SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
USA NETWORKS, INC.
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[USA NETWORKS INC LOGO]
April 9, 2001
Dear Stockholder:
You are invited to attend the 2001 Annual Meeting of Stockholders of USA
Networks, Inc., which will be held at HSN, 1 HSN Drive, 2501 118th Avenue North,
St. Petersburg, Florida, on Wednesday, May 2, 2001, at 4:00 p.m., Eastern time.
At this year's stockholders meeting, you will be asked to elect 14 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.
Attendance at the Annual Meeting will be limited to stockholders of record
as of March 13, 2001 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 MAY 2, 2001
To the Stockholders:
The Annual Meeting of Stockholders of USA Networks, Inc., a Delaware
corporation (the "Company" or "USAi"), will be held at HSN, 1 HSN Drive, 2501
118th Avenue North, St. Petersburg, Florida, on Wednesday, May 2, 2001, at
4:00 p.m., Eastern time, for the following purposes:
1. To elect 14 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 USAi for the 2001 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 USAi's common stock and Class B common stock as of
the close of business on March 13, 2001 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 March 13, 2001 for any purpose germane to the
meeting during the 10-day period preceding the date of the meeting at the
offices of USAi, located at 152 West 57th Street, New York, New York 10019.
By order of the Board of Directors,
[LOGO]
Julius Genachowski
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
New York, New York
April 9, 2001
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.
USA NETWORKS, INC.
152 WEST 52ND STREET
42ND FLOOR
NEW YORK, NY 10019
PROXY STATEMENT
This Proxy Statement (first mailed on or about April 9, 2001) is being
furnished to holders of common stock and Class B common stock in connection with
the solicitation of proxies by the Board of Directors of USA Networks, Inc.
("USAi" 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 and Class B
common stock is accompanied by a form of proxy for use at the Annual Meeting.
The Company effected a two-for-one stock split on February 24, 2000 of its
outstanding shares of common stock and Class B common stock as of the close of
business on February 10, 2000. All of the information presented herein is on a
post-split basis, except where specifically indicated otherwise.
At the Annual Meeting, USAi stockholders will be asked:
(1) To elect 14 members of the USAi 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 USAi for the 2001 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 Wednesday, May 2, 2001 at 4:00 p.m.
Eastern time, at HSN, 1 HSN Drive, 2501 118th Avenue North, St. Petersburg,
Florida.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
Only holders of record of common stock and Class B common stock at the close
of business on March 13, 2001 (the "Record Date") are entitled to notice of, and
will be entitled to vote at, the Annual Meeting. 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 Class B common stock and common stock vote together as
a single class. At the close of business on the Record Date, there were
314,393,889 shares of common stock and 63,033,452 shares of Class B common 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 USAi for use at the Annual
Meeting. You are requested to complete, date and sign the accompanying proxy
card and promptly return it in the accompanying envelope or otherwise mail it to
USAi. All proxies evidenced by proxy cards that are properly executed and
returned, and that are not revoked, will be voted at the Annual Meeting in
accordance with the instructions indicated thereon. If no instructions are
indicated on the proxy card, such proxies will be voted FOR each of the
proposals described in this Proxy Statement.
The Board of Directors of USAi 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 USAi 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.
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Annual Meeting by (i) delivering to The Bank of New York a
written notice, bearing a date later than the proxy, stating that the proxy is
revoked, (ii) signing and so delivering a proxy relating to the same shares and
bearing a later date prior to the vote at the Annual Meeting, or
(iii) 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 USAi c/o The Bank of New York at the
following address: USA Networks, Inc., P.O. Box 11070, New York, New York
10203-0070. You may request a new proxy card by calling MacKenzie
Partners, Inc. at 1-800-322-2885 or 212-929-5500.
VOTE REQUIRED
Election of ten 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 and Class B common stock voting
together as a single class (the "Total Voting Power"). Election of four 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 USAi 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 14.8% of the common stock, 100% of the Class B
common stock and 73.5% of the combined voting power of the common stock and the
Class B common stock. Thus, regardless of the vote of any other USAi
stockholder, Mr. Diller has control over the vote on each matter to be
considered by stockholders at the Annual Meeting other than the election of the
four directors to be elected separately by the holders of the common stock.
QUORUM; BROKER NON-VOTES
A quorum for the transaction of business at the Annual Meeting is a majority
of the shares of common stock or 157,196,945 shares, and a majority of the
shares of Class B common stock, or 31,516,727 shares, issued and outstanding on
the Record Date, which shares must be present in person or represented by proxy
at the Annual Meeting in order to be counted towards a quorum. 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.
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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
USAi will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of USAi may solicit proxies from stockholders by telephone, letter,
facsimile or in person. Following the original mailing of the proxies and other
soliciting materials, USAi 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 to request authority for
the exercise of proxies. In such cases, USAi, upon the request of the record
holders, will reimburse such holders for their reasonable expenses.
USAi 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 USAi 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 14 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 USAi has designated
Messrs. Keough, Savoy and Schwarzkopf and Ms. Busquet as nominees for the
positions on the USAi Board to be elected by the holders of USAi 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.
Background information about the Board's nominees for election is set forth
below.
PAUL G. ALLEN, age 48, has been a director of USAi since July 1997.
Mr. Allen has been a private investor for more than five years, with interests
in a wide variety of companies, many of which focus on multimedia digital
communications. These companies include Vulcan Ventures Inc., of which
Mr. Allen is the President, Chief Executive Officer and Chairman of the Board,
Vulcan Northwest Inc., of which Mr. Allen is Chairman of the Board, Charter
Communications, Inc., of which Mr. Allen is Chairman of the Board, and Vulcan
Programming, Inc. In addition, Mr. Allen is the Chairman of the Board of Trail
Blazers, Inc. of the National Basketball Association and is the owner and
Chairman of the Board of the Seattle Seahawks of the National Football League.
Mr. Allen currently serves as a director of Microsoft Corporation and Charter
Communications, Inc., and also serves as a director of various private
corporations.
EDGAR BRONFMAN, JR., age 45, has been a director of USAi since
February 1998. He has been Executive Vice Chairman of Vivendi Universal since
December 2000. Previously, 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 a member of the Boards of New York University Medical Center, The
Wharton School of the
3
University of Pennsylvania, and the Board of Governors of The Joseph H. Lauder
Institute of Management & International Studies at the University of
Pennsylvania.
ANNE M. BUSQUET, age 51, has been a director of USAi since March 1999. She
has been the President, Interactive Services and New Businesses, an American
Express division, since July 2000. Previously, 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
is a member of the Board of Trustees for Teach of America, Rheedlen Centers for
Children and Families and the Cornell University Trustees Council. She also
serves on the Board of Directors for Globeset, Inc. and Protege, Inc.
BARRY DILLER, age 59, has been a director and the Chairman and Chief
Executive Officer of USAi (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 was a director
and member of the Executive Committee of Seagram until December 8, 2000, and
currently serves as a director of Ticketmaster and The Washington Post 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, the Executive Board for
the Medical Sciences of University of California, Los Angeles and the Board of
the Children's Advocacy Center of Manhattan.
PHILIPPE GERMOND, age 44, has been a director of USAi 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 56, has been a director of USAi since December 1996
and has been Vice Chairman of USAi since October 1999. Previously, Mr. Kaufman
served in the Office of the Chairman for USAi since January 1997 and as Chief
Financial Officer of USAi since November 1, 1997. Prior to that time, he served
as Chairman and Chief Executive Officer of Savoy 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 and Hotel
Reservations Network, Inc.
DONALD R. KEOUGH, age 74, has been a director of USAi 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 H.J. Heinz Company, The Washington Post Company, McDonald's Corporation and
YankeeNets, LLC. He is immediate 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.
