Khosrowshahi,
Genachowski and Sileck was $5,250.
(8) Mr. Kaufman was appointed as Vice Chairman of USA on October 13, 1999. Prior
to that time, he served in the Office of the Chairman and as Chief Financial
Officer of USA and received compensation as such during fiscal 1999, which
is reflected herein.
(9) Includes $187,500 for the 20% discount on the purchase price of USA shares
purchased under the 2000 Bonus Stock Purchase Program (described in Note 4
above).
(10) As of December 31, 2001, Messrs. Kaufman, Khosrowshahi, Genachowski and
Sileck held 45,000, 45,000, 25,000 and 15,000 shares of restricted stock,
respectively. The value of these shares as of December 31, 2001 was
$1,228,950, $1,228,950, $682,750 and $409,650, respectively.
(11) Mr. Khosrowshahi was appointed as Executive Vice President and Chief
Financial Officer on January 31, 2002. Prior to that, he served as Executive
Vice President, Operations and Strategic Planning of USA from July 24, 2000
to January 31, 2002 and he served as President of USA Networks Interactive
from August 5, 1999 to July 24, 2000. From March 2, 1998 until August 5,
1999, Mr. Khosrowshahi served as Vice President, Strategic Planning of USA.
Compensation received as President, USA Networks Interactive, a division of
USA, during fiscal 1999 and 2000 is reflected herein. Amount reflected in
the 2000 salary column reflect an annual base salary of $450,000 from
July 24, 2000, when Mr. Khosrowshahi became USA Executive Vice President,
Operations and Strategic Planning.
(12) In addition to the options shown in the table, Mr. Khosrowshahi was also
granted 200,000 options to purchase Hotels Class A common stock during 2000
while he was President, USA Networks Interactive.
(13) Of this amount, Mr. Khosrowshahi elected to defer $15,000 under USA's 1999
Bonus Stock Purchase Program. Under the 1999 Bonus Stock Purchase Program,
in lieu of receiving a cash payment for the entire amount of their 1999
bonuses, all bonus eligible employees of USA had a right to elect to
purchase shares of common stock with up to 50% of the value of their 1999
bonus payments. Employees were entitled to purchase these shares at a 20%
discount to the then current market value of USA common stock, as determined
in accordance with the terms of the program.
(14) Mr. Genachowski was appointed as Senior Vice President, General Counsel and
Secretary on August 9, 2000. Prior to that time, he served as General
Counsel and Senior Vice President, Business Development of USA Broadcasting
and Vice President, Corporate Development at Ticketmaster
Online-Citysearch, Inc., and received compensation as such during fiscal
2000, which is reflected herein.
(15) Represents a $50,000 housing allowance plus a tax gross-up, pursuant to
Mr. Genachowski's employment agreement.
(16) Reflects an annual base salary of $300,000 for the period January 1, 2000
to August 9, 2000 and an annual base salary of $400,000 from August 9, 2000
through December 31, 2000.
(17) Represents $43,750 for the 20% discount on the purchase price of USA shares
purchased under the 2000 Bonus Stock Purchase Program (described in Note 4
above) and $51,399 for a housing allowance pursuant to Mr. Genachowski's
employment agreement.
(18) Mr. Sileck served as USA's Senior Vice President and Chief Financial
Officer from October 12, 1999 to January 31, 2002.
OPTION GRANTS
The following table presents information with respect to options to purchase
USA's common stock granted to the Named Executive Officers during the year ended
December 31, 2001. The grants were made under the 2000 Stock and Annual
Incentive Plan ("2000 Incentive Plan").
The 2000 Incentive Plan is administered by the Compensation/Benefits
Committee and the Performance-Based Compensation Committee, which have the sole
discretion to determine the selected officers, employees and consultants to whom
incentive or non-qualified options, SARs, restricted stock and performance units
may be granted. As to these awards, the Compensation/Benefits Committee and the
Performance-Based Compensation Committee also have the sole discretion to
determine the number, type, exercise price, vesting schedule and other terms,
conditions and restrictions of the grants. The Compensation/Benefits Committee
and the Performance-Based Compensation Committee also
15
retain discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice such options. The exercise price of an incentive stock
option granted under the 2000 Incentive Plan must be at least 100% of the fair
market value of USA's common stock on the date of grant. In addition, options
granted under the 2000 Incentive Plan terminate ten years from the date of
grant. To date, only non-qualified stock options have been granted under the
2000 Incentive Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES PRICE OPTION TERMS(2)
OPTIONS GRANTED IN THE PER SHARE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(1) DATE(1) 5%($) 10%($)
---- ---------- -------------- --------- ---------- --------- ----------
Barry Diller.................... -- -- -- -- -- --
Chairman and Chief Executive
Officer
Victor A. Kaufman............... 250,000 3.33% $22.55 4/25/11 3,545,393 8,984,723
Vice Chairman 450,000 6.00% $23.82 12/16/11 6,741,122 17,083,325
Dara Khosrowshahi............... 83,333 1.11% $22.55 4/25/11 1,181,793 2,994,896
Executive Vice President and 250,000 3.33% $23.82 12/16/11 3,745,068 9,490,736
Chief Financial Officer
Julius Genachowski.............. 83,333 1.11% $22.55 4/25/11 1,181,793 2,994,896
Executive Vice President, 250,000 3.33% $23.82 12/16/11 3,745,068 9,490,736
General Counsel and Secretary
Mike Sileck..................... 83,333 1.11% $22.55 4/25/11 1,181,793 2,994,896
Senior Vice President and
Chief Financial Officer
--------------------------
(1) Options to purchase USA stock granted on April 25, 2001, become exercisable
in installments with 25% vesting on December 31, 2001, and 12.5% vesting on
each 6 month anniversary thereof. Options to purchase USA stock granted
during December 2001 generally become exercisable in four equal annual
installments commencing on the first anniversary of the grant date. All of
these options expire ten years from the date of grant.
(2) These amounts represent assumed rates of appreciation only, and also assume
that all of the options vest and become exercisable, and that they are held
in each case for the full 10-year term. Actual gains, if any, on stock
option exercises are dependent on the future performance of the common stock
as well as on the option holders' continued employment through the vesting
period and other contractual provisions. Potential value is reported net of
the option exercise price, but before taxes associated with exercise. The
amounts reflected in this table may not be achieved.
