AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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USA NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 59-2712887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
152 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 314-7300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JULIUS GENACHOWSKI, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
USA NETWORKS, INC.
152 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 314-7300
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
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WITH COPIES TO:
PETER D. LYONS, ESQ. PAMELA S. SEYMON, ESQ. RICHARD B. DODD, ESQ.
Shearman & Sterling Wachtell, Lipton, Rosen & Katz Preston Gates & Ellis LLP
555 California Street, Suite 2000 51 West 52nd Street 701 Fifth Avenue, Suite 5000
San Francisco, California 94104 New York, New York 10019-6150 Seattle, Washington 98104
(415) 616-1100 (212) 403-1000 (206) 623-7580
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
CALCULATION OF REGISTRATION FEE CHART
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING AGGREGATE REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED(1) REGISTERED PRICE PER SECURITY OFFERING PRICE FEE(2)
Common Stock, $0.01 par value..................... 52,800,000(3) N/A $1,360,920,000(4) $125,205
Series A Cumulative Convertible Preferred Stock,
par value $.01 per share........................ 13,127,000 N/A N/A(5) N/A
Warrants to purchase one share of Common Stock.... 15,256,154 N/A N/A(6) N/A
Common Stock, $0.01 par value..................... 15,256,154(7) $35.10(8) $535,491,005 $49,265
(1) This registration statement relates to the resale by the selling security
holder named herein of the securities of the Registrant listed above that
were issued to the selling security holder in the merger of a wholly owned
subsidiary of Registrant with and into Expedia, Inc. The issuance of the
securities listed above to the selling security holder have been registered
pursuant to a registration statement on Form S-4, that was filed with the
Securities and Exchange Commission on August 22, 2001 (file no. 333-68120),
as such registration statement has been or may be amended from time to time.
(2) Calculated by multiplying 0.000092 by the proposed maximum aggregate
offering price.
(3) The number of shares of common stock, par value $.01 per share, of the
Registrant ("USA common stock") to be registered pursuant to this
Registration Statement is based on the maximum number of shares of USA
common stock issuable to the selling security holder in the Expedia
transaction, including those shares issuable upon the conversion of the USA
preferred stock and shares of common stock that may be issued as dividends
on the USA preferred stock.
(4) Calculated solely for purposes of calculating the registration fee pursuant
to 457(c) of the Securities Act of 1933, as amended (the "Securities Act"),
based on $25.775, the average of the high and low prices of USA common stock
quoted on The Nasdaq National Market on January 22, 2002.
(5) No consideration will be received by the Registrant upon the conversion of
the USA preferred stock into common stock in connection with the exercise of
the conversion right.
(6) Pursuant to 457(g) of the Securities Act, as a registration fee for the USA
common stock to be issued upon the exercise of the USA warrants has been
paid (as calculated below), no separate registration fee is required with
respect to the USA warrants.
(7) Maximum number of shares of USA common stock to be issued upon exercise of
the USA warrants being offered hereby.
(8) Estimated solely for purposes of calculating the registration fee pursuant
to 457(g) under the Securities Act of 1933, as amended (the "Securities
Act"), based on the maximum exercise price ($35.10) of the USA warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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EXPLANATORY NOTE
This Registration Statement and the accompanying prospectus assumes
consummation of the Expedia transaction. In the event that the Expedia
transaction is not completed, USA will file an application to the Securities and
Exchange Commission to withdraw this Registration Statement before it becomes
effective.
PROSPECTUS
[USA NETWORKS INC. LOGO]
SHARES OF USA COMMON STOCK,
SHARES OF USA SERIES A CUMULATIVE
CONVERTIBLE PREFERRED STOCK
AND
WARRANTS TO ACQUIRE USA COMMON STOCK
This prospectus relates to the resale of up to shares of common
stock, par value $0.01 per share ("USA common stock"), of USA Networks, Inc.,
shares of Series A Cumulative Convertible preferred stock, par value
$0.01 per share ("USA preferred stock"), of USA, and warrants to
acquire one share of USA common stock ("USA warrants"), which are held
beneficially by Microsoft Corporation on the date of this prospectus. The
shares of USA common stock offered by this prospectus include up to
shares of USA common stock issuable upon conversion of the USA
preferred stock, upon exercise of the USA warrants and as dividends on the USA
preferred stock. The shares of USA common stock, USA preferred stock and the USA
warrants being offered by this prospectus are referred to collectively as the
"Securities" in this document. The "selling security holder" under this
prospectus means either Microsoft Corporation or one or more controlled
affiliates of Microsoft Corporation in whose name the Securities are held. The
terms of the USA preferred stock and the USA warrants are described under
"Description of USA Capital Stock" in this prospectus.
We will not receive any proceeds from the sale of the Securities by the
selling security holder.
After registration, the Securities may be sold from time to time to
purchasers directly by the selling security holder. Alternatively, the selling
security holder may offer the Securities through underwriters, dealers or agents
on terms to be determined at the time of the sale. See "Plan of Distribution" on
page 9.
The selling security holder and any agents, dealers or underwriters that
participate with the selling security holder in the distribution of the
Securities may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (herein referred to as the "Securities Act"), and any
commissions received by them and any profit on the resale of the Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
USA common stock is quoted on the Nasdaq National Market under the symbol
"USAI." On January , 2002, the last reported sale price of USA common stock
was $ per share. Applications have been made to list the shares of USA
preferred stock and USA warrants on the Nasdaq National Market under the symbols
"USAIP" and "USAIW," respectively. There can be no assurance that either the USA
preferred stock or USA warrants will qualify for listing on Nasdaq.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER IN CONNECTION WITH PURCHASING THE USA COMMON STOCK, USA PREFERRED STOCK
OR USA WARRANTS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE ILLEGAL.
The date of this prospectus is February , 2002
TABLE OF CONTENTS
PAGE
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FORWARD-LOOKING INFORMATION................................. 1
WHERE YOU CAN FIND MORE INFORMATION......................... 1
SUMMARY..................................................... 3
THE OFFERING................................................ 5
RISK FACTORS................................................ 7
USE OF PROCEEDS............................................. 8
PLAN OF DISTRIBUTION........................................ 9
SELLING SECURITY HOLDERS.................................... 10
DESCRIPTION OF CAPITAL STOCK................................ 11
CERTAIN MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES..... 15
LEGAL MATTERS............................................... 20
EXPERTS..................................................... 20
FORWARD-LOOKING INFORMATION
This prospectus and the Securities and Exchange Commission ("SEC") filings
that are incorporated by reference into this prospectus contain forward-looking
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), that are based on the current expectations that we have about us and our
securities. These forward-looking statements include, but are not limited to,
statements about our industry, plans, objectives, expectations, intentions,
assumptions and other statements contained in this prospectus that are not
historical facts. When used in this prospectus or our SEC filings, the words
"expect", "anticipate", "intend", "plan", "believe", "seek", "estimate" and
similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties relating to our industry and our operations including those
described in "Risk Factors", actual results may differ materially from those
expressed or implied by these forward-looking statements. This is particularly
true for a young and rapidly evolving industry such as the online travel
industry.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference rooms in Washington, D.C., New
York, New York, and Chicago, Illinois:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 2333 Broadway Citicorp Center, Suite 1400
Room 1024 New York, New York 10279 500 West Madison Street
Washington, D.C. 20549 Chicago, Illinois 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to you free of charge at the
SEC's website at www.sec.gov.