4
GEORG KOFLER, age 43, has been a director of USAi since July 2000.
Dr. Kofler has been CEO of H.O.T. Networks AG, a holding company for home
shopping channels in Europe, since December 2000 and Chairman of the Supervisory
Board of H.O.T. Home Order Television AG since December 1999. Previously, from
December 1988 through 1999, he was CEO of ProSieben Media AG, a media company
based in Munich, Germany. Prior to joining ProSieben, Dr. Kofler assisted
Dr. Leo Kirch as Office Supervisor in the Kirch Group from 1987 to 1988.
Dr. Kofler is a shareholder of both H.O.T. Networks AG and H.O.T. Home Order
Television AG. He is also Chairman of the Supervisory Board of EUVIA Media AG &
Co.KG, the 100% parent company of tm 3, a Munich based television station.
MARIE-JOSEE KRAVIS, age 51, has been a director of USAi 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 Canadian Imperial Bank of Commerce, Hasbro, Inc., Hollinger
International Inc., Ford Motor Company and StarMedia Network, Inc.
PIERRE LESCURE, age 55, has been a director of USAi since March 2001. He
became co-Chief Operating Officer of Vivendi Universal S.A. in December 2000,
upon the merger of Vivendi, The Seagram Company Ltd. and Canal Plus S.A. He is
also Chairman and Chief Executive Officer of Canal Plus S.A. since February 16,
1994 and Chairman of the Executive Board of Groupe Canal Plus since
December 11, 2000. Mr. Lescure helped launch Canal Plus Image in 1984.
Mr. Lescure is a Member of the Board of Directors of the European studio
StudioCanal, Chairman of its French subsidiary, StudioCanal France, and is also
Chairman of the Paris-Saint Germain (PSAG) soccer club.
JEAN-MARIE MESSIER, age 44, has been a director of USAi 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 1996. Mr. Messier is
co-chairman of Europe and Africa of the Global Business Dialogue on Electronic
Commerce (GBDe) and chairman of the China Europe Business Committee.
Mr. Messier also serves as a director of BNP Paribas, Louis Vuitton Moet
Hennessey (LVMH), Saint-Gobain and Alcatel.
WILLIAM D. SAVOY, age 36, has been a director of USAi since July 1997.
Currently, Mr. Savoy serves as President of Vulcan Ventures Inc., a venture
capital fund wholly owned by Paul Allen. From 1987 until November 1990,
Mr. Savoy was employed by Layered, Inc. and became its President in 1988.
Mr. Savoy serves on the Advisory Board of DreamWorks SKG and also serves as
director of Charter Communications, Inc., drugstore.com, High Speed Access
Corporation, InfoSpace, Inc., Metricom, Inc., Peregrine Systems, Inc., RCN
Corporation and Telescan, Inc.
GEN. H. NORMAN SCHWARZKOPF, age 66, has been a director of USAi since
December 1996. He previously had served as a director of Home Shopping Network
since May 1996. Since his retirement 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
5
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 52, has been a director of USAi since
March 1999. She is 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 31, has been Executive Vice President, Operations and
Strategic Planning of USAi since July 2000. From August 1999 to July 2000,
Mr. Khosrowshahi served as President, USA Networks Interactive, a division of
USAi. Mr. Khosrowshahi joined USAi in 1998 as Vice President of Strategic
Planning for USAi, and was later promoted to Senior Vice President in May 1999.
Prior to joining USAi, 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, Hotel Reservations Network, Inc.
and ARTISTDirect.
JULIUS GENACHOWSKI, age 38, has been Senior Vice President, General Counsel
and Secretary of USAi 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. Before joining USAi, he
served as Chief Counsel to Federal Communications Commission Chairman Reed
Hundt. Mr. Genachowski 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 serves as a director
of Styleclick, Inc.
MICHAEL SILECK, age 40, has been Senior Vice President and Chief Financial
Officer of USAi since October 1999. Prior to that time, he served as Chief
Financial Officer of USA Networks, a division of USAi, from September 1999 to
October 1999. Before joining USA Networks, Mr. Sileck served as Vice President
of Finance of Sinclair Broadcast Group from June 1996 to August 1999. Prior to
that time, Mr. Sileck served as Director of Finance at River City Broadcasting
from July 1990 to June 1996. Mr. Sileck serves as a director of Hotel
Reservations Network, 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.
EXECUTIVE COMMITTEE. The Executive Committee of the Board of Directors,
consisted of Messrs. Bronfman, Diller and Kaufman during 2000. 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 met two times
during 2000.
6
AUDIT COMMITTEE. The Audit Committee of the Board of Directors currently
consists of Messrs. Keough and Savoy and Gen. Schwarzkopf, 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, a
copy of which is attached as Exhibit A to this Proxy Statement. 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 2000. The formal report of the Audit Committee
with respect to the year 2000 is set forth under the heading "Audit Committee
Report" below.
COMPENSATION/BENEFITS COMMITTEE. The Compensation/Benefits Committee of the
Board of Directors, currently consisting of Messrs. Keough and Savoy and
Ms. Busquet, 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 is Chairman of the Compensation/Benefits Committee. The
Compensation/Benefits Committee met eleven times during 2000.
PERFORMANCE-BASED COMPENSATION COMMITTEE. The Performance-Based
Compensation Committee of the Board of Directors, currently consisting of
Mr. Savoy and Ms. Busquet, 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 Compensation Committee is an employee of the Company. The
Performance-Based Compensation Committee met eight times during 2000.
The Board met six times during 2000. During 2000, 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 Mr. Allen. Mr. Allen
attended all regularly scheduled Board meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents, as of January 31, 2001, information relating
to the beneficial ownership of USAi's common stock by (1) each person known by
USAi to own beneficially more than 5% of the outstanding shares of USAi's common
stock, (2) each director of USAi, (3) each of the Chief Executive Officer and
the four other most highly compensated executive officers of USAi who served in
such capacities as of December 31, 2000 (the "Named Executive Officers"), and
(4) all executive officers and directors of USAi as a group. The table also
presents, as of January 31, 2001, information relating to the beneficial
ownership of shares of Class A common stock of Hotel Reservations
Network, Inc., a subsidiary of USAi ("HRN"), shares of Class A common stock of
Styleclick, Inc., a subsidiary of USAi ("Styleclick"), and shares of Class B
common stock of Ticketmaster, a subsidiary of USAi ("TM"), by (1) each director
of USAi, (2) each of the Named Executive Officers, and (3) all executive
officers and directors of USAi as a group.
7
Unless otherwise indicated, beneficial owners listed here may be contacted
at USAi's corporate headquarters address, 152 West 57th Street, New York, New
York 10019. For each listed person, the number of shares of USAi common stock,
HRN 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 USAi Class B common stock, HRN Class B common stock, Styleclick Class B
common stock and TMCS Class A common stock owned by such person, but does not
assume the conversion of those shares owned by any other person. Shares of USAi
Class B common stock may at the option of the holder be converted on a
one-for-one basis into shares of USAi common stock. Shares of HRN Class B common
stock may at the option of the holder be converted on a one-for-one basis into
shares of HRN 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 USAi common stock, HRN 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 January 31, 2001.
The percentage of votes for all classes of USAi common stock is based on one
vote for each share of USAi common stock and ten votes for each share of USAi
Class B common stock. These figures do not include any unissued shares of USAi
common stock or USAi 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 HRN common stock is based on one vote for each share of HRN Class A common
stock and 15 votes for each share of HRN 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.