16
The table below presents information concerning the exercise of stock
options by the Named Executive Officers during the year ended December 31, 2001,
and the fiscal year-end value of all unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
YEAR END (#) AT YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
Barry Diller............ 2,752,500 52,314,107 47,120,888 -- 956,110,597 --
Chairman and Chief
Executive Officer
Victor A. Kaufman....... 730,000 11,187,332 1,312,000 1,600,000 12,750,319 8,088,813
Vice Chairman
Dara Khosrowshahi....... 135,000 1,622,875 302,083 921,250 2,685,337 5,498,791
Executive Vice
President and Chief
Financial Officer(3)
Julius Genachowski...... 36,000 370,268 163,333 680,000 1,061,828 3,761,788
Executive Vice
President, General
Counsel and Secretary
Mike Sileck............. -- -- 158,333 375,000 1,138,663 2,694,373
Senior Vice President
and Chief Financial
Officer
--------------------------
(1) Represents the difference between the exercise price of the options and the
closing price of USA's common stock on the date of exercise and does not
exclude the U.S. federal and state taxes due upon exercise.
(2) Represents the difference between $27.31, the closing price of USA's common
stock on December 31, 2001, and the exercise price of the options, and does
not include the U.S. federal and state taxes due upon exercise.
(3) Mr. Khosrowshahi also holds 155,300 options to acquire Hotels Class A common
Stock. None of such options are exercisable and the value of such options at
year end was $4,756,500, based on the difference between $46.00, the closing
price of Hotels' Class A common stock on December 31, 2001, and the exercise
price of the options, and does not include the U.S. federal and state taxes
due upon exercise.
COMPENSATION OF OUTSIDE DIRECTORS
Each director of USA who is not an employee of USA or any of its
subsidiaries receives an annual retainer of $30,000 per year and the chairperson
of each standing committee receives an annual retainer of $2,500 per year. USA
also pays each of these directors $1,000 for each USA or USANi LLC Board meeting
and each USA or USANi LLC Board committee meeting attended, plus reimbursement
for all reasonable expenses incurred by a director as a result of attendance at
any of these meetings. For the year ended December 31, 2001, Messrs. Bennett,
Bronfman and Malone waived their rights to receive the annual retainer and
attendance fees.
During 2001, the USA Directors' Stock Option Plan was amended to provide
that directors who are not employees of USA or any of its subsidiaries receive a
grant of options to purchase 15,000 shares of USA's common stock upon initial
election to office and thereafter receive a grant of options to purchase 10,000
shares of USA's common stock annually on the date of USA's annual meeting of
stockholders at which the director is re-elected. The exercise price per share
of USA's common stock subject to the options is the fair market value of USA's
common stock on the date of grant, which is defined as the mean of the high and
low sale price on the date on any stock exchange on which the
17
common stock is listed or as reported by NASDAQ or, in the event that the common
stock is not so listed or reported, as determined by an investment banking firm
selected by the Compensation/Benefits Committee. The options vest in three equal
annual installments commencing on the first anniversary of the grant date. The
options expire ten years from the date of grant. For the year ended
December 31, 2001, Messrs. Bennett, Bronfman and Malone waived their rights to
receive such option grants.
Under USA's Deferred Compensation Plan for Non-Employee Directors,
non-employee directors may defer all or a portion of their annual retainer fees.
Eligible directors who defer their directors' fees can elect to have such
deferred fees applied to the purchase of share units, representing the number of
share of USA common stock that could have been purchased on the relevant date,
or credited to a cash fund. If any dividends are paid on USA common stock,
dividend equivalents will be credited on the share units. The cash fund will be
credited with deemed interest at an annual rate equal to the weighted average
prime lending rate of JP Morgan Chase Bank. Upon termination, a director will
receive (1) with respect to share units, such number of shares of USA common
stock as the share units represent; and (2) with respect to the cash fund, a
cash payment. The payments made upon termination will be either in a lump sum or
in installments, as previously elected by the eligible director at the time of
the related deferral election.
EQUITY COMPENSATION AGREEMENT; EMPLOYMENT AGREEMENTS
MR. DILLER. Under the Equity and Bonus Compensation Agreement dated
August 24, 1995, USA issued and sold to Mr. Diller 883,976 shares of USA's
common stock at $5.65625 per share in cash (the "Initial Diller Shares") and an
additional 883,976 shares of common stock for the same per share price (the
"Additional Diller Shares") payable by means of a cash payment of $2,210 and an
interest-free, secured, non-recourse promissory note in the amount of
$4,997,779. These amounts have been adjusted as appropriate to reflect the two
two-for-one stock splits to holders of record as of the close of business on
March 12, 1998 and February 10, 2000, respectively. The promissory note is
secured by the Additional Diller Shares and by that portion of the Initial
Diller Shares having a fair market value on the purchase date of 20% of the
principal amount of the promissory note.
Mr. Diller's Equity and Bonus Compensation Agreement with USA also provides
for a gross-up payment to be made to Mr. Diller, if necessary, to eliminate the
effect of the imposition of the excise tax under Section 4999 of the Internal
Revenue Code upon payments made to Mr. Diller and imposition of income and
excise taxes on the gross-up payment.
Mr. Diller was also granted a bonus arrangement, contractually independent
from the promissory note, under which he received a bonus payment of
approximately $2.5 million on August 24, 1996, and was to receive a further such
bonus payment on August 24, 1997, which was deferred. The deferred amount
accrues interest at a rate of 6% per annum. Mr. Diller also received $966,263
for payment of taxes by Mr. Diller due to the compensation expense which
resulted from the difference in the per share fair market value of USA's common
stock and the per share purchase price of the Initial Diller Shares and
Additional Diller Shares.
MR. KHOSROWSHAHI. On July 24, 2000 (the "Effective Date"), USA and
Mr. Khosrowshahi entered into an amended and restated employment agreement for a
term continuing until March 3, 2003 and providing for an annual base salary of
$450,000 per year. Mr. Khosrowshahi is also eligible to receive an annual
discretionary bonus.
Mr. Khosrowshahi's employment agreement provides for a grant of options
("USA Options") to purchase 300,000 shares of USA's common stock.
Mr. Khosrowshahi's options become exercisable in four equal installments, with
25% vesting on July 24, 2001 and an additional 25% vesting on each of the next
three anniversaries of that date. Upon a change of control of USA, 100% of
Mr. Khosrowshahi's options become vested and exercisable. Upon termination of
Mr. Khosrowshahi's employment by USA for any reason other than death, disability
or cause, or if Mr. Khosrowshahi
18
terminates his employment for good reason, USA is required to pay
Mr. Khosrowshahi his base salary through the term of his agreement over the
course of the then remaining term, subject to mitigation by Mr. Khosrowshahi. In
the event of a termination for any reason other than death, disability or cause
or if Mr. Khosrowshahi terminates his employment for good reason,
Mr. Khosrowshahi's USA Options and all other options ("Prior Options") held by
him prior to the Effective Date will immediately vest and they shall remain
outstanding for the earlier of one year from the date of termination and the end
of the term of such options. In addition, if on or prior to December 3, 2002,
USA has not offered Mr. Khosrowshahi an extension of term until July 25, 2004,
the USA Options, other than those to vest on July 24, 2004, shall immediately
vest and they and any then outstanding Prior Options shall remain outstanding
until March 3, 2004.