As allowed by SEC rules, this prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
Information that we subsequently file with the SEC will automatically update
this prospectus. This prospectus incorporates by reference the documents set
forth below that we have previously filed with the SEC. These documents contain
important information about our company and its financial condition.
1. Annual Report on Form 10-K for the year ended December 31, 2000.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001.
3. Current Reports on Form 8-K filed on January 10, 2001, February 1, 2001,
March 6, 2001, April 25, 2001, June 6, 2001, June 7, 2001, June 27,
2001, July 16, 2001, July 23, 2001, July 25, 2001, September 18, 2001,
October 2, 2001, October 24, 2001, October 30, 2001, October 31, 2001,
two filed on November 9, 2001, December 5, 2001, December 17, 2001,
December 18, 2001 and January 8, 2002.
4. Definitive proxy statement filed on April 9, 2001.
5. Registration Statement on Form S-4, filed on August 22, 2001, as amended
on November 9, 2001, November 19, 2001 and January 8, 2002 (file
no. 333-68120).
1
This prospectus also incorporates by reference the following documents of
Expedia, Inc. that have been previously filed with the SEC:
1. Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
June 30, 2001.
2. Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
You may request free copies of these filings by writing or telephoning us at
the following address:
USA Networks, Inc.
152 West 57th Street
New York, New York 10019
(212) 314-7300
Attention: Corporate Secretary
USA has supplied all information contained or incorporated by reference in
this prospectus relating to USA. Expedia has supplied all such information
relating to Expedia and Microsoft has supplied all such information relating to
Microsoft.
Information contained on our website is not part of this prospectus. You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. The information contained in this prospectus is accurate
only as of the date of this prospectus and, with respect to material
incorporated herein by reference, the dates of such referenced material.
2
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. TO UNDERSTAND THE
TERMS OF THE SECURITIES BEING OFFERED HEREBY, YOU SHOULD READ THIS ENTIRE
PROSPECTUS AND THE DOCUMENTS IDENTIFIED UNDER THE CAPTION "WHERE YOU CAN FIND
MORE INFORMATION." IN THIS PROSPECTUS, THE TERMS "USA" AND "WE" REFER TO USA
NETWORKS, INC. AND OUR SUBSIDIARIES, EXCEPT WHERE IT IS CLEAR THAT SUCH TERMS
MEAN ONLY USA NETWORKS, INC.
USA NETWORKS, INC.
USA (Nasdaq: USAI) is a company focused on the new convergence of
information, direct selling and entertainment. USA is currently organized into
two groups, the Interactive Group and the Entertainment Group. The Interactive
Group consists of Expedia, Inc. (Nasdaq: EXPE); Home Shopping Network (including
HSN International and HSN Interactive); Ticketmaster (Nasdaq: TMCS), which
operates CitySearch and Match.com; Hotel Reservations Network (Nasdaq: ROOM);
Electronic Commerce Solutions; Styleclick; and Precision Response Corporation.
The Entertainment Group consists of USA Cable, including USA Network, SCI FI
Channel, TRIO, Newsworld International, and Crime; Studios USA, which produces
and distributes television programming; and USA Films, which produces and
distributes films.
On December 17, 2001, USA announced that it had entered into an agreement
with Vivendi Universal, S.A. pursuant to which USA would contribute USA's
Entertainment Group to a joint venture with Vivendi, which joint venture would
also hold the film, television and theme park businesses of Universal Studios,
Inc., a subsidiary of Vivendi. Barry Diller would be chairman and chief
executive officer of the joint venture as well as of USA. Upon consummation of
the USA/Vivendi transaction, the joint venture would be controlled by Vivendi
and its subsidiaries, with the common interests owned 93.06% by Vivendi and its
subsidiaries, 5.44% by USA and its subsidiaries and 1.5% by Mr. Diller.
USA INTERACTIVE
Upon completion of the USA/Vivendi transaction, USA will be renamed "USA
Interactive" and will be a leader in integrated interactivity, including
ticketing, online travel, online dating, teleservices, electronic retailing and
other interactive commerce services. USA's businesses will consist of Expedia;
Home Shopping Network (including HSN International and HSN Interactive);
Ticketmaster, which operates Citysearch and Match.com; Hotel Reservations
Network; Electronic Commerce Solutions; Styleclick; and Precision Response
Corporation.
After the completion of the USA/Vivendi transaction, USA will no longer be
engaged in the general entertainment businesses, and the transaction agreements
include a noncompetition provision, for a specified period, regarding USA's
participation in businesses similar to those to be conducted by the joint
venture. USA's business will be primarily focused on its electronic commerce and
interactive/information service businesses, and USA expects that it will
actively seek to grow those businesses, including through acquisitions. Any such
acquisitions could involve the issuance of additional USA securities or cash or
a combination of securities and cash. In addition, following the completion of
the USA/Vivendi transaction, USA generally will no longer be required to obtain
the consent of Vivendi, Liberty Media Corporation or Mr. Diller as USA
stockholders for any such acquisitions regardless of the size of such
acquisitions. USA is continually reviewing, and often in discussions with third
parties regarding, such possible growth opportunities, including transactions in
the online and offline travel services and commerce-related areas.
We are located at 152 West 57th Street, New York, New York 10019 and our
telephone number is (212) 314-7300. Our website can be found at
www.usanetworks.com.
3
THE USA/EXPEDIA MERGER
On February , 2002, we completed our acquisition of a controlling interest
in Expedia, Inc. through a merger of one of our subsidiaries with and into
Expedia. As a result of the merger, we own all of the outstanding shares of
Expedia Class B common stock, representing approximately % of Expedia's
currently outstanding shares and % of the voting interest in Expedia.
Expedia's remaining equity is held by the public.
Pursuant to the terms of the USA/Expedia transaction documents, Microsoft
Corporation, which beneficially owned 33,722,710 shares of Expedia common stock,
elected to exchange all of its Expedia common stock for USA securities in the
merger (subject to possible proportionate cutback in the event holders of more
than 37,500,000 shares of Expedia common stock elected to exchange those shares
for USA securities). Expedia shareholders who did not receive USA securities in
the transaction retained their Expedia shares and received for each Expedia
share held 0.1920 of a new Expedia warrant.
For more detail on the merger, please refer to our registration statement on
Form S-4, which we filed with the Securities and Exchange Commission on
August 22, 2001, as amended from time to time (file no. 333-68120).
4
THE OFFERING
USA COMMON STOCK
Number being offered hereby..................
Common Stock Authorized and Outstanding...... As of the date of this prospectus, we are
authorized to issue up to 1,600,000,000
shares of USA common stock and 400,000,000
shares of USA Class B common stock. As of
February , 2002, there were shares
of USA common stock outstanding held of
record by approximately stockholders
and 63,033,452 shares of USA Class B common
stock outstanding held of record by seven
stockholders.
Use of proceeds.............................. We will not receive any proceeds from the
sale of the USA common stock by the selling
security holder.
Transfer Agent............................... The Bank of New York.
Nasdaq National Market symbol................ USAI.
USA PREFERRED STOCK
Number being offered hereby..................
Preferred Stock Authorized and Outstanding... As of the date of this prospectus, we are
authorized to issue up to 100,000,000 shares
of preferred stock, par value of $0.01 per
share. As of February , 2002, there were
13,125,000 shares of USA preferred stock
outstanding held of record by
approximately stockholders.
Expiration Date.............................. February , 2029.
Conversion Price............................. $50 divided by the conversion price per share
of USA common stock. The conversion price is
initially $33.75.