8
PERCENT
NUMBER OF OF PERCENT OF VOTES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS SHARES CLASS (ALL CLASSES)
- ------------------------------------ ------------------ ----------- -------- ----------------
Capital Research & Management Co....... USAi common 21,988,530(1) 7.2% 2.2 %
333 South Hope Street
Los Angeles, CA 90071
Liberty Media Corporation.............. USAi common 74,442,234(2) 21.0% 55.7 %
9197 South Peoria Street
Englewood, CO 80112
Vivendi Universal S.A.................. USAi common 31,611,308(3) 9.9% 16.3 %
42, Avenue Friedland
75380 Paris cedex 08/France
Barry Diller........................... USAi common 153,448,380(2)(4) 37.1% 73.5 %
HRN Class A --(5) * *
Styleclick Class A --(6) * *
TM Class B --(7) * *
Paul Allen............................. USAi common 30,207,361(8) 9.9% 3.2 %
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B 105,622(9) * *
Edgar J. Bronfman, Jr.................. USAi common -- * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Anne M. Busquet........................ USAi common 12,333(10) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Julius Genachowski..................... USAi common 91,917(11) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B 700 * *
Philippe Germond....................... USAi common -- * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Dara Khosrowshahi...................... USAi common 284,122(12) * *
HRN Class A 52,083(13) * *
Styleclick Class A -- * *
TM Class B -- * *
Victor A. Kaufman...................... USAi common 1,396,338(14) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Donald R. Keough....................... USAi common 161,341(15) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
9
PERCENT
NUMBER OF OF PERCENT OF VOTES
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS SHARES CLASS (ALL CLASSES)
- ------------------------------------ ------------------ ----------- -------- ----------------
Georg Kofler........................... USAi common 1,100,000(16) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Marie-Josee Kravis..................... USAi common -- * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Pierre Lescure......................... USAi common -- * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Jean-Marie Messier..................... USAi common -- * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
William D. Savoy....................... USAi common 53,333(17) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B 14,166(18) * *
Gen. H. Norman Schwarzkopf............. USAi common 162,333(19) * *
HRN Class A -- * *
Styleclick Class A -- * *
TM Class B -- * *
Michael Sileck......................... USAi common 40,000(20) * *
HRN Class A 1,500 * *
Styleclick Class A -- * *
TM Class B -- * *
Diane Von Furstenberg.................. USAi common 5,833(21) *
HRN Class A --(21) * *
Styleclick Class A --(21) * *
TM Class B --(21) * *
All executive officers and directors as
a group (17 persons)................. USAi common 186,963,291 44.8% 76.6 %
HRN Class A 53,583 * *
Styleclick Class A -- * *
TM Class B 120,488 * *
- ------------------------------
* The percentage of shares beneficially owned does not exceed 1% of the class.
(1) Based upon information filed with the Securities and Exchange Commission by
Capital Research & Management Co. as of December 31, 2000.
(2) Consists of 24,838,738 shares of USAi common stock and 756,644 shares of
USAi Class B common stock held by Liberty and 44 shares of USAi common stock
held collectively by the BDTV Entities and 8,000,000, 31,236,444, 8,010,364
and 1,600,000 shares of USAi 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
10
stockholders agreement among Liberty, Universal, Vivendi Universal (as the
successor to The Seagram Company Ltd.), the parent of Universal, USAi and
Mr. Diller (the "Stockholders Agreement"), Mr. Diller generally has the
right to vote all of the shares of USAi common stock and USAi Class B common
stock held by Liberty and BDTV Entities.
(3) Consists of 18,181,308 shares of USAi common stock and 13,430,000 shares of
USAi 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 USAi common stock and USAi Class B common stock held by
Vivendi Universal.
(4) Consists of 2,209,908 shares of USAi common stock owned by Mr. Diller,
options to purchase 45,123,388 shares of USAi common stock granted under
USAi's stock option plans, 61,542 shares of USAi common stock held by a
private foundation as to which Mr. Diller disclaims beneficial ownership, 44
shares of USAi common stock and 48,846,808 shares of USAi Class B common
stock held by the BDTV Entities, 24,838,738 shares of USAi common stock and
756,644 shares of USAi Class B common stock which are held by Liberty, and
18,181,308 shares of USAi common stock and 13,430,000 shares of USAi
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
5,833 shares of USAi common stock held by Ms. Von Furstenberg, as to which
Mr. Diller disclaims beneficial ownership.
(5) Excludes 38,999,100 shares of HRN Class B common stock owned by USAi, as to
which Mr. Diller disclaims beneficial ownership. These shares are
convertible into an equal number of shares of HRN Class A common stock.
(6) Excludes 23,153,713 shares of Styleclick Class B common stock owned by USAi,
as to which Mr. Diller disclaims beneficial ownership. These shares are
convertible into an equal number of shares of Styleclick Class A common
stock.
(7) Excludes 42,480,143 shares of TM Class A common stock and 53,302,401 shares
of TM Class B common stock owned by USAi, 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.
(8) Consists of 30,144,028 shares of USAi common stock and options to purchase
63,333 shares of USAi common stock granted under USAi's stock option plans.
(9) Consists of 95,622 shares of TM Class B common stock held by Mr. Allen and
10,000 shares of TM Class B common stock held by Vulcan Ventures, Inc.
(10) Consists of 4,000 shares of USAi common stock and options to purchase 8,333
shares of USAi common stock granted under USAi's stock option plans.
(11) Consists of 917 shares of USAi common stock, 45,000 shares of USAi
restricted stock and options to purchase 46,000 shares of USAi common stock
granted under USAi's stock option plans.
(12) Consists of 4,122 shares of USAi common stock, 55,000 shares of USAi
restricted stock and options to purchase 225,000 shares of USAi common stock
granted under USAi's stock option plans.
(13) Consists of options to purchase 52,083 shares of HRN Class A common stock
granted under HRN's stock option plans.
(14) Consists of 34,338 shares of USAi common stock, 45,000 shares of USAi
restricted stock and options to purchase 1,317,000 shares of USAi common
stock granted under USAi's stock option plans.
(15) Consists of 84,676 shares of USAi common stock and options to purchase
76,665 shares of USAi common stock granted under USAi's stock option plans.
Excludes 3,079,056 shares of USAi common stock beneficially owned, as of
December 31, 2000, by Allen & Co., for which Mr. Keough serves as Chairman.
Mr. Keough disclaims beneficial ownership of such shares.
(16) Consists of options to purchase 1,100,000 shares of USAi common stock
granted under USAi's stock plans.
(17) Consists of 10,000 shares of USAi common stock and options to purchase
43,333 shares of USAi common stock granted under USAi's stock option plans.
(18) Consists of 10,000 shares of TM Class B common stock and options to
purchase 4,166 shares of TM Class B common stock granted under TM's stock
option plans.
(19) Consists of options to purchase 162,333 shares of USAi common stock granted
under USAi's stock option plans.
(20) Consists of 15,000 shares of USAi restricted stock and options to purchase
25,000 shares of USAi common stock granted under USAi's stock option plans.
(21) Consists of options to purchase 5,833 shares of USAi common stock granted
under USAi's stock option plans. Excludes shares beneficially owned by
Mr. Diller, as to which Ms. Von Furstenberg disclaims beneficial ownership.
11
The following table presents, as of January 31, 2001, information relating
to the beneficial ownership of USAi'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 West 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 USAi Class B common stock and the BDTV
Entities hold 48,846,808 shares of USAi 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 USAi
Class B common stock held by Liberty and the BDTV Entities.
(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 2000.
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, 2001 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.
12
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 2001.