MR. GENACHOWSKI. On August 9, 2000, USA and Mr. Genachowski entered into an
employment agreement for a term continuing until September 30, 2002 and
providing for an annual base salary of $400,000 per year. Mr. Genachowski is
also eligible to receive an annual discretionary bonus. Under the agreement,
Mr. Genachowski is entitled to receive an annual housing allowance, plus tax
gross-up for such allowance, not to exceed an aggregate of $100,000.
Mr. Genachowski's employment agreement provides for a grant of options to
purchase 200,000 shares of USA's common stock. Mr. Genachowski's options become
exercisable in four equal installments, with 25% vesting on August 9, 2001 and
an additional 25% vesting on each of the next three anniversaries of that date.
Upon a change of control of USA, 100% of Mr. Genachowski's options become vested
and exercisable. Upon termination of Mr. Genachowski's employment by USA for any
reason other than death, disability or cause, or if Mr. Genachowski terminates
his employment for good reason, USA is required to pay Mr. Genachowski his base
salary through the term of his agreement over the course of the then remaining
term and continue the housing allowance for the remainder of the term, subject,
in each case, to mitigation by Mr. Genachowski. In the event of a termination
for any reason other than cause or if Mr. Genachowski terminates his employment
for good reason, Mr. Genachowski's options that would vest in the 12 months
following such termination will vest immediately and remain exercisable for one
year from the date of such termination.
MR. SILECK. On October 12, 1999, USA and Mr. Sileck entered into a two-year
employment agreement, providing for an annual base salary of $400,000 per year.
Mr. Sileck is also eligible to receive an annual discretionary bonus.
Mr. Sileck's employment with USA terminated on January 31, 2002.
Mr. Sileck's employment agreement provides for a grant of options to
purchase 75,000 shares of USA's common stock, as adjusted for USA's two-for-one
stock split to holders of record as of the close of business on February 10,
2000. Mr. Sileck's options became exercisable with respect to 25% of the total
shares on October 12, 2000, with an additional 25% vesting on each of the next
three anniversaries of that date. Upon a change of control of USA, 100% of
Mr. Sileck's options become vested and exercisable. Mr. Sileck's options expire
upon the earlier to occur of 10 years from the date of grant or 90 days
following the termination of his employment for any reason. In the event that
Mr. Sileck's employment is terminated by USA for any reason other than cause,
death or disability, USA is required to pay Mr. Sileck's base salary through the
end of the term of his agreement, subject to mitigation by Mr. Sileck.
19
PERFORMANCE GRAPH
The Stock Price Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Exchange Act or the Securities Act of 1933,
as amended (the "Securities Act", and together with the Exchange Act, the
"Acts"), except to the extent that USA specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The graph below compares cumulative total return of USA common stock, the
Nasdaq Composite Index and the Standard & Poor's Entertainment Index based on
$100 invested at the close of trading on December 31, 1996 through December 31,
2001. USA selected the Standard & Poor's Entertainment Index as its Peer Group
because it includes companies engaged in many of the same businesses as USA.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
12/31/96 12/31/97 12/31/98 12/31/99 121/29/00 12/31/01
USA 100 216.84 278.95 465.26 327.37 459.96
NASDAQ-COMPOSITE 100 121.64 169.84 315.2 191.36 151.07
S&P-ENTERTAINMENT 100 144.95 195.51 227.74 193.63 167.04
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
USA.................................... $100.00 $216.84 $278.95 $465.26 $327.37 $459.96
NASDAQ-COMPOSITE....................... $100.00 $121.64 $169.84 $315.20 $191.36 $151.07
S&P-ENTERTAINMENT...................... $100.00 $144.95 $195.51 $227.74 $193.63 $167.04
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has a Compensation/Benefits Committee, which in
fiscal year 2001 was comprised of Messrs. Donald Keough and William Savoy and
Ms. Anne M. Busquet, and a Performance-Based Compensation Committee, which in
fiscal year 2001 was comprised of Mr. Savoy and Ms. Busquet. None of the members
of these Committees is or was in the past an officer or employee of USA or any
of its subsidiaries. Mr. Keough is Chairman of the Board of Allen & Company
incorporated. From time to time, USA has retained the services of Allen &
Company Incorporated, a New York investment banking firm.
REPORT ON EXECUTIVE COMPENSATION
The Compensation/Benefits Committee of the Board of Directors and the
Performance-Based Compensation Committee (collectively, the "Committee")
furnished the following joint report that provides an overview of the Company's
compensation philosophy and executive compensation programs for the 2001 fiscal
year.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is philosophically designed to
reward exceptional performance and to align the financial interests of the
Company's senior executives with those of the equity owners of the Company. To
achieve this end, the Committee has developed and implemented a compensation
program designed to attract, retain and incentivize highly skilled executives
with the business experience and acumen necessary for achievement of the
Company's long-term business objectives.
To implement this philosophy in 2001, the Committee adopted an incentive
compensation program (the "2001 Program") intended to form the basis for
determining both short-term and long-term incentive compensation for USA
employees, including executive officers. The 2001 Program contains objective
standards designed to provide strong performance incentives for employees. Under
the 2001 Program, employees receive a greater portion of their annual bonuses in
stock options as opposed to cash, thus tying together even more closely the
interests of employees and shareholders while also serving as an important
retention mechanism. The 2001 Program also provides for grants of restricted
stock to reward truly exceptional performance. The components of the program are
discussed below. The Committee and mangement are constantly re-evaluating the
Company's executive compensation program. The 2001 Program reflected changes
from prior years' programs, and future years may see additional changes.
The compensation of the Company's Chief Executive Officer and the four other
most highly compensated executive officers is governed in part by the terms of
certain agreements which are described under "Executive Compensation-Equity
Compensation Agreement; Employment Agreements" herein.
BASE SALARY
The base salaries paid to the Company's executive officers are based upon
recommendations of senior management, and require approval of the Committee.
Management and the Committee take into account a variety of factors in
determining base salary, including (i) competitive salaries for comparable
officers at comparable companies, (ii) individual performance and an assessment
of the value of the individual's services to USA, (iii) the fairness of
individual executive officers' salaries relative to their responsibilities,
(iv) the salaries of other executive officers, and (v) USA's financial
performance. At different times, depending upon prevailing circumstances, the
Committee gives these criteria varying degrees of weight. Messrs. Khosrowshahi,
Genachowski and Sileck were paid base salary
21
in accordance with their respective employment agreements. The salaries for the
Company's executive officers were not changed in 2001.