Adjustments.................................. The number of shares of USA common stock
issuable upon conversion of the USA preferred
stock and the conversion price of the USA
preferred stock are subject to adjustment
from time to time upon the occurrence of any
of the following events to USA common stock:
any stock split; any stock consolidation,
combination or subdivision; any stock
dividend or other distribution; and any
repurchase, reclassification,
recapitalization or reorganization. The
conversion price is also subject to downward
adjustment in the event that the share price
of USA common stock exceeds $35.10 at the
time of conversion pursuant to a formula
described under "Description of Capital
Stock."
Use of proceeds.............................. We will not receive any proceeds from the
sale of the USA preferred stock by the
selling security holder.
Transfer Agent............................... The Bank of New York.
5
Nasdaq National Market symbol................ An application has been made to list the USA
preferred stock on the Nasdaq National Market
under the symbol USAIP; however, there can be
no assurance that the USA preferred stock
will qualify for listing on Nasdaq.
USA WARRANTS
Number being offered hereby..................
Expiration Date.............................. February , 2009.
Exercise Price............................... $35.10 per share of USA common stock.
Adjustments.................................. The number of shares of USA common stock
issuable upon exercise of the warrants and
the exercise price of the warrants are
subject to adjustment from time to time upon
the occurrence of any of the following events
to USA common stock: any stock split; any
stock consolidation, combination or
subdivision; any stock dividend or other
distribution; and any repurchase,
reclassification, recapitalization or
reorganization.
Use of proceeds.............................. We will not receive any proceeds from the
sale of the USA warrants by the selling
security holder.
Transfer Agent/Warrant Agent................. The Bank of New York.
Nasdaq National Market symbol................ An application has been made to list the USA
warrants on the Nasdaq National Market under
the symbol USAIW; however, there can be no
assurance that the USA warrants will qualify
for listing on Nasdaq.
6
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER THE FOLLOWING FACTORS CAREFULLY BEFORE DECIDING TO PURCHASE OUR
SECURITIES. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM
IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
RISK FACTORS RELATING TO OUR ACQUISITION OF CONTROL OF EXPEDIA
WE MAY NOT REALIZE ALL OF THE ANTICIPATED BENEFITS OF THE MERGER TRANSACTION
The success of the merger transactions will depend, in part, on the ability
of us and Expedia to realize certain anticipated growth opportunities from
integrating Expedia's businesses with our businesses and the businesses of our
affiliates. We cannot assure you that this integration will result in the
realization of the full anticipated benefits of the growth opportunities or that
these benefits will be achieved within the anticipated time frame or at all. In
addition, legal arrangements between us or our affiliates and certain third
parties may restrict the ability of the parties to integrate parts of Expedia's
businesses with our businesses or the businesses of our affiliates.
RISK FACTORS RELATING TO USA
WE DEPEND ON OUR KEY PERSONNEL
We are dependent upon the continued contributions of our senior corporate
management, particularly Mr. Diller, and certain key employees for our future
success. Mr. Diller is our Chairman of the Board and Chief Executive Officer.
Mr. Diller does not have an employment agreement with us, although he has been
granted options to purchase a substantial number of shares of USA common stock.
If Mr. Diller no longer serves in his positions at USA, our business, as
well as the market price of USA common stock, could be substantially adversely
affected. In addition, under the terms of a governance agreement, dated as of
October 19, 1997, among Universal Studios, HSN, Inc. (now USA), Mr. Diller and
Liberty, if Mr. Diller no longer serves as Chief Executive Officer of USA, then
certain restrictions on Universal Studios' conduct will be eliminated, and the
ability of Universal Studios (which is controlled by Vivendi) to increase its
equity interest in USA will be accelerated. We cannot assure you that we will be
able to retain the services of Mr. Diller or any other of our members of senior
management or key employees.
WE ARE CONTROLLED BY MR. DILLER AND IN HIS ABSENCE, WILL BE CONTROLLED BY
VIVENDI AND/OR LIBERTY
Mr. Diller, through entities he controls, currently beneficially owns or has
the right to vote 100% of the shares of our Class B common stock, par value $.01
per share, which is sufficient to control the outcome of any matter submitted to
a vote or for the consent of our shareholders with respect to which holders of
USA common stock and USA Class B common stock vote together as a single class.
Mr. Diller, subject to the terms of a stockholders agreement, dated as of
October 19, 1997 (the "Current Stockholders Agreement"), among Universal
Studios, Liberty, Mr. Diller, USA and The Seagram Company Ltd. (now controlled
by Vivendi), effectively controls the outcome of all matters submitted to a vote
or for the consent of our stockholders (other than with respect to the election
by the holders of USA common stock of 25% of the members of our board of
directors (rounded up to the nearest whole number) and certain matters as to
which a separate class vote of the holders of USA common stock is required under
Delaware law).
Under the Current Stockholders Agreement, Mr. Diller, Universal Studios and
Liberty have agreed that USA securities owned by any of Mr. Diller, Universal
Studios, Liberty and certain of their
7
affiliates will not be voted in favor of the taking of any action with respect
to certain fundamental changes relating to USA, except with the consent of each
of Mr. Diller, Universal Studios and Liberty. Accordingly, in respect of these
matters, each of Mr. Diller, Universal Studios and Liberty currently has the
ability to veto, in his or its sole discretion, the taking of any action with
respect to these matters. Following completion of the USA/Vivendi transaction,
each of Mr. Diller and Liberty will have the right to consent to the fundamental
changes in the event that USA is highly leveraged. We cannot assure you that
Mr. Diller and Liberty, and prior to completion of the USA/Vivendi transaction,
Universal Studios, will agree in the future on any such transaction or action,
in which case we would not be able to engage in such transaction or take such
action.
In addition, prior to the USA/Vivendi transaction, any third party seeking
to acquire us would be required to negotiate such transaction with Mr. Diller,
Vivendi and Liberty, and the interests of any one or more of such persons as
shareholders may be different from the interests of our other shareholders.
Upon Mr. Diller's permanent departure from USA, we may change in various
fundamental respects. For example, prior to the completion of the Vivendi
transaction, generally, Vivendi, through Universal Studios, would be able to
control USANi LLC, through which a significant portion of our businesses are
currently owned, and also would have the ability to seek to directly control us.
Following completion of the USA/Vivendi transaction, generally, Liberty would be
able to control USA through its ownership of its USA Class B shares.
USE OF PROCEEDS
All of the Securities being offered under this prospectus from time to time
are being sold by the selling security holder. We will not receive any of the
proceeds from the sale of the Securities by the selling security holder.
8
PLAN OF DISTRIBUTION
METHOD OF SALE
The Securities may be sold pursuant to this prospectus by the selling
security holders in any of the following ways:
- The Securities may be sold through underwriters in one or more
underwritten offerings on a firm commitment or best efforts basis. The
Securities may be sold through a broker or brokers, acting as principals
or agents. Transactions through broker-dealers may include block trades in
which brokers or dealers will attempt to sell the Securities as agent but
may position and resell the block as principal to facilitate the
transaction. The Securities may be sold through dealers or agents or to
dealers acting as market makers. Broker-dealers may receive compensation
in the form of discounts, concessions, or commissions from the selling
security holder and/or the purchasers of the Securities for whom such
broker-dealers may act as agents or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in
excess of customary commissions).
- The Securities may be sold on any exchange on which the securities are
listed.
- The Securities may be sold in private sales directly to purchasers.