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 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 USAi who served in such
capacities as of December 31, 2000--for services rendered to USAi 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 USAi or any of its subsidiaries.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -----------------------------
OTHER ANNUAL RESTRICTED ALL OTHER
NAME AND FISCAL COMPENSATION STOCK AWARDS STOCK COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) ($)(1) ($)(2) OPTIONS (#)(3) ($)
- ------------------ -------- ---------- --------- ------------ ------------ -------------- ------------
Barry Diller........... 2000 500,000 1,675,000(4) 146,563(5) -- -- 316,736(7)(8)
Chairman and Chief 1999 500,000 -- -- -- -- 920,992(7)(8)
Executive Officer 1998 126,923(6) -- -- -- -- 1,288,472(7)(8)
Victor A. Kaufman...... 2000 650,000 1,500,000(4) 193,155(10) 278,438(11) 750,000 5,250(8)
Vice Chairman(9) 1999 500,000 1,050,000 -- 837,188 700,000 4,800(8)
1998 500,000 450,000(12) -- 500,000 200,000 4,800(8)
Dara Khosrowshahi...... 2000 421,148 650,000(4) 81,250(5) 278,438(11) 565,000(14) 5,250(8)
Executive Vice 1999 341,552 400,000(15) -- 837,188 100,000 4,800(8)
President, Operations 1998 248,077 300,000(12) -- 125,000 220,000 --
and Strategic
Planning(13)
Julius Genachowski..... 2000 338,173(17) 500,000(4) 95,149(18) 278,438(11) 450,000 5,250(8)
Senior Vice
President,
General Counsel
and Secretary(16)
Michael Sileck......... 2000 400,000 500,000(4) -- 278,438(11) 350,000 5,250(8)
Senior Vice President 1999 107,688 65,000 -- -- 100,000 --
and Chief Financial
Officer(19)
- ------------------------------
(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 USAi
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 USAi common stock, as
adjusted, to the extent applicable, for two two-for-one stock splits that
became effective for holders of record as of the close of business on
March 12, 1998 and February 10, 2000, respectively.
13
(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 USAi'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 USAi
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 USAi
common stock, as determined in accordance with terms of the program.
(5) Reflects the 20% discount on the purchase price of USAi shares purchased
under the 2000 Bonus Stock Purchase Program (described in Note 4 above).
(6) Reflects an annual base salary of $500,000 commencing September 25, 1998.
(7) Mr. Diller has an interest-free, secured, non-recourse promissory note in
the amount of $4,997,779 payable to USAi which was used to purchase 883,976
shares of common stock. As a result, Mr. Diller had compensation for imputed
interest of $286,368 in 1998, $286,368 in 1999 and $311,486 in 2000. 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. USAi
has amortized unearned compensation of $999,162 in 1998 and $630,912 in
1999.
(8) Includes USAi's matching contributions under its 401(k) Retirement Savings
Plan. Under the 401(k) Plan as in effect through December 31, 2000, USAi
matches $.50 for each dollar a participant contributes up to the first 6% of
compensation. For fiscal 1998, USAi's matching contributions for
Messrs. Diller and Kaufman were $3,519 and $4,800, respectively. For fiscal
1999, USAi's matching contributions for Messrs. Diller, Kaufman and
Khosrowshahi were $3,712, $4,800 and $4,800, respectively. For fiscal 2000,
USAi's matching contribution for each of Messrs. Diller, Kaufman,
Khosrowshahi, Genachowski and Sileck was $5,250.
(9) Mr. Kaufman was appointed as Vice Chairman of USAi on October 13, 1999.
Prior to that time, he served in the Office of the Chairman and as Chief
Financial Officer of USAi and received compensation as such during fiscal
1999, which is reflected herein.
(10) Includes $187,500 for the 20% discount on the purchase price of USAi shares
purchased under the 2000 Bonus Stock Purchase Program (described in Note 4
above).
(11) As of December 31, 2000, Messrs. Kaufman, Khosrowshahi, Genachowski and
Sileck held 45,000, 55,000, 45,000 and 15,000 shares (after giving effect to
the Company's two-for-one stock split as of February 10, 2000) of restricted
stock, respectively. The value of these shares as of December 31, 2000 was
$874,687.50, $1,069,062.50, $874,687.50 and $291,562.50, respectively.
(12) Of this amount, Messrs. Kaufman and Khosrowshahi elected to defer $225,000
and $60,000, respectively, under USAi's 1998 Bonus Stock Purchase Program.
Under the 1998 Bonus Stock Purchase Program, in lieu of receiving a cash
payment for the entire amount of their 1998 bonuses, all bonus eligible
employees of USAi had a right to elect to purchase shares of common stock
with up to 50% of the value of their 1998 bonus payments. Employees were
entitled to purchase these shares at a 20% discount to the then current
market value of USAi common stock, as determined in accordance with the
terms of the program.
(13) Mr. Khosrowshahi was appointed as Executive Vice President, Operations and
Strategic Planning of USAi on July 24, 2000. Prior to that, 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 USAi. Compensation received as President,
USA Networks Interactive, a division of USAi, 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 USAi Executive Vice President, Operations and Strategic Planning.
(14) In addition to the options shown in the table, Mr. Khosrowshahi was also
granted 200,000 options to purchase HRN Class A common stock during 2000
while he was President, USA Networks Interactive.
(15) Of this amount, Mr. Khosrowshahi elected to defer $15,000 under USAi'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 USAi 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 USAi common stock, as
determined in accordance with the terms of the program.
(16) 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.
(17) 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.
(18) Represents $43,750 for the 20% discount on the purchase price of USAi
shares purchased under the 2000 Bonus Stock Purchase Program (described in
Note 4 above) and $51,399 for a housing allowance pursuant to
Mr. Genachowski's employment agreement.
(19) Mr. Sileck joined USAi as its Senior Vice President and Chief Financial
Officer on October 12, 1999.
14
OPTION GRANTS
The following table presents information with respect to options to purchase
USAi's common stock granted to the Named Executive Officers during the year
ended December 31, 2000. The grants were made under the 2000 Stock and Annual
Incentive Plan ("2000 Incentive Plan").
The 2000 Incentive Plan is administered by the Compensation/Benefits
Committee and the Performance-Based Compensation Committee, which have the sole
discretion to determine the selected officers, employees and consultants to whom
incentive or non-qualified options, SARs, restricted stock and performance units
may be granted. As to these awards, the Compensation/Benefits Committee and the
Performance-Based Compensation Committee also have the sole discretion to
determine the number, type, exercise price, vesting schedule and other terms,
conditions and restrictions of the grants. The Compensation/Benefits Committee
and the Performance-Based Compensation Committee also retain discretion, subject
to plan limits, to modify the terms of outstanding options and to reprice such
options. The exercise price of an incentive stock option granted under the 2000
Incentive Plan must be at least 100% of the fair market value of USAi's common
stock on the date of grant. In addition, options granted under the 2000
Incentive Plan terminate within ten years of the date of grant. To date, only
non-qualified stock options have been granted under the 2000 Incentive Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
PERCENT
OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS TO ASSUMED ANNUAL RATES OF STOCK
SECURITIES EMPLOYEES EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED PRICE OPTION TERMS(3)
OPTIONS IN THE PER SHARE EXPIRATION -----------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(1) DATE(2) 5%($) 10%($)
- ---- ------------- ----------- --------- ---------- ----------- -----------
Barry Diller...................... -- -- -- -- -- --
Chairman and Chief
Executive Officer
Victor A. Kaufman................. 750,000 5.16% 18.63 12/18/10 8,787,230 22,268,567
Vice Chairman
Dara Khosrowshahi................. 15,000 0.10% 21.69 5/10/10 204,611 518,524
Executive Vice President, 300,000 2.06% 24.94 7/24/10 4,705,390 11,924,381
Operations and Strategic 250,000 1.72% 18.63 12/18/10 2,929,077 7,422,856
Planning(4).....................