ANNUAL BONUS
Pursuant to the 2001 Program, the targeted amount of cash bonuses was
reduced from the prior year by one-half and additional stock options were issued
in lieu of that portion of the cash bonus target. Under the program, the
Committee established performance targets for each of the Company's divisions
and subsidiaries based upon the achievement of a specified level of EBITDA (the
primary metric), revenue and free cash flow. Under the program, an initial cash
bonus pool was established, with final payouts to be determined based on a
comparison of actual results to the targeted amounts. Under the 2001 Program, no
bonus would be paid if results were below minimum thresholds established for the
2001 Program and bonuses could exceed the targeted amount for extraordinary
performance beyond the established targets. Divisions an subsidiaries generally
did not reach the 2001 targets; those that did received bonuses pursuant to the
2001 Program. The Committee is responsible for determining the CEO's bonus and
the CEO makes recommendations to the Committee regarding allocation of the bonus
pool to the four other named executive officers. Because the 2001 targets
generally were not met, no annual cash bonuses were paid to executive officers
for 2001.
STOCK BASED COMPENSATION
The Committee believes that its stock option program appropriately links
executive interest to stockholder value. As a result of the 2001 Program, stock
option based compensation was comprised of two portions, one for the portion
that would be granted as a result of reducing the annual cash bonus pool (the
"special options") and the other consisting of the Company's traditional stock
option grant. Special options were granted in 2001 to a broad-based pool group
of employees, including executive officers. The terms of the special options
provide for vesting of 25% of the options on December 31, 2001 and an additional
12.5% vesting on each six-month anniversary of that date; provided that upon
termination of employment by the Company, options that would have vested over
the succeeding 18 months would vest upon termination of employment and be
exercisable for a period of 90 days.
The Company also granted options at year-end. On an overall basis, the
Company granted significantly fewer of these traditional annual options during
2001 than in past years. The options were granted on a discretionary, rather
than a formulaic basis. With respect to the options granted, the number granted
to executive officers, including the named executive officers, was proposed by
senior management and reviewed with and approved by the Committee. The factors
that influenced decisions with respect to these option grants included
individual performance, an assessment of the value of the individual's services
to USA, the awards given to other executives and the desire to keep the
Company's overall compensation competitive. Such stock options provide incentive
for the creation of shareholder value of the long term since the full benefit of
the compensation package cannot be realized unless the Company's common stock
appreciates during the term of the option. All grants are reviewed and approved
by the Committee and all year-end grants vest over a four-year period.
The Committee did not award any restricted stock to executive officers
during 2001.
TAX MATTERS
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid in any
fiscal year to a corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year. However,
the statute exempts qualifying performance-based compensation from the deduction
limit if certain requirements are met. The Company has structured certain of its
compensation policies to comply with Section 162(m), including submitting
certain matters to the Performance-Based
22
Compensation Committee. Stock based compensation under the Company's 2000 Stock
and Incentive Plan are also structured to comply with Section 162(m).
The Board, the Compensation/Benefits Committee and the Performance-Based
Compensation Committee reserve the authority to award non-deductible
compensation in appropriate circumstances. In addition, it is possible that some
compensation paid pursuant to certain awards that have already been granted,
including options granted by a company that was subsequently acquired by USA,
may be nondeductible.
COMPENSATION OF CHIEF EXECUTIVE OFFICER FOR THE FISCAL YEAR
Effective September 25, 1998, the Committee authorized the payment to
Mr. Diller of an annual base salary of $500,000. Prior to such time, Mr. Diller
had not received a salary from the Company. Mr. Diller's base salary for fiscal
year 2001 remained unchanged and, like the period 1998-2000, Mr. Diller did not
receive additional option grants in 2001. Because the targets under the 2001
Program generally were not met, Mr. Diller and the Company's other executive
officers did not receive cash bonuses for 2001. The Committee believes
Mr. Diller's compensation is appropriate. Mr. Diller holds a very significant
equity stake in the Company and, to the extent his performance as CEO translates
into an increase in the value of the Company's stock, all stockholders,
including Mr. Diller, share the benefit. The Committee may, in the future, elect
to change base salary, bonus and/or grant additional options to Mr. Diller.
SUMMARY
The Committee believes that the Company's executive compensation program
must continually provide executives with a strong incentive to focus on and
achieve the Company's business objectives. By assuring that executives are
appropriately compensated and therefore motivated, the long-term interests of
stockholders will be best served. The actions taken by the Committee in 2001
were consistent with this focus and the principles outlined above.
Members of the Compensation/Benefits Committee
Anne M. Busquet
Donald R. Keough
William D. Savoy (Chairman)
Members of the Performance-Based Compensation Committee
Anne M. Busquet
William D. Savoy
AUDIT COMMITTEE REPORT
The Audit Committee is comprised of three independent directors and operates
under a written charter, which has been adopted by the Board of Directors. The
Audit Committee charter governs the operations of the Audit Committee and sets
forth its responsibilities. Pursuant to its charter, the Committee provides
assistance to the Board of Directors in fulfilling its oversight
responsibilities to shareholders, potential shareholders, the investment
community, and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs as
established by management and the Board. The Audit Committee is authorized,
among other things, to recommend to the Board of Directors independent certified
public accounting firms for selection as auditors of the Company; make
recommendations to the Board of Directors on auditing matters; examine and make
recommendations
23
to the Board of Directors concerning the scope of audits; and review and approve
the terms of transactions between or among the Company and related parties.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the audited consolidated financial statements for the Company for the
fiscal year ended December 31, 2001 with the Company's management and Ernst &
Young LLP ("Ernst & Young"), our independent auditors.
The Audit Committee has discussed with Ernst & Young the matters required to
be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees." In addition, the Committee has received the written
disclosures and the letter from Ernst & Young required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees" and has
discussed with Ernst & Young its independence from the Company and its
management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements for the Company for the fiscal year ended December 31, 2001
be included in our Annual Report on Form 10-K for the year ended December 31,
2001 for filing with the Securities and Exchange Commission.
Members of the Audit Committee
Donald R. Keough (Chairman)
William D. Savoy
Gen. H. Norman Schwarzkopf
FEES PAID TO OUR INDEPENDENT AUDITORS
AUDIT FEES: The aggregate fees billed for professional services rendered by
Ernst & Young LLP, our independent auditors, in connection with the audit and
review of our 2001 financial statements was $1,720,200.
