Filed by Expedia, Inc.
Pursuant to Rule 165 and Rule 425
under the Securities Act of 1933
Subject Company: Expedia, Inc.
Commission File No. 000-27429
This document contains 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, including statements regarding our expectations, beliefs, intentions or
strategies regarding the future. Forward-looking statements can be identified by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms or comparable terms. These statements are based on management's
current expectations and are subject to uncertainty and changes in
circumstances. Actual results may differ materially from these expectations due
to changes in global economic, business, competitive market and regulatory
factors or failure of the transactions described to be completed for any reason.
We have based all of our forward-looking statements on information available to
us as of July 16, 2001 and we are not obligated to update any of these forward-
looking statements. You should note that our actual results could differ
materially from the forward-looking statements.
USA Networks, Inc. ("USA") and Expedia, Inc. ("Expedia") will file a joint
prospectus/proxy statement and other relevant documents concerning USA's
acquisition of Expedia with the Securities and Exchange Commission ("SEC").
INVESTORS ARE URGED TO READ THE JOINT PROSPECTUS/PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED OR TO BE FILED IN THE FUTURE WITH THE SEC BECAUSE THOSE
DOCUMENTS CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain such
documents free of charge at the SEC's website at www.sec.gov. In addition, such
documents may also be obtained free of charge by contacting USA Networks, Inc.,
152 West 57th Street, New York, New York, 10019, Attention: Investor Relations,
or Expedia, Inc., 13810 SE Eastgate Way, Suite 400, Bellevue, WA 98005,
Attention: Investor Relations. INVESTORS SHOULD READ THE JOINT PROSPECTUS/PROXY
STATEMENT CAREFULLY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR
INVESTMENT DECISION.
USA and its directors and officers may be deemed to be participants in the
offering of securities by USA, and Expedia and its directors and officers may be
deemed to be participants in the offering of securities by Expedia as well as in
the solicitation of proxies from Expedia shareholders to adopt the agreement
providing for USA's acquisition of a controlling interest in Expedia. A detailed
list of the names and interests of USA's directors and executive officers is
contained in the definitive proxy statement on Schedule 14A filed by USA with
the SEC on April 9, 2001, and a detailed list of the names and interests of
Expedia's directors and executive officers is contained in the definitive proxy
statement on Schedule 14A filed by Expedia with the SEC on October 11, 2000.
Copies of those filings may be obtained free of charge at the SEC's website at
www.sec.gov.
* * * *
[THE FOLLOWING SLIDE SHOW WAS PRESENTED TO EMPLOYEES OF EXPEDIA LOCATED IN
EUROPE ON JULY 26, JULY 27 AND JULY 31, 2001.]
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[LOGO OF EXPEDIA, INC.]
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[LOGO OF EXPEDIA, INC.]
[LOGO OF USA NETWORKS INC] [LOGO OF MICROSOFT]
The USA Networks Package:
A Briefing for Expedia Employees
Germany, UK and Belgium
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[LOGO OF EXPEDIA, INC.]
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Expedia Transaction
. USA Networks is offering to purchase up to 37.5 million shares of Expedia
common stock
. Existing shareholders have an opportunity to participate on the same terms as
Microsoft
. Stock Option holders will receive Expedia warrants
. Microsoft stock option holders must exercise or lose MSFT options.
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[LOGO OF EXPEDIA, INC.]
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The Exchange
\
--------------------------------
/
[LOGO OF MICROSOFT] Up to 33.7 million shares of
Expedia Common Stock*
\
--------------------------------
/
Other Up to 3.8 million shares of [LOGO OF USA
Shareholders Expedia Common Stock* NETWORKS INC]
/ ___
-------------------------------- |
\ |
37.5mm USAI "bundled securities": | Based on
. USAI common stock | theoretical
. Preferred stock | value
. Warrants |
___|
* If more than 37.5 million shares of Expedia stock are offered to be exchanged,
all shareholders will be cut back on a prorated basis.