Julius Genachowski................ 200,000 1.38% 21.88 8/9/10 2,752,043 6,974,217
Senior Vice President, 250,000 1.72% 18.63 12/18/10 2,929,077 7,422,856
General Counsel and Secretary
Mike Sileck....................... 100,000 0.69% 21.88 7/18/10 1,376,021 3,487,109
Senior Vice President 250,000 1.72% 18.63 12/18/10 2,929,077 7,422,856
and Chief Financial Officer
- ------------------------------
(1) These option grants and the related exercise prices reflect the two-for-one
stock split on USAi stock that became effective for holders of record as of
the close of business on February 10, 2000.
(2) Options to purchase USAi stock granted during the year ended December 31,
2000, generally become exercisable in four equal annual installments
commencing on the first anniversary of the grant date. These options expire
ten years from the date of grant.
(3) Potential value is reported net of the option exercise price, but before
taxes associated with exercise. These amounts represent assumed rates of
appreciation only. 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. The amounts reflected in this table may not
necessarily be achieved.
(4) Mr. Khosrowshahi was granted options to purchase 100,000 shares of HRN
Class A common stock on each of February 22, 2000 and April 5, 2000 when he
was President, USA Networks Interactive. Each grant represented 4.7% of the
total options
15
granted by HRN during 2000. The options granted February 22, 2000 have an
exercise price of $16.00 per share and become exercisable over a four year
period, with 25% vesting on the first anniversary of the grant date and
1/48 of the options vesting each month thereafter. The options granted
April 5, 2000 have an exercise price of $15.50 per share and become
exercisable over a three year period, with 25% vesting on the first and
second anniversaries of the grant date and the remainder vesting on the
third anniversary of the grant date. The options expire ten years from the
date of grant. The potential realizable value at assumed rates of stock
price appreciation of 5% and 10% are $1,006,231 and $2,249,988,
respectively, for the February options and $947,787 and $2,470,301,
respectively, for the April options. See also footnote (3) above.
The table below presents information concerning the exercise of stock
options by the Named Executive Officers during the year ended December 31, 2000,
and the fiscal year-end value of all unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
YEAR END (#)(1) YEAR-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
Barry Diller................ -- -- 45,123,388 4,750,000 579,194,295 46,460,700
Chairman and Chief
Executive Officer
Victor A. Kaufman........... 200,000 3,360,061 1,281,000 1,661,000 9,919,650 4,255,672
Vice Chairman
Dara Khosrowshahi........... 30,000 345,000 140,000 885,000 945,000 1,684,375
Executive Vice President,
Operations and Strategic
Planning(3)
Julius Genachowski.......... 4,000 39,750 46,000 500,000 238,750 341,875
Senior Vice President,
General Counsel and
Secretary
Mike Sileck................. -- -- 25,000 425,000 585 204,880
Senior Vice President and
Chief Financial Officer
- ------------------------------
(1) Reflects the two-for-one stock split for USAi stock which became effective
for holders of record as of the close of business on February 10, 2000.
(2) Represents the difference between $19.4375, the closing price of USAi's
common stock on December 31, 2000, and the exercise price of the options
(each, as adjusted to reflect the two-for-one stock split to holders of
record as of the close of business on February 10, 2000), and does not
include the U.S. federal and state taxes due upon exercise.
(3) Mr. Khosrowshahi also holds 200,000 options to acquire HRN Class A common
Stock. None of such options are exercisable and the value of such options at
year end was $2,525,000, based on the difference between $28.375, the
closing price of HRN's Class A common stock on December 31, 2000, 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 USAi who is not an employee of USAi or any of its
subsidiaries receives an annual retainer of $30,000 per year. USAi also pays
each of these directors $1,000 for each USAi or USANi LLC Board meeting and each
USAi 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, 2000, the directors that were
designated by Universal and Liberty waived their rights to receive the annual
retainer and attendance fees.
16
Under the USAi Directors' Stock Option Plan, directors who are not employees
of USAi or any of its subsidiaries receive a grant of options to purchase 5,000
shares of USAi's common stock upon initial election to office and thereafter
annually on the date of USAi's annual meeting of stockholders at which the
director is re-elected. The exercise price per share of USAi's common stock
subject to the options is the fair market value of USAi'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 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 increments of 1,667 shares
on each of the first two anniversaries of the date of grant, and 1,666 shares on
the third. The options expire ten years from the date of grant. For the year
ended December 31, 2000, the directors that were designated by Universal and
Liberty waived their rights to receive such option grants.
Under USAi'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 USAi common stock that could have been purchased on the relevant date,
or credited to a cash fund. If any dividends are paid on USAi common stick,
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 The Chase Manhattan Bank. Upon termination, a director
will receive (1) with respect to share units, such number of shares of USAi
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, USAi issued and sold to Mr. Diller 883,976 shares of USAi'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 USAi 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 USAi'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"), USAi and
Mr. Khosrowshahi entered into an amended and restated employment agreement for a
term continuing until March 3, 2003 and
17
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
("USAi Options") to purchase 300,000 shares of USAi'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 USAi, 100% of
Mr. Khosrowshahi's options become vested and exercisable. Upon termination of
Mr. Khosrowshahi's employment by USAi for any reason other than death,
disability or cause, or if Mr. Khosrowshahi terminates his employment for good
reason, USAi 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 USAi 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, USAi has not offered
Mr. Khosrowshahi an extension of term until July 25, 2004, the USAi 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, USAi 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 USAi'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 USAi, 100% of Mr. Genachowski's options become
vested and exercisable. Upon termination of Mr. Genachowski's employment by USAi
for any reason other than death, disability or cause, or if Mr. Genachowski
terminates his employment for good reason, USAi 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, USAi 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 agreement provides for a grant of options to
purchase 75,000 shares of USAi's common stock, as adjusted for USAi'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 USAi,
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 USAi for any reason other than cause,
death or disability, USAi is required to pay Mr. Sileck's base salary through
the end of the term of his agreement, subject to mitigation by Mr. Sileck.
18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. William D. Savoy and Donald R. Keough and Ms. Anne M. Busquet served
as members of the Compensation/Benefits Committee for the entire 2000 calendar
year. None of these directors was ever an officer or employee of USAi or its
subsidiaries.
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 USAi specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The graph below compares cumulative total return of USAi 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, 1995 through December 31,
2000. USAi selected the Standard & Poor's Entertainment Index as its Peer Group
because it includes companies engaged in many of the same businesses as USAi.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Dollars
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
USAi 100 68.35 148.2 190.65 317.99 223.74
NASDAQ-COMPOSITE 100 122.71 149.25 208.4 386.77 234.81
S&P-ENTERTAINMENT 100 101 146.4 197.47 230.01 195.57
12/29/95 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
-------- -------- -------- -------- -------- --------
USAi.................................. $100.00 $ 68.35 $148.20 $190.65 $317.99 $223.74
NASDAQ-COMPOSITE...................... $100.00 $122.71 $149.25 $208.40 $386.77 $234.81
S&P-ENTERTAINMENT..................... $100.00 $101.00 $146.40 $197.47 $230.01 $195.57
19
COMPENSATION/BENEFITS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation/Benefits Committee of the Board of Directors furnished the
following report on executive compensation for the 2000 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 and retain highly skilled executives with the
business experience and acumen necessary for achievement of the Company's
long-term business objectives. The Compensation/Benefits Committee uses
compensation surveys to provide information and data to assist it in developing
compensation programs that are competitive with other similarly-situated
companies.
The Company's executive compensation in 2000 consisted of three components:
base salary; an annual performance-based bonus; and stock-based compensation.
The general guidelines used by the Company to determine these components are
described below. Subject to these guidelines, bonus awards and option grants
have been awarded on a discretionary rather than a formulaic basis. The Company
also occasionally grants restricted stock to employees who demonstrate
extraordinary performance.