AUDIT RELATED FEES: The aggregate fees billed for professional services
rendered by Ernst & Young LLP was $4,253,975, including fees for internal audit,
registration statements, accounting consultations, due diligence, pensions and
statutory audits and agreed-upon procedures.
ALL OTHER FEES: The aggregate of all other fees billed for professional
services rendered during 2001 by Ernst & Young LLP was $2,2120,769, including
fees for tax compliance and consulting services.
There were no fees incurred by Ernst & Young LLP during 2001 for
professional services rendered in connection with financial information services
design and implementation.
The Audit Committee has considered whether the non-audit services rendered
by our independent auditors with respect to the foregoing fees are compatible
with maintaining their independence.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Mr. Diller, the Chairman of the Board and Chief Executive Officer of USA, is
the sole holder of the voting stock of the BDTV Entities. The BDTV Entities hold
shares of USA common stock and Class B common stock which have effective voting
control of USA with respect to all matters submitted for the vote or consent of
stockholders as to which stockholders vote together as a single class.
In 1997, USA and Mr. Diller agreed to defer repayment of an interest-free,
secured, non-recourse promissory note in the amount of $4,997,779 due from
Mr. Diller from September 5, 1997 to September 5, 2007. As of December 31, 2001,
the promissory note remained outstanding. In 1997, Mr. Diller and USA agreed to
defer the payment of a bonus in the amount of $2.5 million that otherwise was to
be paid to Mr. Diller in 1997. The deferred bonus amount accrues interest at a
rate of 6% per annum.
24
In 2001, USA and Mr. Diller entered into an agreement with respect to the
construction of facilities including a screening room on Mr. Diller's property
and the payment of operating expenses relating thereto, to assist Mr. Diller in
connection with Company-related activities. Construction costs of approximately
$1.8 million were paid by USA and the agreement provides that under certain
circumstances, including upon Mr. Diller's termination of employment by USA or
its affiliates, Mr. Diller shall have the option of paying to USA an amount
equal to the depreciated book value of the construction costs to acquire the
facilities.
In October 2000, a subsidiary of USA and Nineteen Forty CC Inc. ("Nineteen
Forty"), a company owned by Mr. Diller, acquired an aircraft for use by
Mr. Diller and other directors and executive officers of USA in connection with
USA's business. Nineteen Forty, which originally was under contract to purchase
the aircraft, assigned to USA its rights under the purchase agreement and, in
exchange, USA granted Nineteen Forty an option to acquire all or any portion of
the aircraft for its depreciated value of USA's books if USA should ever acquire
an ownership interest in the aircraft. The aircraft is currently owned 77.2% by
the USA subsidiary and 22.8% by Nineteen Forty. USA's ownership interest remains
subject to Nineteen Forty's option.
In 2001, USA, through Home Shopping Network, paid approximately $295,382 to
Diane Von Furstenberg Studio L.P., of which Ms. Von Furstenberg, currently a
member of the Board of Directors, is the founder and Chairman. Such payment was
made in connection with goods offered for sale on Home Shopping Network's
programming services.
During 2001, Ms. Busquet, currently a member of the Board of Directors of
USA, provided consulting services to USA for which she received $20,080 from USA
during 2002.
From time to time, USA has retained the services of Allen & Company
Incorporated, a New York investment banking firm. Mr. Keough, currently a member
of the Board of Directors of USA, is Chairman of Allen & Company.
VIVENDI TRANSACTION
On December 17, 2001, USA announced the Vivendi Transaction, pursuant to
which USA would contribute USA's Entertainment Group to Vivendi Universal
Entertainment LLLP, a joint venture with Vivendi ("VUE"), which joint venture
would also hold the film, television and theme park businesses of Universal, a
subsidiary of Vivendi. Upon consummation of the Vivendi Transaction, the joint
venture will be controlled by Vivendi and its subsidiaries, with the common
interests owned 93.06% by Vivendi and its subsidiaries, 5.44% by USA and its
subsidiaries and 1.5% by Mr. Diller. The Vivendi Transaction was approved by USA
shareholders at the USA special shareholder meeting held April 23, 2002.
In connection with the Vivendi Transaction, USA and its subsidiaries will
receive the following at the closing of the transactions: (i) approximately
$1.62 billion in cash, debt-financed by the joint venture, subject to
tax-deferred treatment for a 15-year period; (ii) a $750 million face value
Class A preferred interest in the joint venture, with a 5% annual paid-in-kind
dividend and a 20-year term, to be settled in cash at its then face value at
maturity; (iii) a $1.75 billion face value Class B preferred interest in the
joint venture, with a 1.4% annual paid-in-kind dividend, a 3.6% annual cash
dividend, callable and puttable after 20 years, to be settled by Vivendi at its
then face value with a maximum of approximately 43.2 million shares of USA
common stock and 13.4 million shares of USA Class B common stock (for a total of
56.6 million USA common shares), provided that Vivendi may substitute cash in
lieu of shares of USA common stock (but not USA Class B common stock), at its
election; (iv) a 5.44% common interest in VUE, generally callable by Universal
after five years and puttable by USA after eight years, which may be settled in
either Vivendi stock or cash, at Universal's election; and (v) cancellation of
all of Vivendi's USANi LLC interests currently exchangeable into USA common
25
shares, including USANi LLC interests obtained from Liberty in a related
transaction (see immediately below).
In the aforementioned related transaction, Liberty will exchange 7,079,726
shares of USANi LLC for shares of USA common stock, and subsequently transfer to
Universal 25,000,000 shares of USA common stock, entities holding its remaining
38,694,982 shares of USANi LLC, as well as the assets and liabilities of Liberty
Programming France (which consist primarily of 4,921,250 shares of
multiThematiques S.A., a French entity), in exchange for 37,386,436 Vivendi
ordinary shares.