The selling security holders may enter into hedging transactions with
counterparties (including broker-dealers), and the counterparties may engage in
short sales of the Securities in the course of hedging the positions they assume
with such selling security holders, including, without limitation, in connection
with distribution of the Securities by such counterparties. In addition, the
selling security holders may sell short the Securities, and in such instances,
this prospectus may be delivered in connection with such short sales and the
Securities offered hereby may be used to cover such short sales. The selling
security holders may also enter into option or other transactions with
counterparties that involve the delivery of the Securities to the
counterparties, who may then resell or otherwise transfer such Securities.
The selling security holders may also loan or pledge the Securities and the
borrower or pledgee may sell the Securities as loaned or upon a default may sell
or otherwise transfer the pledged Securities.
Securities covered by this prospectus which qualify for sale pursuant to
Rule 144 or Rule 145 of the Securities Act may be sold under Rule 144 or
Rule 145 rather than pursuant to this prospectus.
The selling security holders reserve the right to accept and, together with
their agents from time to time to reject, in whole or in part, any proposed
purchase of Securities to be made directly or through agents.
TIMING AND PRICE
The Securities may be sold from time to time by the selling security
holders. There is no assurance that the selling security holders will sell or
dispose of any or all of the Securities.
We are required to keep this Registration Statement effective until the
earlier of the date on which the selling security holders no longer hold the
Securities or February , 2003.
Selling security holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of our securities by them.
Securities may be sold at a fixed price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices. Such prices will
be determined by the holders of such securities
9
or by agreement between such holders and purchasers or underwriters and/or
dealers (who may receive fees or commissions in connection therewith).
PROCEEDS, COMMISSIONS AND EXPENSES
The aggregate proceeds to the selling security holder from the sale of the
Securities offered by it hereby will be the purchase price of such Securities
less discounts, concessions and commissions, if any. We will not receive any of
the proceeds from this offering.
The selling security holders will be responsible for payment of commissions,
concessions and discounts of underwriters, dealers or agents.
The selling security holders will pay for all printing costs, SEC filing
fees and fees of its counsel. We will pay all fees, disbursements and
out-of-pocket expenses and costs incurred by us in connection with the
preparation of the registration statement of which this prospectus is a part and
in complying with all applicable securities and blue sky laws.
The selling security holders and any broker-dealers or agents that
participate with the selling security holders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit on the
resale of the Securities may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company has agreed to indemnify the selling security holders against
certain liabilities, including liabilities arising under the Securities Act. The
selling security holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
Securities against certain liabilities, including liabilities arising under the
Securities Act.
NASDAQ LISTING STATUS
Application has been made to list the USA preferred stock and USA warrants
on the Nasdaq National Market under the symbols "USAIP" and "USAIW"
respectively. USA common stock is currently listed on the Nasdaq National Market
under the symbol "USAI." There can be no assurance that either the USA preferred
stock or USA warrants will qualify for listing on Nasdaq.
SELLING SECURITY HOLDERS
In connection with the merger, we issued shares of USA common
stock, shares of USA preferred stock and USA warrants to a
wholly owned affiliate of Microsoft Corporation. Microsoft (or one or more
controlled affiliates of Microsoft) will be the selling security holder under
this prospectus. All of the Securities are being offered under this prospectus
for the account of the selling security holders. In addition, we may issue up to
additional shares of USA common stock upon conversion of the USA
preferred stock, exercise of the USA warrants issued to the selling security
holders or as in-kind dividends on the USA preferred stock. Immediately
following completion of the offering contemplated by this prospectus and
assuming that the selling security holders sell under this prospectus the
maximum number of Securities offered through this prospectus, the selling
security holders will not own any USA securities.
The Securities are being registered to permit public secondary trading of
the Securities. The selling security holders may offer the Securities for resale
from time to time. See "Plan of Distribution."
We have filed with the SEC a registration statement, of which this
prospectus forms a part, with respect to the resale of the Securities from time
to time under Rule 415 under the Securities Act.
Because the selling security holders may dispose of all or a portion of its
Securities, we cannot estimate the number of Securities that will be held by the
selling security holders upon termination of any such disposition. In addition,
the selling security holders identified above may sell, transfer or
10
otherwise dispose of all or a portion of the Securities in transactions exempt
from the registration requirements of the Securities Act. See "Plan of
Distribution."
RELATIONSHIP WITH MICROSOFT
On July 15, 2001, we entered into the merger agreement with Microsoft and
Expedia, pursuant to which we acquired a controlling interest in Expedia, Inc.
on February , 2002. In connection with the merger agreement, we and Microsoft
also entered into a voting and election agreement, pursuant to which we granted
to Microsoft registration rights, including the right to underwritten offerings,
relating to the Securities. Pursuant to such agreement, USA filed a registration
statement, of which this prospectus is a part, with respect to the Securities on
January 29, 2002. The voting and election agreement is described in more detail
in our registration statement on Form S-4 (file no. 333-68120), as amended, and
incorporated herein by reference.
In the ordinary course of business, USA and some of our subsidiaries,
including Expedia, are parties to a number of commercial arrangements with
Microsoft, all of which arrangements were negotiated on an arms'-length basis
and none of which are material to USA. The agreements between Expedia and
Microsoft were in place at the time that Expedia completed its initial public
offering and was still a controlled subsidiary of Microsoft. Some of those
arrangements were amended in certain respects in connection with the merger
agreement and remain in place, including agreements that relate to intellectual
property rights, carriage and cross-promotion, administrative and operational
services, hosting arrangements, license agreements, registration rights and tax
sharing with respect to periods prior to completion of the USA/Expedia merger.
DESCRIPTION OF CAPITAL STOCK
Set forth below is a description of our capital stock. The following
statements are brief summaries of, and are subject to the provisions of, our
restated certificate of incorporation and bylaws, the USA warrant agreement and
the relevant provisions of the Delaware General Corporation Law.
As of the date of this prospectus, our authorized capital stock consists of
1,600,000,000 shares of USA common stock, par value $0.01 per share, 400,000,000
shares of USA Class B common stock, par value $0.01 per share, and 100,000,000
shares of preferred stock, par value $0.01 per share.
USA COMMON STOCK AND USA CLASS B COMMON STOCK
As of February , 2002, there were shares of USA common stock
outstanding held of record by approximately stockholders and 63,033,452
shares of USA Class B common stock outstanding held of record by seven
stockholders.
With respect to matters that may be submitted to a vote or for the consent
of our stockholders, including the election of directors, each holder of USA
Class B common stock is entitled to ten votes for each share of USA Class B
common stock held and will vote together with the holders of USA common stock as
a single class. Each holder of USA common stock is entitled to one vote for each
share of USA common stock held. Notwithstanding the foregoing, the holders of
USA common stock, acting as a single class, are entitled to elect 25% of the
total number of our directors, and, in the event that 25% of the total number of
directors shall result in a fraction of a director, then the holders of USA
common stock, acting as a single class, are entitled to elect the next higher
whole number of directors.
Shares of USA Class B common stock are convertible into shares of USA common
stock at the option of the holder thereof at any time on a share-for-share
basis. Such conversion ratio will in all events be equitably preserved in the
event of any recapitalization of USA by means of a stock dividend on, or a stock
split or combination of, outstanding USA common stock or USA Class B common
stock,
11
or in the event of any merger, consolidation or other reorganization of USA with
another corporation. Upon the conversion of USA Class B common stock into shares
of USA common stock, those shares of USA Class B common stock will be retired
and will not be subject to reissue. Shares of USA common stock are not
convertible into shares of USA Class B common stock.