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Option Holders
Will receive approximately 1 Expedia warrant for every 5 Expedia options*
* (actual ratio = 0.1920 warrants for 1 share)
Before Transaction \ After Transaction
--------------------------------
/
1 warrant (approximately)*
1,000 EXPE Options for every 5 options 1,000 EXPE Options
&
192 EXPE Warrants*
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Warrant to Option Holders:
Who is Eligible
Any employee that has been granted stock options on or before July 15, 2001
and still holds the option at the time the warrants are offered
What Options are Eligible
. Vested and unvested outstanding options
. Granted prior to July 15th (includes July review grants)
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[LOGO OF EXPEDIA, INC.] For Option Holders
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What is an Expedia Warrant?
A warrant is similar to a non-qualified stock option. It is the right to buy:
- A specific amount of Expedia stock
- At a specific price ($52)
- By a specific date (7 year expiration)
- Will be tradable on a public exchange once vested
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[LOGO OF EXPEDIA, INC.] For Option Holders
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What You Can Do With Expedia Warrants
You can:
- Hold
- Exercise
- Sell
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Vesting
. Warrants begin to vest 90 days after close of the deal
. After 90 days, warrants vest on the same schedule as the underlying options
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Vesting Schedule
Options
| | | | |
| | | | |
|_____________|________________________|__________________|____/ /______|
| | | | / / |
| | | | |
11/1/00 11/1/01 5/1/02 5/1/05 11/1/07
1,000 125 125 1,000 Expiration
options vest vest 100%
granted vested
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Vesting Schedule
Warrants
192 24 24 192
warrants vest vest 100%
offered | | vested Expiration
| | | |
| | | |
|____ BLACK ___|__________|____________________|________/ /__________|
OUT | | / / |
| | | |
10/15/01 1/15/02 5/1/02 5/1/05 10/15/08
| | |
| | |
Options | | |
| | |
| | |
| | | | |
| | | | |
|________|____________________|____________________|________/ /__________|
| | | | / / |
| | | | |
11/1/00 11/1/01 5/1/02 5/1/05 11/1/07
1,000 125 125 1,000 Expiration
options vest vest 100%
granted vested
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Warrant Schedule
7/15/01 ~10/5/01 ~10/15/01 1/15/02
/ / / /
/ / / / \
/ / / / \
--------------------------------------------------------------------------------
Cannot Exercise Warrant /
Cannot Warrants (90 Days) Vests with /
Exercise Underlying
Options Option
Can exercise options
| | | |
| | | |
\ | / \ | / \ | / \ | /
\|/ \|/ \|/ \|/
Eligibility Warrant Shareholder Warrant
Date Offer Date Mtg. Vesting
Begins
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Warrant Tax Details
(German employees)
At Issuance: No Tax
At Vest: No Tax
At Exercise: Ordinary Income Tax
At Sale of Expedia Stock: Capital Gain (no tax if held shares greater than 1
year)
At Sale of Warrant: Ordinary Income Tax
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Warrant Tax Details
(UK employees)*
At Issuance: No Tax
At Vest: No Tax
At Exercise: Ordinary Income Tax
At Sale of Expedia Stock: Ordinary Income
(Upon the sale of stock, ordinary income is recognized unless Expedia Inc can
demonstrate that it is NOT a dependent subsidiary of USAI. We are currently
taking steps to secure capital gains tax treatment at sale)
At Sale of Warrant: Ordinary Income Tax
*Assumes Resident and Ordinarily Resident
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Warrant Tax Details
(Belgium employees)
Warrants are taxed like options, at offer
Offer: Number of warrants is known,
vesting is known,
exercise price is known.
Based on the information you received on July
16th, you may have received an offer. Refusal
of this offer is necessary to ensure that no
taxes are due.
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[LOGO OF EXPEDIA, INC.] For Option Holders
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Expedia Warrant Tax Details
(Belgium employees)
. Refusal forms are being distributed and needed back by September 14th
. At issuance, a new offer (the real one) will be made to you
. Taxation on warrants is similar to tax on options
-- Taxation will be on 17% of the FMV of Expedia Inc. stock underlying the
warrants at offer.
-- No tax upon exercise or sale of warrants.
-- Taxation can be reduced.
-- More information to be provided at the time of offer.
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Expedia Shareholders
. Are you a shareholder right now?
. Do you intend to buy Expedia stock within the next 3-4 months?
If the answer is yes to either of these questions, this next section is for
you.