In addition, USA will issue to Universal ten-year warrants to acquire shares
of USA common stock as follows: 24,187,094 shares at $27.50 per share;
24,187,094 shares at $32.50 per share; and 12,093,547 shares at $37.50 per
share. Barry Diller, USA's chairman and chief executive officer, will receive a
common interest in VUE with a 1.5% profit sharing percentage in return for his
agreeing to specified non-competition provisions and agreeing to serve as
chairman and chief executive officer of the joint venture. USA and Mr. Diller
have agreed that they will not compete with Vivendi's television and filmed
entertainment businesses (including the joint venture) for a minimum of
18 months. In February 2002, Mr. Diller assigned to three executive officers of
USA the right to receive beneficial interests in a portion of Mr. Diller's
common interest in VUE. As a result of the assignments, upon closing of the
transactions, Victor Kaufman, vice chairman and a director of USA, will have an
economic interest in Mr. Diller's VUE common interests subject to put and call
rights with a minimum value of $15 million, and both of Dara Khosrowshahi,
executive vice president and chief financial officer of USA, and Julius
Genachowski, executive vice president and general counsel of USA, will have an
economic interest in Mr. Diller's VUE common interests subject to put and call
rights with a minimum value of $2.5 million. Mr. Kaufman will serve as special
advisor to the chairman and chief executive officer of VUE. In no event will any
of the officers receive any amounts referred to above prior to the exercise of
the put or call relating to Mr. Diller's common interest, nor will any of these
officers have any right to exercise any voting interests relating to
Mr. Diller's VUE common interest. As a result of the assignments, upon closing
of the transactions, Mr. Diller's economic interest in his VUE common interest
will be reduced to 92.7% of the original 1.5% profit sharing percentage, subject
to put and call rights at a minimum price of $255 million.
In connection with the transactions, the following has also been agreed:
- USA and Universal have agreed to terminate the domestic distribution
agreement and the international distribution agreement, both described
below under "Other Relationships between USA and Universal", upon (1) the
completion of the transactions or (2) the termination of the Transaction
Agreement;
- USA, Vivendi, Universal, Liberty and Mr. Diller have entered into an
Amended and Restated Governance Agreement that will become effective at
the closing of the transactions and supersede the existing Governance
Agreement among the parties. The Amended and Restated Agreement restricts
Vivendi's ability to acquire additional USA equity securities and its
ability to transfer USA securities. In addition, this agreement provides
for continuing representation on USA's board of directors by Vivendi and
Liberty. The agreement also eliminates Vivendi's right to veto specified
"fundamental matters," and significantly limits the circumstances in which
Liberty and Mr. Diller are entitled to exercise veto rights. Finally, the
agreement eliminates Vivendi's preemptive rights with respect to USA
common shares, while preserving Liberty's existing preemptive rights. If
the transactions are not completed, the existing Governance Agreement will
remain in effect.
- Vivendi, Universal, Liberty and Mr. Diller have entered into an Amended
and Restated Stockholders Agreement, which will become effective at the
closing of the transactions and supersede the existing Stockholders
Agreement. Generally, the agreement governs the relationship among the
stockholders, including rights of first refusal for sales of USA
securities,
26
tag-along rights for sales of USA securities by Liberty and Mr. Diller,
restrictions on transfers of USA securities and a standstill by
Mr. Diller with respect to Vivendi. Under this agreement, Mr. Diller
generally has voting control over all of the USA shares owned by Universal
and Liberty.
Summaries of the agreements relating to the Vivendi Transaction are set
forth in, and copies of these agreements have been filed with the Securities and
Exchange Commission as Appendices A through F to, USA's Definitive Proxy
Statement, dated March 25, 2002, and are available from the Securities and
Exchange Commission.
UNIVERSAL TRANSACTION
On February 12, 1998, the Company completed the Universal transaction, in
which USA acquired USA Networks, a New York partnership (which consisted of USA
Network and Sci-Fi Channel cable television networks), and the domestic
television production and distribution business ("Studios USA") of Universal
from Universal. Universal is controlled by Vivendi Universal. See "Other
Relationships between USA and Universal". USA paid Universal approximately
$1.6 billion in cash ($300 million of which was deferred with interest) and an
effective 45.8% interest in USA through shares of common stock, Class B common
stock and shares of USANi LLC, a Delaware limited liability company ("USANi
LLC"). USA maintains control and management of USANi LLC, and the businesses
held by USANi LLC are managed by USA in substantially the same manner as they
would be if USA held them directly through wholly owned subsidiaries. The USANi
LLC shares are exchangeable for shares of common stock and Class B common stock
on a one-for-one basis. In connection with the Vivendi Transaction described
above, all shares of USANi LLC held by Universal and Liberty will exchanged for
shares of USA common stock or cancelled. Following the transactions, USANi LLC
will be wholly owned by USA and its subsidiaries.
In connection with the Universal transaction, USA, Vivendi Universal
(successor to The Seagram Company Ltd.), Universal, Liberty and Mr. Diller
entered into various transaction agreements, including the following:
- an investment agreement, pursuant to which, among other things, (1) each
of Universal and Liberty were granted a preemptive right, subject to
limitations, to maintain their respective percentage ownership interests
in USA in connection with future issuances of USA capital stock and
(2) with respect to issuances of USA capital stock in specified
circumstances, Universal is obligated to maintain the percentage ownership
interest in USA that it had prior to the issuances;
- a governance agreement which, among other things, (1) details restrictions
on the acquisitions of additional USA securities, on the transfer of USA
securities and other conduct restrictions, in each case, applicable to
Universal and (2) governs Universal's and Liberty's rights to
representation on the USA Board of Directors and Liberty's, Universal's
and Mr. Diller's right to approve certain fundamental changes by USA or
any USA subsidiary;
- a stockholders agreement which, among other things, governs the ownership,
voting, transfer or other disposition of USA securities owned by
Universal, Liberty and Mr. Diller and their respective affiliates, and
under which Mr. Diller exercises voting control over the equity securities
of USA held by these persons and their affiliates; and
- a spinoff agreement which, in the event Mr. Diller no longer serves as
Chief Executive Officer of USA or becomes disabled, generally provides for
interim arrangements relating to management of USA and efforts to achieve
a spinoff or sale of USA's broadcast stations and, in the case of a
spinoff, arrangements relating to their respective rights in USA resulting
from the spinoff.
27
Summaries of these agreements are set forth in USA's Annual Report on
Form 10-K for the year ended December 31, 1998. Furthermore, copies of these
agreements have been filed with the Securities and Exchange Commission as
Appendices A through D to USA's Definitive Proxy Statement, dated January 12,
1998, and are available from the Securities and Exchange Commission. The parties
to these agreements have agreed to amend certain of these agreements, as
described above under "Vivendi Transaction", which amendments will become
effective upon closing of the Vivendi Transaction.