In all other respects, the USA common stock and the USA Class B common stock
are identical. The holders of USA common stock and the holders of USA Class B
common stock are entitled to receive, share for share, such dividends as may be
declared by our board of directors out of funds legally available therefor. In
the event of a liquidation, dissolution, distribution of assets or winding-up of
USA, the holders of USA common stock and the holders of USA Class B common stock
are entitled to share ratably in all assets of USA available for distribution to
our stockholders, after the rights of the holders of the USA preferred stock, if
any, have been satisfied.
In connection with our acquisition of USA Network and Studios USA from
Universal Studios in 1998, we granted to Universal Studios and Liberty
preemptive rights which generally provide that each of Universal Studios and
Liberty may elect to purchase a number of shares of USA stock, or shares of a
subsidiary of USA exchangeable for shares of USA stock, referred to as LLC
shares, so that the percentage equity interest such entity owned of us after our
acquisition of USA Network and Studios USA will be the same as before such
acquisition, in each case, assuming the exchange of all LLC shares owned by
Universal Studios and Liberty and shares of Home Shopping Network owned by a
subsidiary of Liberty. The purchase price for shares of USA stock pursuant to a
preemptive right election is the fair market value of the USA stock, or LLC
share, purchased. Subject to specified limits set forth in the governance
agreement, Universal may elect to receive shares of USA common stock or USA
Class B common stock in connection with a preemptive exercise, or LLC shares
exchangeable for shares of USA stock; Liberty's preemptive exercises are for USA
common stock only, or LLC shares exchangeable for shares of USA common stock. In
connection with, and effective upon completion of, the USA/Vivendi transaction,
Vivendi's preemptive rights will be eliminated.
Our certificate of incorporation provides that there can be no stock
dividends or stock splits or combinations of stock declared or made on USA
common stock or USA Class B common stock unless the shares of USA common stock
and USA Class B common stock then outstanding are treated equally and
identically.
The shares of USA common stock to be issued in connection with the merger
will be validly issued, fully paid and non-assessable.
USA PREFERRED STOCK
As of the date of this prospectus, there were approximately 13,125,000
shares of USA preferred stock outstanding. Shares of USA preferred stock may be
issued from time to time in one or more series. The USA board of directors has
authority, by resolution, to designate the powers, preferences, rights and
qualifications, limitations and restrictions of preferred stock of USA.
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
GENERAL. In connection with the merger, USA issued an aggregate of
approximately 13,125,000 shares of its preferred stock, par value $0.01 per
share, "Series A Cumulative Convertible Preferred Stock," each having a $50.00
face value and a term of 20 years. We refer to Series A Cumulative Convertible
Preferred Stock in this document as USA preferred stock.
THE FOLLOWING IS A DESCRIPTION OF THE MATERIAL TERMS OF THE USA PREFERRED
STOCK, THE POWERS, PREFERENCES, RIGHTS AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS OF WHICH ARE SET FORTH IN THE FORM OF CERTIFICATE OF DESIGNATION OF
THE USA PREFERRED STOCK ATTACHED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
USA TO WHICH
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THIS PROSPECTUS IS A PART AND INCORPORATED BY REFERENCE IN THIS DOCUMENT. WE
URGE YOU TO READ THE CERTIFICATE OF DESIGNATION IN ITS ENTIRETY.
VOTING RIGHTS. Holders of USA preferred stock will be entitled to two votes
for each share of USA preferred stock held on all matters presented to such
shareholders. Except as otherwise required by Delaware law, the USA restated
certificate of incorporation or any special voting rights of USA preferred stock
as described in this document, the holders of USA common stock, USA Class B
common stock and USA preferred stock will vote together as one class. No
separate class vote of USA preferred stock will be required for the approval of
any matter except as required by Delaware law. The number of authorized shares
of any class or series of preferred stock, including the USA preferred stock,
may be amended (but not below the number of shares of USA preferred stock then
outstanding) so long as the holders of a majority of our voting power approve
the amendment.
DIVIDENDS. Each share of USA preferred stock is entitled to receive
dividends equal to the sum of (1) 1.99% of the face value per year, payable
quarterly in cash or USA common stock, at USA's option, plus (2) the excess, if
any, of the aggregate value of any dividends paid on the USA common stock
underlying the USA preferred stock over the amount described in (1). If USA
elects to pay the dividends in USA common stock, the price will be based on the
trailing ten-day average price of USA common stock prior to the payment date. No
other preferred stock of USA will rank senior to USA preferred stock with
respect to payment of dividends.
CONVERSION RIGHTS. Each share of USA preferred stock is convertible, at the
option of the holder at any time after the effective time of the merger, into
that number of shares of USA common stock equal to the quotient obtained by
dividing $50 by the conversion price per share of USA common stock. The initial
conversion price is $33.75 per share of USA common stock. The conversion price
will be adjusted downward if the share price of USA common stock exceeds $35.10
at the time of conversion pursuant to the following formula (rounded to the
nearest cent):
$50 X (USAi)
------------------------------------------------------------------
(USAi X 1.4815) + (0.4792 X (USAi-35.10))
where USAi = trailing ten-day average price of USA common stock.
The certificate of designation also includes an anti-dilution adjustment
provision so that the number of shares of USA common stock to be received upon
conversion of a share of USA preferred stock is adjusted from time to time in
the event of any stock split, stock consolidation, combination or subdivision,
stock dividend or other distribution and any repurchase, reclassification,
recapitalization or reorganization of USA.
REDEMPTION BY USA. Commencing on , 2012, we have the right from
time to time to redeem at least 25% of the original aggregate face value and up
to 100% of the original aggregate face value of the outstanding USA preferred
stock at a redemption price per USA preferred stock equal to face value plus any
accrued and unpaid dividends. Any payment by us pursuant to a redemption by us
may be made in cash or USA common stock, at our option.
REDEMPTION BY THE HOLDER OF USA PREFERRED STOCK. During the 20 business day
period preceding each of the fifth, seventh, tenth and fifteenth anniversaries
of the effective time of the merger, a holder of USA preferred stock shall have
the right to require us to purchase all or a portion of the shares of USA
preferred stock held by such holder for face value plus any accrued and unpaid
dividends. Any payment by us pursuant to a redemption by the holder of USA
preferred stock may be made in cash or USA common stock, at our option.
LIQUIDATION RIGHTS. In the event of a voluntary or involuntary liquidation,
dissolution or winding up of USA, holders of USA preferred stock shall be
entitled to receive in preference to any holder of
13
USA common shares an amount per share equal to all accrued and unpaid dividends
plus the greater of (a) face value, or (b) the liquidating distribution that
would be received had such holder converted the USA preferred stock into USA
common stock immediately prior to the liquidation, dissolution or winding up of
USA. No other preferred stock of USA will rank senior to USA preferred stock
with respect to payment upon liquidation.
RESERVATION OF SHARES OF USA COMMON STOCK. We will keep in reserve at all
times during the term of the USA preferred stock sufficient authorized but
unissued shares of USA common stock for issuance in the event of exercises by
the holders of USA preferred stock.
REGISTRATION OF SHARES UNDER THE SECURITIES ACT OF 1933. The USA preferred
stock and any USA common stock issued upon conversion of the USA preferred stock
will be registered under the Securities Act of 1933.
USA WARRANTS
USA warrants have been issued under a warrant agreement between USA and The
Bank of New York, as warrant agent, a form of which has been filed as an exhibit
to the registration statement of which this prospectus is a part. As of the date
of this prospectus, there were outstanding USA warrants.