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
Compensation/Benefits Committee. Management takes 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 USAi, (iii) the fairness
of individual executive officers' salaries relative to their responsibilities,
(iv) the salaries of other executive officers, and (v) USAi's financial
performance. At different times, depending upon prevailing circumstances, the
Compensation/Benefits Committee gives these criteria varying degrees of weight.
Messrs. Khosrowshahi, Genachowski and Sileck are paid base salary in accordance
with their respective employment agreements.
ANNUAL BONUS
The Company has used annual incentive bonuses to recognize individual
performance and reward exceptional contributions to the Company's business.
Bonuses have been determined as follows: At the end of each fiscal year, a bonus
pool is proposed by senior management and reviewed with the
Compensation/Benefits Committee. This pool is allocable to each division and to
USAi. The bonus pool is based on (i) USAi's financial performance;
(ii) divisional contribution to the whole; and (iii) the prior year's bonus
pool. Although these factors are considered, bonus pools are allocated on a
discretionary, rather than a formulaic basis.
Once the bonus pool is established, the division heads and senior USAi
management are responsible for making recommendations to the
Compensation/Benefits Committee regarding allocation to executives other than
the five most highly compensated officers of the Company based on an assessment
of individual performance. The Compensation/Benefits Committee is responsible
for determining the CEO's bonus and the CEO makes recommendations to the
Compensation/Benefits Committee regarding allocation of the bonus pool to the
four other most highly compensated executive
20
officers of the Company, which the Compensation/Benefits Committee then approves
or disapproves. Subject to certain guidelines based on salary levels, bonuses
have been discretionary, with exceptional efforts and results rewarded
disproportionately. In lieu of receiving a cash payment for the entire amount of
their annual bonuses, employees may elect to receive up to 50% of their bonus
award in shares of USAi common stock, which may be purchased at a 20% discount
to market price.
STOCK BASED COMPENSATION
The Committee believes that its stock option program appropriately links
executive interest to stockholder value. The Company makes annual option grants
to eligible employees based on performance and on occasion issues options to
certain employees upon initial employment and promotion and in connection with
entering into certain new employment arrangements.
The number of options available for grant each year and the allocation of
options is determined as follows: At the end of the year, an aggregate option
pool available for grant to executives at each division and at USAi is proposed
by senior management and reviewed with and approved by the Compensation/Benefits
Committee. As is the case with bonuses, once the option pool is established, the
division heads and senior USAi management are responsible for making
recommendations to the Compensation/Benefits Committee regarding allocation to
executives other than the five most highly compensated executive officers. As is
the case with bonuses, the CEO makes recommendations to the
Compensation/Benefits Committee regarding option grants to the four most highly
compensated executive officers other than the CEO and the Compensation/Benefits
Committee determines the number of options to be granted to the CEO. Subject to
certain guidelines based on salary levels, option grants from the established
pool are discretionary. In addition, a certain number of options are set aside
each year for extraordinary grants to new hires, renewals or other grants that
fall outside the annual grant program. All grants are reviewed and approved by
the Compensation/Benefits Committee and the vast majority of the options granted
vest over a four-year period.
With respect to restricted stock, the Committee awarded a small number of
grants of restricted stock based on the recommendation of the CEO or USAi senior
management to recognize exceptional performance.
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 Compensation Committee. Stock based
compensation under the 2000 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 USAi,
may be nondeductible.
COMPENSATION OF CHIEF EXECUTIVE OFFICER FOR THE FISCAL YEAR
Effective September 25, 1998, the Compensation/Benefits 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 2000 remained unchanged and, like 1999 and 1998,
Mr. Diller did not receive additional option grants in 2000. The
Compensation/Benefits
21
Committee awarded Mr. Diller a bonus of $1,675,000 for fiscal year 2000 based on
the Compensation/ Benefits Committee's overall assessment of Mr. Diller's
stewardship of the Company during 2000. The Compensation/Benefits Committee
believes Mr. Diller's compensation is reasonable. Mr. Diller holds a 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 Compensation/Benefits Committee
may, in the future, elect to change base salary, bonus and/or grant additional
options to Mr. Diller.
SUMMARY
The Compensation/Benefits 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 and link a significant
portion of long-term remuneration directly to stock price appreciation realized
by all of the Company's stockholders. 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 Compensation/Benefits
Committee in 2000 were consistent with this focus and the principles outlined
above.
Members of the Compensation Committee
Anne M. Busquet
Donald R. Keough
William D. Savoy (Chairman)
AUDIT COMMITTEE REPORT
The Audit Committee is comprised of three independent directors and operates
under a written charter, which is attached as Exhibit A. The Committee
recommends to the Board of Directors the selection of the Company's independent
auditors.
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, 2000 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, 2000
be included in our Annual Report on Form 10-K for the year ended December 31,
2000 for filing with the Securities and Exchange Commission.
Members of the Audit Committee
Donald R. Keough (Chairman)
William D. Savoy
Gen. H. Norman Schwarzkopf
22
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 2000 financial statements was $1,683,000.
ALL OTHER FEES: The aggregate of all other fees billed for professional
services rendered during 2000 by Ernst & Young LLP was $6,167,000, including
fees for pension and statutory audits, business acquisitions, registration
statements, internal audit, accounting consultations and tax services.
There were no fees incurred by Ernst & Young LLP during 2000 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 USAi,
is the sole holder of the voting stock of the BDTV Entities. The BDTV Entities
hold shares of USAi common stock and Class B common stock, which have effective
voting control of USAi 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, USAi 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, 2000,
the promissory note remained outstanding. In 1997, Mr. Diller and USAi 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.
In anticipation of the sale of the aircraft previously leased by USAi, in
1999 USAi and Nineteen Forty CC Inc. ("Nineteen Forty") acquired rights to a
second aircraft (the "Aircraft") also for use by Mr. Diller and other directors
and executive officers of USAi and USANi LLC in connection with USAi's and USANi
LLC's business. USAi assigned all of its rights under the purchase agreement to
a third party that purchased the Aircraft for approximately $22 million and
leased it to USAi under a seven-year lease with an option to purchase the
Aircraft. On October 16, 2000, USAi assigned its interest to purchase a 77.2%
interest in the Aircraft to a wholly-owned subsidiary of USAi, and Nineteen
Forty exercised its option to acquire a 22.8% interest in the Aircraft. After
refurbishment of the Aircraft at a cost of approximately $5 million, on
November 1, 2000, Nineteen Forty and the USAi subsidiary paid the third party
leasing company aggregate consideration of $27,066,426 to exercise their option
to purchase the Aircraft.
In 2000, USAi, through Home Shopping Network, paid approximately $936,778 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.
23
UNIVERSAL TRANSACTION
On February 12, 1998, the Company completed the Universal transaction, in
which USAi 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 "Relationship
between USAi and Universal". USAi paid Universal approximately $1.6 billion in
cash ($300 million of which was deferred with interest) and an effective 45.8%
interest in USAi through shares of common stock, Class B common stock and shares
of USANi LLC, a Delaware limited liability company ("USANi LLC"). The USANi LLC
shares are exchangeable for shares of common stock and Class B common stock on a
one-for-one basis.
Due to Federal Communication Commission ("FCC") restrictions on foreign
ownership of entities such as USAi that control domestic television broadcast
licenses, Universal, which is controlled by Vivendi Universal, a French company,
is limited in the number of shares of USAi's stock that it may own. USAi formed
USANi LLC primarily to hold USAi's non-broadcast businesses in order to comply
with such FCC restrictions and for other tax and regulatory reasons. Universal's
interest in USANi LLC is not subject to the FCC foreign ownership limitations.