POLYGRAM FILMED ENTERTAINMENT TRANSACTION
In May 1999, USA acquired from an affiliate of Universal certain assets and
liabilities relating to the domestic (including Canada) motion picture and home
video distribution businesses of PolyGram Filmed Entertainment, Inc., including
such businesses as conducted by Gramercy Pictures, Interscope Communications and
Propaganda Films. The consideration in the transaction consisted of the
assumption by USA of certain liabilities of the acquired businesses. In
addition, in connection with the transaction, USA and Universal entered into
various related agreements, including:
- a domestic distribution agreement relating to certain PolyGram films,
pursuant to which USA has the exclusive right to distribute in the United
States and Canada these films in theatres, on television and on video for
a fee, which was approximately $5.7 million for the year ended
December 31, 2001;
- a $200 million interest-bearing promissory note, pursuant to which USA
loaned to Universal the face amount of the note, which is a recourse note
and is payable out of the revenues otherwise due Universal under the
distribution agreement, $39.3 million of which was outstanding at
December 31, 2001 and the remaining outstanding amount of which will be
repaid at the time of consummation of the Vivendi Transaction; and
- other ancillary agreements, relating to videogram fulfillment, music
administration and transitional services, pursuant to which USA incurred
fees to Universal of approximately $5.6 million for the year ended
December 31, 2001.
USA believes that the terms of the PolyGram transaction are at least as
favorable to USA as the terms that would have been obtained from an unrelated
third party.
OTHER RELATIONSHIPS BETWEEN USA AND UNIVERSAL
Under the Universal transaction, USA and some of its subsidiaries entered
into business agreements with Universal and some of its subsidiaries (some of
which will be terminated upon closing of the Vivendi Transaction, as described
above) relating to, among other things: (1) the domestic distribution by USA of
Universal-produced television programming and Universal's library of television
programming for which USA received from Universal a fee of $4.1 million for the
year ended December 31, 2001; (2) the international distribution by Universal of
television programming produced by Studios USA for which USA paid Universal a
fee of $13.6 million for the year ended December 31, 2001; (3) long-term
arrangements relating to the use by Studios USA of Universal's production
facilities in Los Angeles and Orlando, Florida, for which Universal charged USA
$7.1 million for the year ended December 31, 2001, of which $5.7 was capitalized
to production costs; and (4) a joint venture relating to the development of
international general entertainment television channels, described below.
As part of the Universal transaction, Universal and USA agreed to form a
50-50 joint venture to be managed by Universal which would own, operate and
exploit the international development of USA Network, Sci-Fi Channel and
Universal's action/adventure channel, "13th Street". USA elected to have
Universal buy out its 50% interest in this venture. In connection with the
settlement of its interest in the venture, USA received $24 million from
Universal during 2001.
28
Universal currently holds a substantial equity interest in USA and USANi
LLC. In December 2000, Vivendi S.A., The Seagram Company Ltd. and Canal Plus
combined to form a new company, named Vivendi Universal S.A. Universal was a
subsidiary of Seagram and is now a subsidiary of Vivendi Universal. During 2001,
Messrs. Bronfman, Germond, Lescure and Messier were members of the Boards of
Directors of USA and USANi LLC and held director and executive positions with
Vivendi Universal and its affiliates. These individuals were elected to the
Boards of Directors of USA and USANi LLC under the transaction agreements
relating to the Universal transaction. Other than in their capacities as
stockholders and officers of Vivendi Universal or Universal, and as directors
and stockholders of USA and USANi LLC, these individuals do not have any direct
or indirect interest in the Universal-USA agreements.
USA and USANi LLC believe that their business agreements with Universal
entered into as part of these transactions are all on terms at least as
favorable to USA and USANi LLC as terms that could have been obtained from an
independent third party.
In the ordinary course of business, USA and USANi LLC may determine to enter
into other agreements with Vivendi Universal and its affiliates.
RELATIONSHIP BETWEEN USA AND LIBERTY
Under the agreements relating to the Universal transaction, two designees of
Liberty, Messrs. Malone and Bennett, are members of the USA Board of Directors.
Liberty holds a substantial equity interest in USA and USANi LLC, and Liberty is
a party to the Universal transaction agreements filed as exhibits to USA's
publicly filed reports. As part of the Vivendi Transaction described above,
Liberty will exchange certain of its shares of USANi LLC for shares of USA
common stock and transfer the balance of those shares to Vivendi. Upon
consummation of the Vivendi Transaction, pursuant to the terms and subject to
the conditions of the Amended and Restated Governance Agreement, Liberty will
continue to be entitled to designate two members for election to USA's board of
directors.
During April 1996, Home Shopping Network sold a majority of its interest in
HSN Direct Joint Venture, its infomercial operation, for $5.9 million to
entities controlled by Flextech P.L.C., a company controlled by Liberty. In each
of February 1998, 1999, 2000 and 2001 Flextech paid Home Shopping Network a
$250,000 installment of the purchase price. Home Shopping Network retains a 15%
interest in the venture and a related corporation.
During 1996, Home Shopping Network, along with Jupiter Programming Company,
formed Shop Channel, a television shopping venture based in Tokyo. Liberty Media
International, Inc., a subsidiary of Liberty, owns a 50% interest in Jupiter,
the 70% shareholder in the venture. Home Shopping Network owns a 30% interest in
Shop Channel. During 1999, Home Shopping Network loaned $2.5 million to Shop
Channel, of which $1.4 million was outstanding at December 31, 2001. In
addition, Home Shopping Network sold inventory and provided services in the
amount of $579,000 to Shop Channel during 2001.
USA and USANi LLC believe that their business agreements with Liberty have
been negotiated on an arm's-length basis and contain terms at least as favorable
to USA and USANi LLC as those that could be obtained from an unaffiliated third
party.
In the ordinary course of business, and otherwise from time to time, USA and
USANi LLC may determine to enter into other agreements with Liberty and its
affiliates.
USANI LLC DISTRIBUTIONS
Under the USANi LLC Operating Agreement, USANi LLC is obligated to make a
distribution to each of the LLC members in an amount equal to each member's
share of USANi LLC's taxable
29
income at a specified tax rate. The amount for 2001 is $153.5 million and was
paid on February 28, 2002. In March 2000, the Company made a mandatory tax
distribution payment to Universal and Liberty in the amount of $68.1 million
related to the year ended December 31, 1999. The amount for the year ended
December 31, 1998 was $28.8 million and it was paid in March 1999.
RELATIONSHIP WITH MICROSOFT
EXPEDIA TRANSACTION. On February 4, 2002, USA completed its acquisition of
a controlling interest in Expedia, Inc. In connection with the Expedia
transaction, Microsoft agreed to vote the Expedia shares it beneficially owned
or had the right to vote in favor of the transaction and granted USA an
irrevocable proxy to vote its Expedia shares in this manner. Microsoft also
agreed to elect to exchange all of its shares of Expedia common stock for
Expedia Class B common stock, which were then exchanged for USA securities. Also
in connection with the transactions, USA agreed to grant to Microsoft customary
registration rights, including the right to underwritten offerings, relating to
USA securities owned by Microsoft following completion of the transactions. As
part of the registration rights, USA agreed to file a registration statement on
Form S-3 with respect to Microsoft's USA securities and to use its reasonable
best efforts to make such registration statement effective as promptly as
practicable following the completion of the transactions. Microsoft's
registration rights relating to its USA securities are set forth in the voting
and election agreement between USA and Microsoft. The voting and election
agreement is attached as an exhibit to USA's registration statement on Form S-4
(File No. 333-68120) and is available from the Securities and Exchange
Commission. As a result of the Expedia transaction, Microsoft holds
approximately 5.8% of USA's outstanding common stock, approximately 97.6% of
USA's outstanding preferred stock and approximately 5.3% of the vote represented
by all outstanding voting securities.