Each USA warrant entitles its holder to purchase one share of USA common
stock at an exercise price of $35.10 per share of USA common stock. The exercise
price must be paid in cash. Each USA warrant may be exercised on any business
day on or prior to February , 2009. Any USA warrant not exercised before the
expiration of this period will become void, and all rights of the holder of the
USA warrant will cease. Holders of USA warrants will not be entitled, by virtue
of being such holders, to have any rights of holders of USA common stock until
they exercise their warrants.
The number of shares of USA common stock issuable upon exercise of the USA
warrants and the exercise price of the USA warrants will be subject to
adjustment from time to time upon the occurrence of any of the following events:
any stock split; any stock consolidation, combination or subdivision; any stock
dividend or other distribution; and any repurchase, reclassification,
recapitalization or reorganization.
We will keep in reserve at all times before the expiration date of the USA
warrants sufficient authorized but unissued shares of USA common stock for
issuance in the event of exercises by the holders of USA warrants. In addition,
the USA warrants and any USA common stock issued upon exercise of the USA
warrants will be registered under the Securities Act of 1933.
TRANSFER AGENT/WARRANT AGENT
The transfer agent for the shares of USA common stock and USA preferred
stock, and the warrant agent for the USA warrants, is The Bank of New York.
14
CERTAIN MATERIAL UNITED STATES
FEDERAL TAX CONSEQUENCES
GENERAL
The following is a general discussion of certain material United States
federal income and estate tax consequences of the ownership and disposition of
USA common stock, USA preferred stock and USA warrants.
As used herein, a "United States person" is
- a citizen or resident of the United States;
- a corporation created or organized in the United States or under the laws
of the United States or of any state;
- an estate the income of which is includible in gross income for United
States federal income taxation regardless of its source;
- a trust if a court in the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust; or
- any person otherwise subject to United States federal income tax on a net
income basis in respect of its worldwide taxable income.
A "U.S. Holder" is a beneficial owner of USA common stock, USA preferred
stock or USA warrants who is a United States person. A "Non-U.S. Holder" is a
beneficial owner that is not a U.S. Holder.
This discussion is based on current law, which is subject to change,
possibly with retroactive effect, or different interpretations. This discussion
is limited to holders who hold USA common stock, USA preferred stock or USA
warrants as capital assets. Moreover, this discussion is for general information
only and does not address all the tax consequences that may be relevant in light
of your particular circumstances, nor does it discuss special tax provisions
which may apply if you have relinquished United States citizenship or residence.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT
TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF PURCHASING, OWNING AND
DISPOSING OF OUR COMMON STOCK, PREFERRED STOCK OR WARRANTS, AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
TAXATION OF U.S. HOLDERS
This section describes the tax consequences to a U.S. Holder. If you are not
a U.S. Holder, this section does not apply to you.
DISTRIBUTIONS. Distributions on USA common stock and USA preferred stock
will constitute dividend income, taxable at ordinary income rates, to the extent
of USA's current or accumulated earnings and profits. Any excess will be treated
as non-taxable return of capital to the extent of the holder's basis in the
common or preferred stock, and thereafter as capital gain.
SALES OR EXCHANGES. On the sale, exchange or other disposition of shares of
USA common stock, USA preferred stock (other than a redemption of the common or
preferred stock, discussed below), or USA warrants, holders will generally
recognize capital gain or loss equal to the difference between the sale proceeds
and the adjusted tax basis in the stock or warrant sold, exchanged or disposed
of. This gain or loss will be long-term capital gain or loss if at the time of
the sale, exchange or disposition the
15
holder has held the stock or warrant sold, exchanged or disposed of for more
than one year. If the stock or warrant being sold, exchanged or disposed of has
received in a transaction qualifying as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, the holder's holding period in the
stock or warrant will include the holder's holding period in the stock
surrendered in the reorganization. Long-term capital gains of non-corporate U.S.
Holders are generally subject to a maximum tax rate of 20%. The deductibility of
capital losses is subject to limitations.
DIVIDENDS TO CORPORATE SHAREHOLDERS. In general, a distribution on the USA
common stock or USA preferred stock that is taxable as a dividend and that is
made to a corporate shareholder will qualify for the 70% corporate
dividends-received deduction under the Internal Revenue Code. However, a
dividend that arises upon a redemption of common stock or preferred stock will
generally constitute an "extraordinary dividend" under Section 1059 of the
Internal Revenue Code. In addition, constructive dividends received on common
stock within two years of the holder's acquisition of the stock or preferred
stock may also constitute "extraordinary dividends." If the extraordinary
dividend rules apply, the corporate shareholder may lose some or all of the
benefits of the dividends-received deduction. Furthermore, there are many
exceptions and restrictions relating to the availability of the
dividends-received deduction. Consequently, corporate shareholders should
consult their own tax advisors regarding the extent, if any, that the
dividends-received deduction is available to them and the extent to which the
extraordinary dividend rules may apply.
REDEMPTION OF USA COMMON STOCK OR USA PREFERRED STOCK. A redemption of USA
common stock or USA preferred stock generally would be a taxable event and would
be treated as if the holder sold the common stock or preferred stock if the
redemption:
- results in a "complete termination" of the holder's interest in both USA
common stock and USA preferred stock;
- is "substantially disproportionate" (i.e., after the redemption, the
percentage of all our outstanding voting stock that is owned by the holder
is less than 80% of the percentage of all our outstanding voting stock
(and the percentage of all our outstanding common stock that is owned by
the holder is less than 80% of all our outstanding common stock) that was
owned by the holder immediately before the redemption); or
- is "not essentially equivalent to a dividend" (i.e., the redemption must
meaningfully reduce the holder's proportionate interest in USA based on
the holder's particular circumstance; the Internal Revenue Service has
indicated that this test is satisfied by even a small reduction in the
percentage interest of a shareholder whose relative stock interest in a
publicly held corporation is minimal and who exercises no control over
corporate affairs).
In determining whether any of these tests has been met, holders must take
into account the shares of stock actually owned and the shares of stock
constructively owned by reason of certain constructive ownership rules set forth
in Section 318 of the Internal Revenue Code.
If stock is redeemed in a redemption that meets one of the tests described
above, the holder generally would recognize taxable gain or loss equal to the
difference between the amount of cash and the fair market value of property
received and the holder's tax basis in the stock redeemed. This gain or loss
would be long-term capital gain or capital loss if the stock were held for more
than one year.
If a redemption does not meet any of the tests described above, the entire
amount of the cash and the fair market value of property received generally
would be taxed as a dividend as explained above under "Distributions." If a
redemption is treated as a distribution that is taxable as a dividend, the
holder's basis in the redeemed stock would be transferred to the holder's
remaining shares of stock, if any.
POTENTIAL DEEMED DISTRIBUTIONS ON USA PREFERRED STOCK. At the time of
conversion, the conversion price of the USA preferred stock will be adjusted
downward if the price of USA common
16
stock exceeds $35.10 at such time in accordance with the formula described under
"DESCRIPTION OF CAPITAL STOCK--USA Preferred Stock--Conversion Rights." In
general, a reduction in the conversion price of a convertible preferred stock,
such as the USA preferred stock, will result in a deemed distribution taxable as
a dividend unless it is pursuant to a bona fide, reasonable anti-dilution
adjustment formula, which the reduction in conversion price described in the
preceding sentence would not be considered to be or satisfies another exception,
described below.