USAi maintains control and management of USANi LLC, and the businesses held by
USANi LLC are managed by USAi in substantially the same manner as they would be
if USAi held them directly through wholly owned subsidiaries.
In connection with the Universal transaction, USAi, 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 USAi in connection with future issuances of USAi capital stock and
(2) with respect to issuances of USAi capital stock in specified
circumstances, Universal is obligated to maintain the percentage ownership
interest in USAi that it had prior to the issuances;
- a governance agreement which, among other things, (1) details restrictions
on the acquisitions of additional USAi securities, on the transfer of USAi
securities and other conduct restrictions, in each case, applicable to
Universal and (2) governs Universal's and Liberty's rights to
representation on the USAi Board of Directors and Liberty's, Universal's
and Mr. Diller's right to approve certain fundamental changes by USAi or
any USAi subsidiary;
- a stockholders agreement which, among other things, governs the ownership,
voting, transfer or other disposition of USAi 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 USAi 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 USAi or becomes disabled, generally provides
for interim arrangements relating to management of USAi and efforts to
achieve a spinoff or sale of USAi's broadcast stations and, in the case of
a spinoff, arrangements relating to their respective rights in USAi
resulting from the spinoff.
Summaries of these agreements are set forth in USAi'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 USAi's Definitive Proxy Statement, dated January 12,
1998, and are available from the Securities and Exchange Commission.
24
POLYGRAM FILMED ENTERTAINMENT AND OCTOBER FILMS TRANSACTIONS
In May 1999, USAi 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 USAi of certain liabilities of the acquired businesses. In
addition, in connection with the transaction, USAi and Universal entered into
various related agreements, including:
- a domestic distribution agreement relating to certain PolyGram films,
pursuant to which USAi has the exclusive right to distribute in the United
States and Canada these films in theatres, on television and on video for
a fee;
- a $200 million interest-bearing promissory note, pursuant to which USAi
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; and
- other ancillary agreements, relating to videogram fulfillment, music
administration and transitional services.
USAi believes that the terms of the PolyGram transaction are at least as
favorable to USAi as the terms that would have been obtained from an unrelated
third party.
In addition, in May 1999, USAi acquired 100% of the capital stock of OFI
Holdings, Inc., which owns the business of October Films. Universal was the
majority shareholder in OFI. In the transaction, the minority shareholders of
OFI received an aggregate of $12 million in respect of their equity interest in
OFI, Universal received 600,000 shares of USAi common stock in respect of its
interest, and Universal also purchased 600,000 shares of USAi common stock for
an aggregate purchase price of $12 million. The market price of USAi common
stock was $18.75 per share on the trading day immediately prior to the date the
OFI merger agreement was executed. The foregoing share numbers and market price
have been adjusted as appropriate to reflect the two-for-one stock split to
holders of record as of the close of business on February 10, 2000. The terms of
this transaction were negotiated by USAi, Universal and a special committee of
independent directors of OFI and their respective advisors.
RELATIONSHIP BETWEEN USAI AND UNIVERSAL
Under the Universal transaction, USAi and some of its subsidiaries entered
into business agreements with Universal and some of its subsidiaries relating
to, among other things: (1) the domestic distribution by USAi of
Universal-produced television programming and Universal's library of television
programming; (2) the international distribution by Universal of television
programming produced by Studios USA; (3) long-term arrangements relating to the
use by Studios USA of Universal's production facilities in Los Angeles and
Orlando, Florida; and (4) a joint venture relating to the development of
international general entertainment television channels.
As part of the Universal transaction, Universal and USAi 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". USAi elected to have
Universal buy out its 50% interest in this venture. Accordingly, during the
first half of 1999, USANi LLC reversed amounts previously recorded for its share
of losses of the joint venture.
Universal, through its ownership of USAi stock and USANi LLC shares, is
USAi's largest stockholder, assuming conversion of Universal's LLC Shares that
is not currently permissible under FCC rules. 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
25
a subsidiary of Vivendi Universal. Messrs. Bronfman, Germond, Lescure and
Messier are members of the Boards of Directors of USAi and USANi LLC and hold
director and executive positions with Vivendi Universal and its affiliates.
These individuals were elected to the Boards of Directors of USAi 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 USAi and USANi LLC, these
individuals do not have any direct or indirect interest in the Universal-USAi
agreements.
As described above, in May 1999, USAi and Universal entered into certain
agreements relating to the PolyGram Filmed Entertainment and October Films
transactions.
USAi 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 USAi and USANi LLC as terms that could have been obtained from an
independent third party.
In the ordinary course of business, USAi and USANi LLC may determine to
enter into other agreements with Vivendi Universal and its affiliates.
EXERCISE OF PREEMPTIVE RIGHTS
In May 2000, pursuant to the investment agreement, Liberty exercised
preemptive rights to acquire Company capital stock (as adjusted as appropriate
to reflect the two-for-one stock split to holders of record as of the close of
business on February 10, 2000) with respect to the issuance of 24,344,675 shares
of common stock in connection with the acquisition of Precision Response
Corporation. Liberty exercised its preemptive rights option to acquire 7,920,274
shares of common stock for an aggregate consideration of $179,092,374, or $22.61
per share.
RELATIONSHIP BETWEEN USAI AND LIBERTY
Liberty is an indirect wholly-owned subsidiary of AT&T Corp. ("AT&T")
through a merger in March 1999 in which Tele-Communications, Inc. (now called
AT&T Broadband) became a subsidiary of AT&T. As a result of this merger and
certain governance provisions implemented at the time of the merger, based on
information publicly reported by Liberty, neither AT&T nor AT&T Broadband is
deemed to be the beneficial owner of securities of USAi owned by Liberty. USAi
and USANi LLC subsidiaries in the ordinary course of business enter into
agreements with AT&T and its subsidiaries relating to, among other things, the
carriage of USA Cable's networks, the Home Shopping Network and America's Store
programming and the acquisition of, or other investment in, businesses related
to the businesses of USAi and USANi LLC, all of which have been negotiated on an
arm's-length basis.
Currently, none of the members of USAi's Board of Directors is affiliated
with, or has been designated by, Liberty. Under the agreements relating to the
Universal transaction, two designees of Liberty, Messrs. Malone and Bennett, are
members of the USANi LLC Board of Directors. Liberty holds a substantial equity
interest in USAi and USANi LLC, and Liberty is a party to the Universal
transaction agreements filed as exhibits to USAi's publicly filed reports.
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
26
$2.5 million to Shop Channel, of which $2.1 million was outstanding at
December 31, 2000. In addition, Home Shopping Network sold inventory and
provided services in the amount of $722,000 to Shop Channel during 2000.
USAi 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 USAi 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, USAi
and USANi LLC may determine to enter into other agreements with Liberty and its
affiliates.
RELATIONSHIP BETWEEN USAI AND MR. KOFLER
On December 17, 1999, USAi entered into an agreement with Thomas and Leo
Kirch and Georg Kofler pursuant to which each agreed to cooperate with each
other to pursue on an exclusive basis televised shopping and related e-commerce
opportunities in Europe and to consider pursuing other media opportunities
subject to preexisting obligations. The parties also agreed to consolidate their
joint teleshopping and electronic commerce businesses in Europe and form
entities to pursue electronic commerce and teleshopping opportunities on the
basis of a mutually agreed ownership structure pursuant to which Mr. Kofler
would be entitled to 26.725% of any entity formed by the partners. Mr. Kofler
has agreed to be responsible for the exploration of business opportunities in
Europe, the development of entities to pursue such opportunities and the
selection of management for such entities for which USAi has agreed to pay
Kofler $1 million annually during the five (5) year term of the agreement.