OTHER AGREEMENTS. USA and its subsidiaries have entered into a series of
commercial agreements with Microsoft generally relating to media time, the
adoption by USA and its subsidiaries of Microsoft technology and functionality,
branding and advertising, and the provision of ticketing, city guide and
personals content and functionality to the Microsoft Network. USA believes that
these transactions result in terms to USA and its subsidiaries that are at least
as favorable as those that could be obtained from a third party.
MICROSOFT/EXPEDIA AGREEMENTS. In addition, prior to consummation of the
Expedia transaction, Expedia and Microsoft amended the various agreements that
the parties had previously put in place. These agreements relate to (i) the
provision by Microsoft of certain administrative and operational services to
Expedia, (ii) carriage and cross-promotion providing for co-branding on certain
Microsoft sites, (iii) hosting services provided by Microsoft for Expedia's
websites, (iv) licensing by Microsoft of certain intellectual property to
Expedia, (v) Expedia's worldwide rights to use certain of Microsoft's retail
products and internal tools, (vi) Microsoft's agreement to develop, maintain,
host and serve maps on the Expedia websites and (vii) an assignment by Microsoft
of patent applications to Expedia and Expedia's agreement to share royalties in
certain circumstances.
ANNUAL REPORTS
Upon written request to the Corporate Secretary, USA Networks, Inc., 152
West 57th Street, New York, New York 10019, the Company will provide without
charge to each person solicited an additional copy of USA's 2001 Annual Report
on Form 10-K, including the financial statements and financial statement
schedules filed therewith. The Company will furnish a requesting securityholder
with any exhibit not contained therein upon payment of a reasonable fee.
30
PROPOSALS OF STOCKHOLDERS
The Company currently intends to hold its next annual meeting in April of
2003. Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the 2003 Annual Meeting of
Stockholders must submit the proposal to the Company at its principal executive
offices no later than December 31, 2002. Stockholders who intend to present a
proposal at the 2002 Annual Meeting of Stockholders without inclusion of such
proposal in the Company's proxy materials are required to provide notice of such
proposal to the Company no later than March 15, 2003. The Company reserves the
right to reject, rule out of order, or take other appropriate action with
respect to any proposal that does not comply with these and other applicable
requirements.
OTHER MATTERS
The Board has no knowledge of any other matters to be presented at the
meeting other than those described herein. If any other matters should properly
come before the meeting, it is the intention of the persons designated in the
proxy to vote on them according to their best judgment.
YOUR VOTE IS VERY IMPORTANT. YOUR BOARD URGES YOU TO MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE.
USA NETWORKS, INC.
If you have any questions or need assistance in voting your shares, please
contact MacKenzie Partners, Inc. at their toll free number, 1-800-322-2885, or
call 212-929-5500.
New York, New York
April 30, 2002
31
USA NETWORKS, INC.
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF USA NETWORKS,
INC. IN CONNECTION WITH THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 4,
2002
The undersigned stockholder of USA Networks, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 30, 2002 and hereby appoints
each of Julius Genachowski and Dara Khosrowshahi, proxy and attorney-in-fact,
each with full power of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the Annual Meeting of Stockholders
of USA Networks, Inc. to be held on Tuesday, June 4, 2002, at 8:30 a.m., local
time, at USA's offices at 8800 Sunset Boulevard, West Hollywood, California, and
at any adjournments or postponements thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side hereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE PROVIDED.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS INDICATED, WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED, AND IN
THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR
ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
(See reverse side)
USA NETWORKS, INC.
P.O. BOX 11001
NEW YORK, N.Y. 10203-0001
USA NETWORKS, INC. ALTERNATE WAYS TO VOTE YOUR PROXY
VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY-7 DAYS A WEEK
-------------------------------------------------------------------------------------------------------------
TELEPHONE INTERNET MAIL
--------- -------- ----
1-866-368-4703 https://www.proxyvotenow.com/usi o Mark,sign and
o Use any touch-tone telephone. o Go to the website address listed date your Proxy
o Have your Proxy Form in hand. above. Card.
o Enter the Control Number OR o Have your Proxy Form in hand. OR o Detach card from
located in the box below. o Enter the Control Number located Proxy Form.
o Follow the simple recorded in the box below. o Return the card
instructions o Follow the simple instructions. in the postage-paid
envelope provided.
-------------------------------------------------------------------------------------------------------------
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card.IF YOU
HAVE SUBMITTED YOUR PROXY BY TELEPHONE OR THE INTERNET THERE IS NO NEED FOR YOU
TO MAIL BACK YOUR PROXY.
CONTROL NUMBER FOR
TELEPHONE OR INTERNET VOTING
1-866-368-4703
CALL TOLL-FREE TO VOTE
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET
(PLEASE SIGN, DATE AND RETURN
THIS PROXY IN THE ENCLOSED X
POSTAGE PREPAID ENVELOPE.) VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK.
USA'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND 2.
1. Election of Directors WITHHOLD AUTHORITY to vote* EXCEPTIONS / /
FOR all nominees for all nominees listed below / /
listed below / /
Nominees: Robert R. Bennett, Edgar Bronfman, Jr., Anne M. Busquet*, Barry
Diller, Philippe Germond, Victor A. Kaufman, Donald R. Keough*, Marie-Josee
Kravis, John C. Malone, Jean-Marie Messier, Gen. H. Norman Schwarzkopf*, Diane
Von Furstenberg
*To be voted upon by the holders of Common Stock voting as a separate class.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME.) All nominees
will serve a term of one year or until their respective successors shall have
been duly elected and qualified
2. THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP TO SERVE AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2002
FOR AGAINST ABSTAIN
|_| |_| |_|
3. Such other business as may properly come before the annual meeting or any
adjournment or postponement thereof.
To change your address, please mark this box. |_|
Please sign exactly as name appears on Proxy.
Note: When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee, guardian
or corporate officer or partner, please give
full title as such. If a corporation, please
sign in corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
---------------- ------------------------------ -----------------------------
Date Share Owner sign here Co-Owner sign here