A reduction in conversion price will not result in a deemed distribution if
it represents an adjustment of the price to be paid by the issuer of the
convertible preferred stock in acquiring property, including through a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. However, the authorities treating an adjustment to a conversion price or
conversion ratio as a purchase price adjustment generally have involved an
adjustment at a single, fixed date based on the earnings of the acquired
business for a specified period after the closing of the acquisition. In
contrast, the conversion price of the USA preferred stock will be adjusted at
the time of conversion, which could occur at any time at the election of the
holder. Moreover, the adjustment of the conversion price of the USA preferred
stock is based upon the performance of USA common stock, not the post-merger
earnings of Expedia. As a result, there is substantial uncertainty as to the
availability of this exception from deemed distribution treatment.
Due to this uncertainty, USA intends to treat any reduction to the
conversion price of USA preferred stock as a result of changes in the price of
USA common stock as a deemed distribution to the converting holder at the time
of conversion, in an amount equal to the fair market value of the additional
shares of USA common stock received (and the amount of any cash received in lieu
of additional fractional shares of USA common stock) as a result of the
reduction in the conversion price. If the reduction in conversion price is
treated as a deemed distribution, a converting holder will have dividend income,
taxable at ordinary income rates, to the extent of USA's current or accumulated
earnings and profits. Any excess will be treated as a non-taxable return of
capital to the extent of the holder's basis in the USA preferred stock, and
thereafter as capital gain.
Holders of USA preferred stock are urged to consult their advisors
concerning the proper treatment of the potential reduction in the conversion
price of the USA preferred stock. Holders that are corporations should also
consult their tax advisors concerning the availability of the dividends received
deduction, which is discussed above under "Dividends to Corporate Shareholders."
EXERCISE OF USA WARRANTS. The holder of USA warrants will not recognize
gain or loss on the exercise of a warrant. The holder's basis in the USA common
stock received on exercise of a warrant will equal the holders basis in the
warrant, plus the price paid for the USA common stock (which will be equal to
the strike price of the warrant). The holder's holding period in the USA common
stock will begin on the date the warrant is exercised.
EXPIRATION OF USA WARRANTS. On the expiration of an unexercised warrant,
the holder will recognize a loss equal to the holder's adjusted tax basis in the
warrant. A loss recognized upon expiration of the warrant will be capital loss
if the holder would have held the stock into which the warrant was exercisable
as a capital asset and will be long-term capital loss if the holder held the
warrant for more than one year.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Information reporting will
generally apply to dividends received on USA common stock or USA preferred stock
and to the proceeds received on the sale or disposition of such stock or of a
USA warrant, in each case, by a U.S. Holder who is not an exempt recipient.
Generally, individuals are not exempt recipients, whereas corporations are
exempt recipients. Backup withholding will apply only if the U.S. Holder is not
an exempt recipient and
- fails to furnish its Taxpayer Identification Number ("TIN") which, in the
case of an individual, is his or her Social Security Number;
17
- furnishes an incorrect TIN;
- is notified by the IRS that it has failed to properly report payments of
dividends; or
- fails to certify, under penalty of perjury, that it has furnished a
correct TIN and has not been notified by the IRS that it is subject to
backup withholding.
U.S. Holders should consult their tax advisors regarding their qualification
for exemption from backup withholding and the procedure for demonstrating such
an exemption if applicable.
The amount of any backup withholding from a payment to a U.S. Holder is not
an additional tax and is allowable as a credit against the U.S. Holder's United
States federal income tax liability, if any, or may be claimed as a refund,
provided that the required information is furnished to the IRS.
TAXATION OF NON-U.S. HOLDERS
This section describes the tax consequences to a Non-U.S. Holder. If you are
a U.S. Holder, see the above discussion under "Taxation of U.S. Holders."
DIVIDENDS. If dividends are paid (or if there is a deemed dividend as
described above under "Taxation of U.S. Holders--Potential Deemed Distributions
on USA Preferred Stock"), non-U.S. Holders will be subject to withholding of
United States federal income tax at a 30% rate or a lower rate as may be
specified by an applicable income tax treaty. To claim the benefit of a lower
rate under an income tax treaty, non-U.S. Holders must properly file with the
payor an IRS Form W-8BEN, or successor form, claiming an exemption from or
reduction in withholding under the applicable tax treaty. In addition, where
dividends are paid or deemed paid to a non-U.S. Holder that is a partnership or
other pass through entity, persons holding an interest in the entity may need to
provide certification claiming an exemption or reduction in withholding under
the applicable treaty.
If actual or deemed dividends are considered effectively connected with the
conduct of a trade or business within the United States and, where a tax treaty
applies, are attributable to United States permanent establishment, those
dividends will not be subject to withholding tax, but instead will be subject to
United States federal income tax on a net basis at applicable graduated
individual or corporate rates, provided an IRS Form W-8ECI, or successor form,
is filed with the payor. In the case of a foreign corporation, any effectively
connected dividends may, under certain circumstances, be subject to an
additional "branch profits tax" at a rate of 30% or a lower rate as may be
specified by an applicable income tax treaty.
Non-U.S. holders must comply with the certification procedures described
above, or, in the case of payments made outside the United States with respect
to an offshore account, certain documentary evidence procedures, directly or
under certain circumstances through an intermediary, to obtain the benefits of a
reduced rate under an income tax treaty with respect to dividends paid or deemed
paid with respect to USA common stock or USA preferred stock. In addition, if a
non-U.S. Holder is required to provide an IRS Form W-8ECI or successor form, as
discussed above, the non-U.S. Holder must also provide its tax identification
number.
Non-U.S. Holders that are eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
GAIN ON DISPOSITION OF USA COMMON STOCK, USA PREFERRED STOCK, OR USA
WARRANTS. Non-U.S. Holders generally will not be subject to United States
federal income tax on any gain realized on the sale or other disposition of USA
common stock, USA preferred stock or USA warrants unless:
- the gain is considered effectively connected with the conduct of a trade
or business within the United States and, where a tax treaty applies, is
attributable to a United States permanent establishment (and, in which
case, if the holder is a foreign corporation, may be subject to an
18
additional "branch profits tax" equal to 30% or a lower rate as may be
specified by an applicable income tax treaty);
- the holder is an individual who holds the USA common stock, USA preferred
stock or USA warrants as a capital asset and is present in the United
States for 183 or more days in the taxable year of the sale or other
disposition and other conditions are met; or
- we are or have been a "United States real property holding corporation,"
or a USRPHC, for United States federal income tax purposes. We believe
that we are not currently, and are not likely not to become, a USRPHC. If
we were to become a USRPHC, then gain on the sale or other disposition of
USA common stock or USA preferred stock generally would not be subject to
United States federal income tax provided:
- USA common stock, USA preferred stock or USA warrants were "regularly
traded" on an established securities market; and
- the holder did not actually or constructively own more than 5% of the
USA common stock, USA preferred stock or USA warrants during the
shorter of the five-year period preceding the disposition or the
holder's holding period.
FEDERAL ESTATE TAX. In the case of an individual, USA common stock, USA
preferred stock or USA warrants held at the time of death will be included in
the individual's gross estate for United States federal estate tax purposes, and
may be subject to United States federal estate tax, unless an applicable estate
tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING. We must report annually to
the IRS and to each holder the amount of dividends paid or deemed paid and the
tax withheld with respect to those dividends, regardless of whether withholding
was required. Copies of the information returns reporting those dividends and
withholding may also be made available to the tax authorities in the country in
which a non-U.S. holder resides under the provisions of an applicable income tax
treaty or other applicable agreements.
Backup withholding is generally imposed on certain payments to persons that
fail to furnish the necessary identifying information to the payor. Generally
non-U.S. Holders will be subject to back-up withholding tax with respect to
dividends paid on USA common stock or USA preferred stock unless they certify
their status as non-U.S. Holders.