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Shareholders: Who is Eligible
Expedia Shareholders:
Any employee that has purchased (EXPE) shares through:
. The open market
. The ESPP Plan (up to June 30th purchase)
. Exercising stock options and holding the underlying shares
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Expedia Shareholders will have 2 choices
___________________________________ _____________________________________
| | | |
| | | |
| | | |
| HOLD Expedia Common Stock | | Exchange Expedia common stock |
| & | | for the following: |
| Receive approximately 1 | | |
| Expedia warrant per 5 | | . USAI Common Stock |
| shares held | OR | |
| (actual ratio = 0.1920 warrants | | . USAI Preferred Stock |
| for 1 share) | | |
| | | . USAI Warrants Issued |
| | | |
| [LOGO OF EXPEDIA, INC.] | | [LOGO OF USA NETWORKS INC] |
| | | |
| | | |
|___________________________________| |_____________________________________|
- or a combination of the two choices -
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Expedia Shareholder: Hold
. Hold Expedia Common Stock
. Expedia option holders will receive approximately 1
Expedia warrant for every 5 Expedia shares*
*(actual ratio = 0.1920 warrants for 1 share)
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Expedia Shareholder:
Hold Example
Before Transaction After Transaction
\
-------------------------
/
1,000 EXPE Common 1 warrant (approximately)* 1,000 EXPE Common
for every 5 options &
192 EXPE Warrants*
* (actual ratio = 0.1920 warrants for 1 share)
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Expedia Shareholder: Exchange
Exchange Expedia Common Stock for USAI bundled securities which include:
$17.50 worth of USAI Common Stock
$17.50 worth of USAI Preferred Stock
$ 5.00 worth of USAI Warrants Issued
------
$40.00 Theoretical value per each Expedia common share
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Exchange Example
Before Transaction After Transaction
\
-------------------------
/
1,000 EXPE Common 1 bundled security for 648 USAI Common Shares
each EXPE common 350 USAI Preferred Shares
Valued at $40 per share 418 USAI Warrants
share for the exchange -----------------
$40,000 Total Value
Assumes USAI price of $27
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[LOGO OF EXPEDIA, INC.] For Shareholders
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USAI Bundled Security
Common Shares
-- Company stock with voting rights
Preferred Shares
-- Receives dividends (currently 1.99%)
-- $50 Face Value
-- Convertible into common stock in year at a ratio of (1:1.48)
-- Better conversion rate if USAI stock price is higher
Warrants
-- Traded on Public Exchange
-- $35.10 Exercise Price
-- Immediately vested upon receipt
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Common and Preferred Stock Tax
Details (German employees)
At Exchange: Capital Gain (no tax if held shares greater than 1 year)
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Common and Preferred Stock Tax
Details (Belgian employees)
Hold: Receipt of warrants is taxable benefit
At Exchange:
Taxation will depend on the market value of
Expedia and USA bundled securities at exchange.
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[LOGO OF EXPEDIA, INC.] For Shareholders
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To Exchange or Not to Exchange
Considerations:
. Your personal financial situation
. Exchange could be a tax-efficient way to diversify
. Personal view of EXPE and USAI future stock performance
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[LOGO OF EXPEDIA, INC.] For Shareholders
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Shareholder Schedule
~9/15/01 ~10/15/01
/ / \
-------------------------------------------------
/ / /
\/ \/
Record Shareholder
Date Mtg.
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[LOGO OF EXPEDIA, INC.] For Option and Shareholders
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Summary Points
. Microsoft option holders must exercise their vested options within 3 months
of closing the deal or the options will expire
. Option holders will receive warrants
. Shareholders have 2 choices:
-- Hold EXPE shares and receive Expedia warrants
-- Exchange EXPE shares for USAI bundled securities
. Business as usual
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[LOGO OF EXPEDIA, INC.] For Option and Shareholders
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Tentative time-table from July 16, 2001
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Date Shareholders Option holders
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July 16 Announcement of Transaction Announcement of Transaction
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July 17 - Sept. 30 Employee Seminars Employee Seminars
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Approximately four Receive shareholder
weeks from today information packet
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Prior to shareholder Shareholder must decide to Warrants offered to option
meeting accept or decline exchange holders
offer
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Approximately 90 Shareholder meeting
days from today
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After shareholder Warrants are issued to Warrants do not begin to vest
meeting shareholders until 90 days after close of
deal
Warrants vest at same schedule
as underlying options
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