Mr. Kofler and HSN are also parties to a shareholders agreement relating to
the shares in H.O.T. Home Order Television AG ("HOT Germany") owned by them
which, among other things, provides that Mr. Kofler will vote his shares in HOT
Germany as directed by HSN for the election of a majority of the members of the
Supervisory Board of HOT Germany. HSN has agreed to vote its interest in HOT
Germany as directed by Mr. Kofler with respect to the election of three members
of the HOT Germany Supervisory Board, the election of Mr. Kofler as Chairman of
the Supervisory Board and the commencement of an initial public offering for HOT
Germany. HSN has agreed to purchase Mr. Kofler's HOT Germany stock at a price
not to exceed $50 million in the event a pledgee of such shares seeks to sell
the shares. Kofler has also granted HSN a right of first refusal with respect to
his shares in HOT Germany. Mr. Kofler and his wife own 15% of the stock of HOT
Germany. Mr. Kofler also is a party to an employment agreement with a German
affiliate of HSN and was granted an option to purchase 4,400,000 shares of USAi
Common Stock pursuant to such agreement. The option will vest ratably over four
(4) years and must be exercised not later than ten (10) years following the
grant date. The exercise price of the option was the fair market value of USAi
Common Stock on the date of grant. Under the employment agreement, Kofler will
be paid Thirty Thousand Dollars ($30,000) annually for a two (2) year term. The
term of the employment agreement will renew for an additional two (2) years
unless notice is given by either party at least twelve (12) months prior to the
end of the initial term.
Mr. Kofler also has ownership interests in several entities which are
developing or operating televised shopping and related electronic businesses in
various European jurisdictions and in which HSN or its affiliates also have
ownership interests. In each case, HSN or its affiliate has contributed capital
and in certain instances has agreed to make services and products available to
such entities. We expect that the interests of HSN and Mr. Kofler in these
entities will, to the extent permitted by applicable law, be consolidated with
those of Thomas and Leo Kirch on terms to be agreed upon by Messrs. Kofler,
Thomas and Leo Kirch and USAi.
27
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 USAi's 2000 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.
PROPOSALS OF STOCKHOLDERS
The Company currently intends to hold its next annual meeting in April of
2002. Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the 2002 Annual Meeting of
Stockholders must submit the proposal to the Company at its principal executive
offices no later than December 9, 2001. 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 February 23, 2002. 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 9, 2001
28
EXHIBIT A
CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
USA NETWORKS INC.
ORGANIZATION
This charter governs the operations of the Audit Committee of the Board of
Directors (the Committee) of USA Networks Inc. (the Company). The Committee
shall review and reassess the charter at least annually and obtain the approval
of the Board of Directors. The Committee shall be appointed by the board of
directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the Committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All Committee
members shall be financially literate at the time of appointment, or shall
become financially literate within one year after appointment to the Committee,
and at least one member shall have accounting or related financial management
expertise. For purposes of this paragraph, the terms "independence" and
"financially literate" shall be interpreted as the National Association of
Securities Dealers (NASD) defines those terms.
STATEMENT OF POLICY
The Committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the 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. In so
doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, independent auditors, the internal
auditors, management of the Company and any employee. In discharging its
oversight role, the Committee is empowered to investigate any matter brought to
its attention with full access to all books, records, facilities, and personnel
of the Company and the power to retain outside counsel or other experts for this
purpose.
MEETINGS
The Committee will have a standing meeting whenever there is a full Board of
Directors meeting and at such other times as it deems appropriate. A majority of
the members of the Committee must be present for the valid transaction of
business. The meetings will be with representatives of the independent auditors,
the internal audit function, General Counsel, financial management and with
other members of management at the request of the Committee. Written minutes of
Committee meetings shall be maintained.
RESPONSIBILITIES AND PROCESSES
The primary responsibility for financial and other reporting, internal
controls and compliance with laws, regulations and ethics within the Company
rests with executive management. The primary responsibility of the Committee is
to oversee the Company's financial reporting process on behalf of the board and
report the results of their activities to the board on a regular basis.
Management is responsible for preparing the Company's financial statements, and
the independent auditors are responsible for auditing those financial
statements. The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management as well as the outside auditors have more time, knowledge, and more
detailed information on the Company than do committee members; consequently, in
carrying out its oversight responsibilities, the Committee is not providing any
expert or special assurances to the Company's financial statements or any
professional certification as to the outside auditors' work. The Committee in
carrying out its responsibilities believes its policies and
procedures should remain flexible, in order to best react to changing conditions
and circumstances. The Committee should take the appropriate actions to set the
overall corporate tone for quality financial reporting, sound business risk
practices, and ethical behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
- The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority
and responsibility to evaluate and, where appropriate, replace the
independent auditors. The Committee shall discuss with the auditors their
independence from management and the Company and the matters included in
the written disclosures required by the Independence Standards Board.
Annually, the Committee shall review and recommend to the board the
selection of the Company's independent auditors, subject to shareholders'
approval.
- The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and compensation. Also, the Committee shall
discuss with management, the internal auditors, and the independent
auditors the adequacy and effectiveness of the accounting and financial
controls, including the Company's system to monitor and manage business
risk, and legal and ethical compliance programs. Further, the Committee
shall meet separately with the internal auditors and the independent
auditors, with and without management present, to discuss the results of
their examinations.
- The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. The Committee shall discuss
significant matters impacting the Company's interim financial statements
with management and the independent auditors. Also, the Committee shall
discuss the results of the quarterly review and any other matters required
to be communicated to the Committee by the independent auditors under
generally accepted auditing standards. The chair of the Committee may
represent the entire Committee for the purposes of this review.
- The Committee will include a report of certain of its activities in the
Company's annual proxy statement, beginning December 15, 2000. The report
will state whether the Committee has reviewed the Company's annual audited
financial statements with management; discussed with the independent
auditors those matters required to be communicated under generally
accepted auditing standards; discussed with the independent auditors their
independence and received from them the written communication required by
the Independence Standards Board; and based upon the above reviews and
discussions recommended to the Company's Board of Directors that the
audited financial statements be included in the Company's Form 10-K.
- The Committee will review with General Counsel significant litigation and
other regulatory compliance issues, and evaluate Counsel and management's
assessment of potential financial impact, if any, and allegations of
impropriety pursuant to the Committee's procedures concerning internal
investigations.
- The Committee will review annually the Company's conflict of interest
policy and recommend to the Board of Directors changes that the Committee
may deem appropriate.
USA NETWORKS, INC.
FORM OF PROXY
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 MAY 2, 2001
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 9, 2001, and hereby appoints each of Julius
Genachowski, William J. Severance and Roger W. Clark, 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 Wednesday, May 2, 2001, at 4:00
p.m., Eastern Time, at HSN, 1 HSN Drive, 2501 118th Avenue North, St.
Petersburg, Florida, 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 11070
NEW YORK, NY 10203-0070
THE USAI BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS. |_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
to vote for all the
nominees listed below
|_| EXCEPTIONS
Nominees: Paul G. Allen Philippe Germond Marie-Josee Kravis Gen. H. Norman Schwarzkopf*
Edgar Bronfman, Jr. Victor A. Kaufman Pierre Lescure Diane Von Furstenberg
Anne M. Busquet* Donald R. Keough* Jean-Marie Messier
Barry Diller Georg Kofler William D. Savoy*
* 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.
(CONTINUED FROM OTHER SIDE)
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,
2001.
|_| FOR |_| AGAINST |_| ABSTAIN
Change of Address |_|
Mark here
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.
Dated:
---------------------------------------
---------------------------------------------
Signature
---------------------------------------------
(Signature, if held jointly)
---------------------------------------------
(Title)
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN VOTES MUST BE INDICATED
the enclosed postage prepaid envelope.) (X) IN BLACK OR BLUE INK. |X|