The payment of proceeds of a sale of USA common stock, USA preferred stock
or USA warrants effected by or through a United States office of a broker will
be subject to both backup withholding and information reporting unless the
holder provides the payor with the holder's name and address and certifies its
non-U.S. Holder status or otherwise establishes an exemption. In general, backup
withholding and information reporting will not apply to the payment of the
proceeds of a sale of USA common stock, USA preferred stock or USA warrants by
or through a foreign office of a broker. If, however, such broker is, for United
States federal income tax purposes, a United States person, a controlled foreign
corporation, a foreign person that derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States,
or, a foreign partnership that at any time during its tax year either is engaged
in the conduct of a trade or business in the United States or has as partners
one or more United States persons that, in the aggregate, hold more than 50% of
the income or capital interest in the partnership, such payments will be subject
to information reporting, but not backup withholding, unless such broker has
documentary evidence in its records that the holder is a non-U.S. Holder and
certain other conditions are met or the holder otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against the holder's United States federal
income tax liability provided the required information is furnished in a timely
manner to the IRS.
19
LEGAL MATTERS
The validity of the Securities offered by this prospectus is being passed
upon for us by Wachtell, Lipton, Rosen & Katz, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and financial statement schedule of USA as set forth in
their report, included in USA Networks, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 2000, which is incorporated by reference in this
prospectus. USA's consolidated financial statements and financial statement
schedule are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from Expedia, Inc.'s
Annual Report on Form 10-K for the year ended June 30, 2001, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Expedia in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee.
ITEM AMOUNT
---- --------
SEC Registration Fee........................................ $174,470
NASD Fee.................................................... 0.00
Printing Fees and Expenses.................................. 10,000
Legal Fees and Expenses..................................... 20,000
Accounting Fees and Expenses................................ 5,000
Miscellaneous............................................... 5,030
--------
Total................................................... $214,500
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Restated Certificate of Incorporation limits, to the
maximum extent permitted by Delaware law, the personal liability of directors
for monetary damages for breach of their fiduciary duties as a director. The
Registrant's Amended and Restated Bylaws provide that the directors and officers
(and legal representatives of such directors and officers) will be indemnified
to the fullest extent authorized by the Delaware General Corporation Law with
respect to third-party actions, suits, investigations or proceedings provided
that any such person has met the applicable standard of conduct set forth in the
Delaware General Corporation Law described below. The Registrant's Amended and
Restated Bylaws further provide that directors and officers (and legal
representatives of such directors and officers) will be indemnified with respect
to actions or suits initiated by such person only if such action was first
approved by the board of directors. The Registrant's Amended and Restated Bylaws
allow the Registrant to pay all expenses incurred by a director or officer (or
legal representatives of such directors or officers) in defending any proceeding
in which the scope of the indemnification provisions as such expenses are
incurred in advance of its final disposition, upon an undertaking by such party
to repay such expenses, if it is ultimately determined that such party was not
entitled to indemnity by the Registrant. From time to time, offices and
directors may be provide with indemnification agreements that are consistent
with the foregoing provisions. The Registrant believes that these agreements and
arrangements are necessary to attract and retain qualified persons as directors
and officers.
Section 145 of the General Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent who was or is a
party, or is threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he was a director, officer, employee or agent of the corporation or was
serving at the request of the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
II-1
ITEM 16. EXHIBITS
The following exhibits are filed as part of this registration statement:
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------------
4.1 Certificate of Designations for the Series A Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement (file no. 333-68120) filed with
the Commission on November 9, 2001)
4.2 Form of Certificate for the Series A Cumulative Convertible Preferred
Stock
4.3 Form of Equity Warrant Agreement, including the form of Certificate of
Warrant (incorporated by reference to Exhibit 4.2 of the Registrant's
Registration Statement (file no. 333-68120) filed with the Commission
on November 9, 2001)
5.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the legality of
the securities being issued
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1)
24 Power of Attorney (set forth on the signature page of this
registration statement)
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
this registration statement or any material change to such information in this
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on January 28, 2002.
USA NETWORKS, INC.
By: /s/ BARRY DILLER
-----------------------------------------
Barry Diller
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
We, the undersigned officers and directors of USA Networks, Inc., hereby
severally and individually constitute and appoint Julius Genachowski and Michael
Sileck, and each of them, the true and lawful attorneys and agents of each of us
to execute in the name, place and stead of each of us (individually and in any
capacity stated below) any and all amendments to this registration statement on
Form S-4 and all instruments necessary or advisable in connection therewith and
to file the same with the Securities and Exchange Commission, each of said
attorneys and agents to have the power to act with or without the others and to
have full power and authority to do and perform in the name and on behalf of
each of the undersigned every act whatsoever necessary or advisable to be done
in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person, and we hereby ratify and confirm our
signatures as they may be signed by our said attorneys and agents or each of
them to any and all such amendments and instruments.
* * * * *
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
indicated as of January 28, 2002.
SIGNATURE TITLE
--------- -----
/s/ BARRY DILLER
------------------------------------------- Chairman of the Board,
Barry Diller Chief Executive Officer and Director
/s/ VICTOR A. KAUFMAN
------------------------------------------- Vice Chairman and Director
Victor A. Kaufman
/s/ WILLIAM J. SEVERANCE
------------------------------------------- Vice President and Controller
William J. Severance (Chief Accounting Officer)
/s/ MICHAEL SILECK
------------------------------------------- Senior Vice President
Michael Sileck and Chief Financial Officer
II-3
SIGNATURE TITLE
--------- -----
/s/ PAUL G. ALLEN
------------------------------------------- Director
Paul G. Allen
/s/ ROBERT R. BENNETT
------------------------------------------- Director
Robert R. Bennett
/s/ EDGAR BRONFMAN, JR.
------------------------------------------- Director
Edgar Bronfman, Jr.
/s/ ANNE M. BUSQUET
------------------------------------------- Director
Anne M. Busquet
/s/ PHILIPPE GERMOND
------------------------------------------- Director
Philippe Germond
/s/ DONALD R. KEOUGH
------------------------------------------- Director
Donald R. Keough
/s/ GEORG KOFLER
------------------------------------------- Director
Georg Kofler
/s/ MARIE-JOSEE KRAVIS
------------------------------------------- Director
Marie-Josee Kravis
/s/ PIERRE LESCURE
------------------------------------------- Director
Pierre Lescure
/s/ JOHN C. MALONE
------------------------------------------- Director
John C. Malone
/s/ JEAN-MARIE MESSIER
------------------------------------------- Director
Jean-Marie Messier
II-4
SIGNATURE TITLE
--------- -----
/s/ WILLIAM D. SAVOY
------------------------------------------- Director
William D. Savoy
/s/ H. NORMAN SCHWARZKOPF
------------------------------------------- Director
Gen. H. Norman Schwarzkopf
/s/ DIANE VON FURSTENBERG
------------------------------------------- Director
Diane Von Furstenberg
II-5
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
------------ -----------
4.1 Certificate of Designations for the Series A Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement (file no. 333-68120) filed with
the Commission on November 9, 2001)
4.2 Form of Certificate for the Series A Cumulative Convertible
Preferred Stock
4.3 Form of Equity Warrant Agreement, including the form of Certificate
of Warrant (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement (file no. 333-68120) filed with
the Commission on November 9, 2001)
5.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the legality of
the securities being issued
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 5.1)
24 Power of Attorney (set forth on the signature page of this
registration statement)